Joseph Krist
Publisher
CHICAGO BUDGET
Mayor Brandon Johnson has released his budget proposal for the City of Chicago for 2027. The $17.6 billion plan aims to close an $882 million budget gap. The proposal does not include an increase in property taxes or a change in garbage collection fees. There are also no proposed layoffs. It includes a revival of efforts to impose a corporate head tax, along with a higher cloud computing tax and $480 million in borrowing to pay off police-related settlements.
The new iteration of a head tax would charge companies with more than 125 employees a monthly $25 tax per staffer. It’s expected to generate about $113.8 million per year. The budget features about $120 million in cost cuts, including $85.4 million in “operational efficiencies” and $34.4 million in personnel savings as the result of “freezing” some unfilled positions. At the same time, headcount is maintained at 36,037 full-time city jobs.
Those include a recent $260 million settlement with 17 people who allege that a former police officer framed them for murder. Another $120 million would fund settlements approved in 2026 while the final $100 million would pay for 2027 settlements.
On the revenue side, the Mayor’s proposal calls for increasing the personal property lease transaction (PPLT) tax, a cloud tax, from 15% to 20%. Exceptions would be made for vehicles and equipment for movie making. The plan raises the sports wagering tax to 20%. It is estimated to bring in $76.9 million. A new “package waste” tax of 15 cents for any box or container used to deliver or carry out non-food items is expected to generate $9 million.
CLOUDY HOSPITAL OUTLOOK
I could just recite the sections entitled “reliance on Medicare and Medicaid” in most any bondholders risks section in an O.S. It’s clear that the changes in the OBBBA are quite negative for healthcare. When you add the changes coming on January 1 to the current real time declines in ACA coverage, the pressure on liquidity will mount. Size will only cushion the blows by so much. Many of the regional providers have effectively created “hub and spoke” models to attract patients. Some of those hospitals, especially in rural areas will be pressured to close.
That is just on the revenue side. Inflation continues and the cost of capital continues to rise. Every hospital faces rising costs and some shortages of basics. Changing reimbursement rates won’t impact rising costs. Another cost will be the decreasing availability of immigrant labor to perform many basic hospital tasks. This will drive higher labor costs.
In many ways, the coming changes are really just a return to the conditions of 20 years ago when uninsured patients went to emergency rooms for what could be taken care of in urgent care and the providers looked to the states for help to cover indigent care costs. Those are the very conditions which drove support for the ACA in the first place.
Less demand, higher operating costs, and significant revenue uncertainty. It all adds up to a negative outlook.
PUBLIC BANK ON THE BALLOT
Berkeley, Calif. voters next week will consider a ballot measure that would tax property owners to create a public bank. A public bank could offer low-interest loans for community projects, such as affordable housing, and small businesses. Berkeley’s measure would institute an annual parcel tax for six years, starting at 6 cents per square foot for homes, and 9 cents per square foot for commercial buildings.
Once the fund has collected $40 million, which is expected to take over four years, the city could apply for insurance through the F.D.I.C., as well as certification from the state. The measure limits what could be financed to affordable housing, green energy and infrastructure, and small businesses. San Francisco, across the bay from Berkeley, also has a public bank measure on its ballot next week, but it would create only a governance structure rather than raise funds through a tax.
VIRGIN ISLANDS
V.I. Governor Albert Bryan Jr. has proposed a $250 million bond-financing package to the Legislature designed to put several institutions and utilities on a firmer financial footing. The bonds would provide liquidity which would be directed $85 million to the Territory’s two hospitals to support the health system on St. Thomas and St. Croix. It would also provide $80 million in combined financial assistance to the Virgin Islands Water and Power Authority (WAPA) and Virgin Islands Waste Management Authority (VIWMA).
Each of these entities has been under significant financial strain with all facing minimal liquidity. Remaining proceeds would be applied to general government expenses including retroactive wage payments, tax refunds and other outstanding obligations. The proposed bonds would be backed by Gross Receipts Tax revenues and subject to defined limits on interest rates and repayment terms. The financing would require legislative approval before moving forward.
Typically, the use of bonds to fund operating expenses is negative. There’s nothing typical about the territory’s finances and economy, however. At this time, the proposed financing probably the best choice to provide necessary liquidity to the agencies.
NORTH DAKOTA OIL DOWNSIDE
Oil taxes are the single largest source of tax revenue for North Dakota state government and account for around half of the state’s general fund budget. Thousands of oil wells were drilled during the Bakken oil boom, which saw a peak drilling rig count in 2012. New drilling has slowed significantly, and many of the wells drilled during the boom are aging and less productive. More than half of the 20,000 active oil wells in North Dakota have been certified as stripper wells, or low-producing wells, and pay a 5% gross production tax. But they are exempt from paying a 5% oil extraction tax.
More than 700 stripper wells produced in excess of 35 barrels per day while still benefiting from the reduced tax in the first five months of 2026, state data shows. Stripper wells accounted for 16% of the state’s total oil production in 2025, Department of Mineral Resources data. Here’s the catch. North Dakota law does not contain any provision for revoking a stripper well’s tax exemption if its production swells. North Dakota is the only one of the top eight oil-producing states to grant a permanent tax status for stripper wells.
Some of these wells receive stripper status and then their operators ramp up production which effectively halve the tax rate they would ordinarily pay on production. The North Dakota tax department has told lawmakers the tax break cost more than $200 million annually since the start of the 2023-2025 biennium. The loophole is on pace to cost the state an estimated $260 million in tax revenue this year.
ELECTRC CO-OPS
One major public utility in Georgia – Oglethorpe Electric Cooperative – received a major boost from the federal government in support of a 1.4- gigawatt combined cycle natural gas power plant which began construction this Spring. The U.S. Department of Agriculture announced it is loaning $3.3 billion to Oglethorpe to finance construction. The loan is the largest in the history of the USDA Rural Utility Service.
The claim is that the plant is needed to address base load power needs across the state. Many believe that the plant’s location adjacent to a major Google data center is the real motivation for a fossil fueled base load plant. It comes after the federal government loaned $22 billion from the federal Department of Energy earlier this year to Georgia Power for upgrades across its generation fleet. The two loans represent a sizeable investment in the Trump administration goals to expand nuclear and fossil fueled generation.
Indiana announced a nonbinding agreement with a Canadian engineering services and nuclear company and Hoosier Energy, a nonprofit electric cooperative servicing central and southern Indiana. The plan is to build six gigawatts of new electric generation. This project, if successful, would increase Indiana’s energy generation by more than 22%.
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