Several sources of revenue included in Chicago’s 2026 budget failed to generate the expected funds. The city will now refinance existing debt to cover most of the shortfall.
Chicago will refinance up to $525 million in existing debt to close an $85.1 million gap in its 2026 budget, Mayor Brandon Johnson announced Tuesday.
The refinancing is expected to provide between $65 million and $71 million this year. If that is not enough, the city may use between $6 million and $10 million remaining from federal pandemic relief funds. 
Johnson said the shortfall would be covered without layoffs or cuts to city services. City officials also claim that the refinancing will not increase Chicago’s debt-service costs, although the administration has not explained the arrangement in detail.
Planned Revenue Failed to Materialize
The $16.6 billion city budget relied on several new sources of revenue that have so far produced little or no money.
The largest was a plan to sell approximately $1 billion in unpaid debts owed to Chicago. The transaction was expected to generate $89.6 million. The city contacted 20 financial institutions, but none agreed to complete the purchase. One potential buyer estimated that the debt would bring in only between $5 million and $10 million.
Chicago also expected to raise $29.3 million by selling advertising space on light poles, municipal vehicles and bridge houses. Another $6 million was projected from augmented-reality advertising at locations such as Millennium Park and the Chicago Riverwalk. Neither plan attracted sufficient commercial interest.
An additional $6.8 million was expected from video gambling terminals in bars and restaurants, but the city has not yet authorized them.
Political Dispute Over Responsibility
Johnson blamed members of the City Council for approving unrealistic revenue projections after rejecting his proposed tax on large companies. That measure would have charged businesses with at least 500 employees $33 per worker each month and was expected to generate between $82 million and $100 million annually.
Aldermen who drafted the budget rejected the mayor’s criticism. They accused his administration of delaying measures it opposed and relying on refinancing instead of addressing Chicago’s long-term financial problems.
Although the immediate deficit has fallen from an earlier estimate of $163 million, the city faces a much larger problem next year. Chicago’s latest forecast projects a possible budget shortfall of $1.16 billion in 2027. An updated estimate is expected by the end of September.
Sources: WTTW, WBEZ Chicago Photo: Milan Brašanac
