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Chicago City Council passes fiscal 2020 budget, bond refunding

CHICAGO, Nov 26 (Reuters) - The Chicago City Council on Tuesday approved a fiscal 2020 budget along with other measures, including a big bond refunding, needed to eliminate an $838 million deficit.

The $11.65 billion all-funds budget, the first proposed by Mayor Lori Lightfoot, who took office in May, passed in a 39-11 vote. The operating budget, which is included in the total, is $4.5 billion.

A chronic budget deficit and big unfunded pension liability have weighed on credit ratings for the nation's third-largest city, leading to high borrowing costs.

Lightfoot called the budget "a progressive blueprint for the future."

"This budget is balanced with 61% structural changes, which means we created a long-term fix to our budget challenges," she said.

While the spending plan for the fiscal year that begins Jan. 1 won praise from aldermen for not including a big property tax hike or layoffs, it also faced criticism for not spending enough on mental health and affordable housing and for relying on uncertain revenue.

"This is not a balanced budget. This is a budget with a bunch of holes that are going to have to be filled at a later date," said Alderman Anthony Beale.

He called for delaying the vote until the city learns whether the federal government will approve higher Medicaid reimbursement rates for city ambulance services as part of a plan to generate $163 million for the budget.

The biggest piece of the mayor's deficit-elimination plan involves the refunding $1.3 billion of outstanding bonds to gain a one-time, $210 million savings.

City officials have said an undetermined amount of new subordinate lien bonds issued by Chicago's Sales Tax Securitization Corporation will be used for the refunding. Those bonds give investors a statutory lien on the city's share of state sales taxes.

On Tuesday, S&P Global Ratings rated the upcoming refunding BBB-plus, warning that the city must achieve full structural balance by fiscal 2022 to avoid "a negative impact" on the rating.

Measures aimed at raising $352 million in additional revenue for the budget included new traffic congestion taxes on certain ride shares, tax hikes on restaurant meals and parking, and a new tax on recreational marijuana. The budget also relies on belt-tightening steps that were revisited and increased after Lightfoot was unable to secure approval in the Illinois Legislature for a graduated real estate transfer tax that would have boosted revenue by $50 million.

Lightfoot has blamed growing costs for personnel, pensions and debt for the "historic" $838 million deficit.

(Reporting By Karen Pierog; Editing by Dan Grebler)