Mayor Johnson Unveils Debt Refinancing Plan to Close $85.1M Budget Gap
Mayor Brandon Johnson on Tuesday announced a series of short-term fixes, including refinancing between $500 and $525 million in bonds, to close a projected $85.1 million shortfall in the city's 2026 budget. The refinancing, which Johnson said will save the city between $65 million and $71 million, is designed to avoid layoffs this year and will not add to the city's debt burden.
Speaking to reporters at City Hall, Johnson said the remaining gap could be closed with federal COVID-19 relief dollars set aside for administrative and grant management costs, if necessary. The city still has just under $18.6 million in federal funds allocated for programming, and Johnson said moving some of those funds would not endanger any ongoing projects funded by the American Rescue Plan Act. Neither solution requires City Council sign-off, the mayor said.
The announcement comes after months of budget turmoil. Johnson had previously warned of a $130 million hole in the City Council-crafted budget, but he said Tuesday that deficit has shrunk due to better-than-expected returns in other areas. A midyear budget report showed revenues running about 1.5% ($32 million) under budget, later projecting a $90 million deficit by year's end.
The root of the shortfall, according to the mayor, lies in revenue streams passed in the City Council's spending plan that have failed to produce cash. These include privatized debt collection, selling ad space on city bridges, and selling virtual ads in augmented reality games. Johnson said the Council's revenue plans have yet to deliver the promised funds, blaming a coalition of opposition Council members who took command of the budget process to kill his proposed head tax on large corporations.
"Every single proposal that they put forward failed," Johnson said, calling his Council opposition the "failed corporate caucus." He added, "Had the City Council passed the budget that my administration proposed last year... these resources could have been helping us deliver a better government for our residents."
Opposition Blames Mayor for Shortfall
The opposition group, which calls itself the Budget Accountability Coalition, has accused Johnson's administration of slow-walking their budget initiatives. They allege the administration did not follow up after releasing a request for information from companies interested in carrying out a $2.1 million augmented reality advertising scheme. They also say Johnson was slow to notify the state on video gambling, leaving a $6.8 million proposal in limbo due to Bally's lobbying.
In a statement, the coalition said: "The administration opposed the policy, sat on the required state notification for months, and is now watching Bally's lobby to gut it." The group, roughly 30 aldermen, has blamed Johnson for the shortfall, with an opposition statement via Ald. Sam Nugent's office saying, "Mayor Johnson and his administration have failed to execute the budget as required by law."
Johnson dismissed these criticisms, saying Council projections were unrealistic and that new processes or contracts were needed. He also noted that the $89 million debt sale measure, a key part of the opposition bloc's revenue plans, has not attracted any buyers. Budget officials warned the debt sale wouldn't pay off; only two banks responded, and a Bank of America deal fell through. Johnson said, "This was a bad deal for banks, a terrible prospect for working families."
Progressive Revenues Overperform, But Court Challenges Loom
Despite the shortfall, Johnson highlighted that several progressive revenues he supports are overperforming. These include a tax on online sports wagering, charges on social media advertising, and the personal property lease tax. The new revenue streams are outperforming by at least 56% and 69%, respectively, though both face court challenges.
Johnson also addressed the issue of an advanced pension payment, a sticking point with the Council. The Council pushed for an extra $260 million payment, and the city made its first $130 million payment in January. Johnson reassured investors that the second payment will be made: "It's a question of when, not if."
Long-Term Concerns and Personnel Turnover
The refinancing for 2026 leaves one less option for the 2027 budget, which is anticipated to have a gap of at least $680 million. Johnson did not hint at solutions for that gap, but he noted that the city has already spent $1.41 billion of its $1.887 billion ARPA allocation on day-to-day operations.
Personnel changes have also marked the period: CFO Jill Jaworski left, her replacement Steve Mahr also departed, and Budget Director Annette Guzman announced her departure in early August.
Political Context and Reelection Comments
Asked about the ongoing tensions with the Council, Johnson said, "For them to be in agreement with me." He described a family he recently spoke with struggling after making rent, and referenced the "Corporate Caucus" wanting to place a greater burden on that family. Johnson demurred on questions about reelection, referring to the "problematic City Council." He added that as a former middle school teacher, he can deal with erratic behavior and multitask.
Johnson also declined to elaborate on a data center moratorium, saying he had signed an executive order for scrutiny but not a ban. He noted that a zoning application for Ford City Mall was revised to eliminate data center use; the developer said it was not contemplated. Johnson claimed the change was a product of his executive order, saying, "This is a win for the community members..."
The budget forecast is due by September 30, and the city's next steps will be closely watched as the 2026 fiscal year approaches.