“The choices we made to present a balanced budget have certainly been sobering,” Johnson said in an address to the city council on Wednesday. “As a city, we are constrained by our legacy pensions and our debt costs. These past debts challenge our budget and ability to invest in the great city that we all love.”

The administration was cognizant when looking at resources that underfunding pensions and other obligations could negatively impact Chicago’s credit rating after the city has seen a series of upgrades, Annette Guzman, the city’s budget director, said after the mayor’s speech. The city is rated BBB+ by S&P Global Ratings, A- by Fitch Ratings and Baa3 by Moody’s Ratings.

Johnson’s willingness to back off his promise not to raise the property tax levy signals more tax increases are possible in the future, said Scott Nees, a director at S&P, in an emailed statement.

The city’s sizable budget gap — absent structural solutions — is “unsustainable on a long-term basis,” he said.

Johnson also intends to declare a record $570 million surplus from the city’s tax-increment financing districts to balance the budget. That surplus allows him to pull unused money from economic development funds for the city’s budget and distribute it to other entities like Chicago’s cash-strapped school district. The city will use $54 million from the so-called TIF surplus toward closing its 2025 budget deficit.

Chicago Public Schools will get more than $300 million from the surplus, which will help the district send the city a pension payment that’s been at the center of a months-long fight between the district’s leadership and City Hall.

Johnson said Chicago will continue to work with state and federal sources for more funding. Voters in Illinois and Chicago have rejected ballot measures in recent years to move from a flat income tax rate to a graduated one and to increase levies on the sale of real estate over $1 million.

The mayor’s budget proposal is about two weeks later than originally planned to give his finance team more time to craft solutions.

The city council will hold hearings about Johnson’s budget proposal over the next month or so. The 50 members are expected to vote on it before the end of 2024, with a simple majority needed to pass.

Several aldermen said they don’t know yet how they will vote after the budget address and roughly a dozen members signed a letter calling a property tax increase a “non starter.”

(Updates to add details on city bond ratings beginning in ninth paragraph and aldermen votes in last paragraph.)

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