With City Hall facing a steep ramp-up in required pension payments over the coming years, mayoral candidate Paul Vallas unveiled an economic plan Monday that calls for $1.7 billion in new taxes and spending cuts, with nearly half of his proposal relying on Springfield lawmakers sending Chicago more money.

Vallas, a former City Hall budget director and Chicago Public Schools CEO, announced his plan in a speech to the City Club of Chicago. His five-year proposal includes $250 million in property tax increases, $330 million in spending cuts, $100 million in contract savings and a staggering $771 million in new revenue from the state that counts on a long-wished-for Chicago casino and the legalization of recreational marijuana.

In presenting his plan, Vallas described a city financial picture that remains riddled with debt, saddled by low credit ratings and hampered by billions in unfunded pension obligations with nearly $1 billion in new annual payments on the horizon by 2023.

“I’m running for mayor, because I know Chicago is facing dire financial conditions, and it’s impacting and resonating in all aspects of all life in our communities,” Vallas said. “We’re in a serious financial crisis as a city, and that crisis is not lessening.”

Vallas’ plan attempts to tackle the city’s financial challenges without relying entirely on tax increases for Chicagoans who already have been tapped for a record $543 million property tax increase, and various other fee and fine increases on Mayor Rahm Emanuel’s watch to help stabilize the city’s pension funds and reduce a City Hall budget shortfall that has shrunk but has yet to be entirely wiped off the books.

Vallas’ proposal contemplates $250 million in additional property tax increases over the next five years while instituting a cap that would prevent the city’s property tax levy from increasing by no more than the rate of inflation or 5 percent per year — whichever is less. Vallas said he would like to apply that cap to individual homeowners, rental properties and businesses, but acknowledged he was uncertain if he could do so without some form of state legislation.

Absent any other additional tax increases, Vallas’ plan largely relies on state lawmakers in Springfield sending hundreds of millions of dollars in new money Chicago’s way — a difficult sell given that the state has its own backlog of billions of dollars in unpaid bills and unfunded pensions.

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Still, Vallas envisions over the next five years a $120 million increase in the city’s share of the personal property replacement tax, an additional $250 million from the state for Chicago teachers pensions, $100 million in additional money from getting a more “fair share” of the state’s income tax distributions, $250 million from a new Chicago casino and $50 million for the city’s share of taxes on legalized marijuana, saying the city should demand half of the tax revenue on any sale of the currently illegal drug in the city. Democratic nominee for governor J.B. Pritzker has favored legalizing marijuana and campaigned on instituting a progressive income tax for the state that would require the wealthy to pay more.

After his speech, Vallas was asked if it was realistic to rely on so much money from the state. His answer: You can’t receive what you don’t request.

“I can’t perform miracles, but you need to have a legislative agenda,” Vallas said. “If you don’t get it all, then you have to look at other revenue options.”

As a result, Vallas said he would make his proposed 5 percent cap on property taxes a policy that could be changed, not a firm law.

Capping increases in individual tax bills at 5 percent could complicate efforts to address issues identified by “The Tax Divide,” a series of stories on property tax assessments published by the Chicago Tribune in collaboration with ProPublica Illinois.

That series concluded, in part, that assessments used to determine property taxes tended to undervalue more expensive homes and overvalue less costly homes. As a result, the property tax burden was shifted from wealthier homeowners to less-affluent ones, according to the series and a subsequent independent study conducted under the auspices of the Civic Consulting Alliance.

The Cook County assessor’s office is now taking steps to fix those inequities, which is resulting in far higher assessments of more expensive properties, which decreases the tax burden on less-expensive ones. But capping individual increases in overall taxes at 5 percent could negate those adjustments and shift the burden back to owners of less-expensive homes. Vallas said he hoped the issues would be fixed before he’d institute a cap as mayor.

A property tax cap also could limit the city’s ability to grapple with an anticipated spike in required contributions to the city’s four worker pension funds, given that property taxes are the primary tool Illinois municipalities have to raise revenue. City contributions to the pension funds are expected to grow by more than $900 million per year between 2019 and 2023.

Vallas, though, hopes to cover much of that gap with new city policies. Over five years, Vallas said he would reel in $100 million in so-called payments in lieu of taxes where nonprofits and other entities that aren’t required to pay taxes, such as hospital and universities, make voluntary payments to help cover public safety and other city services. Vallas pointed to a program in Boston that had been successful in using the power of mayoral persuasion to get such nonprofits to kick in money.

Vallas also said he would pull $100 million in surplus from the city’s special taxing districts, which he dubbed a “game show giveaway” that often are abused and not spent in economically struggling or blighted areas as the law originally intended. Over five years, Vallas also projected he could save $100 million by negotiating more cost-effective contracts and $330 million in mostly unspecified cuts. Vallas, though, said he would consider freezing the salaries of city employees making more than $100,000 per year and find a way for those workers to contribute more toward their retirements than they do today.

“I have never met a budget I have not been able to cut or reprioritize anywhere from 5 to 10 percent of the savings,” Vallas boasted of his time as a city budget director, CPS chief and his time running school districts in Philadelphia, New Orleans and Bridgeport, Conn., noting he’s spent 15 years balancing multibillion-dollar budgets.

While his plan relies on plenty of what-ifs, Vallas’ proposal still represents the most detailed economic proposal made by any of the 15 candidates in the February 2019 mayoral race to date.

“It’s not time for amateur hour. I’m sorry, running for mayor shouldn’t be on your bucket list,” Vallas said. “We’re in a crisis situation right now, and we need a crisis manager.”

Chicago Tribune’s Hal Dardick contributed.

bruthhart@chicagotribune.com

Twitter @BillRuthhart

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