Cities targeted by Trump’s troop deployments bear fiscal burden

A lawsuit filed by Illinois Attorney General Kwame Raoul underscores the risks to Chicago’s economy and finances from President Trump’s attempt to use U.S. cities as “training grounds” for the military.

The city of Chicago has joined the lawsuit against Trump administration officials over the federalization of 700 National Guard troops and their deployment to Chicago alongside Immigration and Customs Enforcement agents.

The lawsuit, filed in federal court on Monday, states that the Trump administration’s deployment of troops in Washington, D.C., and in Los Angeles earlier this summer “directly and rapidly chilled economic activity.” It cites a study based on U.S. Census data that found “profoundly negative” economic effects in California, on par with the pandemic and the Great Recession.

Data from OpenTable said restaurant reservations in Washington, D.C. plummeted as much as 31% year-over-year by Aug. 13, days after Trump announced the federal takeover there, according to WUSA 9. 

The city was one of only two large U.S. cities tracked by OpenTable that saw year-over-year declines in August, Nation’s Restaurant News reported.

This escalation by the White House occurs at a delicate moment for Chicago, with City Hall looking to close a $1.15 billion gap in its 2026 budget and the city’s bonds lagging recently in secondary market trading. 

Among the areas where the deployments may harm Chicago finances are tourism and hospitality, core planks of the city’s economy and significant revenue sources for Chicago; police overtime costs; and investor perceptions of a downward slide, even if such perceptions aren’t rooted in reality.

“We know from municipal credit analysis that headline risk is a real thing,” said Justin Marlowe, research professor at the University of Chicago’s Harris School of Public Policy and director of the Center for Municipal Finance there. “And that investor perceptions are sometimes driven by lots of factors, including what they see in the news… In a big, complex and fragmented market like municipals, investor perceptions matter.”

Recent weeks have brought photos and videos of masked federal agents in camouflage outfits patrolling iconic Chicago tourist hotspots like the Loop and Michigan Avenue.

Chicago broke pre-pandemic summer tourism records in 2025. 

“Of course” the deployments threaten Chicago’s reputation and tourism revenues, said Joe Ferguson, president of the Civic Federation, a Chicago-based nonpartisan government research organization.

“All of that might reasonably (cause) a chilling in various economic and business sectors that the city relies upon heavily for revenue,” he said, noting that Trump administration “actions and rhetoric, which in another context might be seen as both libel and slander — casting aspersions on an entire community — have a chilling effect on people who work in Chicago.”

The chilling effect may impact not only small businesses who need the workers being targeted by ICE, but the retail sector more broadly, he said.

Ferguson pointed to reports that the administration intends the deployments to last for 60 days, which would potentially cast a shadow over the Thanksgiving Day Parade and Black Friday. The “direct collateral and reverberative effects may impact the economy overall and dampen revenue streams on which the city is critically relying,” he said.

David Levett, vice president and senior credit officer at Moody’s Ratings, said the city’s strong tourism trends for the first eight months of this year provide a cushion. But “tourism-related revenues are a material driver of Chicago’s financial performance because its revenue mix is heavily tied to economic activity,” he said by email.

Marlowe estimated that between the hotel tax, the amusement tax and sales taxes paid by visitors, tourism alone probably represents $400 million to $500 million of revenue for the city’s budget. 

“There are a lot of other things going on in Chicago, and you don’t have to do a lot to convince people to come here for a conference or a convention or a trade show,” he said. “And that has been a real credit positive for the city post-COVID. So it’s growing in importance for the city’s budget.”

Illinois and Chicago officials have rejected the deployments, saying there is no insurrection in Chicago, and no invasion other than the one organized by Trump himself. 

Chicago Mayor Brandon Johnson on Monday signed an executive order declaring city-owned properties “ICE-free zones.”

Illinois Gov. JB Pritzker said at a press conference Monday that Texas National Guard will be among the hundreds of federalized troops sent to the Chicago area, and that the Trump administration’s goal is “to cause violence and chaos in the city.”

He reeled off a litany of recent provocations and abuses by federal forces in the Chicago area, and called the arrest of Ward 26 Alderperson Jessie Fuentes “a demonstration of authoritarianism.”

Pritzker also said he has had to send backup officers from the Cook County Sheriff’s Office to protect protesters and residents near the ICE facility in Broadview, a western suburb of Chicago. The Broadview Police Department’s chief said ICE agents are making false 911 calls there, further straining police resources.

“What they saw in Los Angeles was that the LAPD had to deploy troops and pay them overtime to safeguard ICE agents,” Marlowe said. “There’s no budget for that. … It’s a difficult decision for the city to make, but you could see a situation where they would say, ‘Yes, we will go out and spend local money that we don’t really have, to try to prevent a much larger incident that could escalate the conflict with the federal government, that could make things more difficult locally.'”

Los Angeles spent more than $32 million to manage protests in response to ICE immigration raids in June, most of which covered $29.5 million in costs tied to the Los Angeles Police Department deployments and overtime pay, according to a post by City Controller Kenneth Meija on X. 

The city spent another $1.4 million on clean up and repairs to public property damaged, Meija said. The totals don’t include the cost of potential lawsuits against LAPD.

The Los Angeles City Council, already struggling financially after enacting cuts to close a $1 billion deficit, approved a $5 million loan to LAPD at a June 18 council meeting to cover expenses related to the anti-ICE protests in downtown Los Angeles.

Los Angeles tourism has been hit by the trifecta of January’s wildfires, the June immigration raids and Trump’s tariff threats slowing international travel, particularly from Canadian tourists.

Municipal market disclosures around resiliency have typically focused on climate change, and now increasingly cybersecurity. But under the Trump administration, political risk is becoming another important facet of disclosure.

That involves not only a financial plan but a threat plan, including the potential loss of federal dollars — although the ever-changing policy decisions coming out of D.C. may complicate the task.

David Erdman is a managing director at Baker Tilly Municipal Advisors. Previously Wisconsin’s state capital finance director, he has long promoted municipal disclosure best practices.  

“Some people have wondered what the benefit is of taking the extra steps and providing more and better municipal disclosures,” Erdman said. “This is one example that shows the benefit of voluntary disclosures or information beyond what is required in a continuing disclosure agreement. 

“By having established good disclosure practices, it may be easier for a governmental entity to quickly address any disclosure needed for new resiliency challenges, since they likely provided some of this disclosure in the past,” he added. “Also, investors may already have a base understanding in hand from the prior disclosure efforts.”

Marlowe said Chicago’s budget has historically assumed a partnership with the federal government that is disintegrating by the week. “I know that there are active conversations happening at City Hall right now about what is that partnership going to look like in the future,” he said. 

Portland, Oregon, is also in the Trump administration’s crosshairs. Late Sunday night, U.S. District Judge Karin Immergut temporarily blocked the Trump administration from deploying National Guard troops from Texas and California to Portland.

Just a few days before, the same court denied Trump’s attempt to deploy Oregon’s own National Guard to Portland.

Immergut, a Trump appointee, ruled that the president could not send troops to Oregon. But Oregon Gov. Tina Kotek said 101 California National Guard members had arrived Saturday. 

Following Sunday’s ruling, California Gov. Gavin Newsom said the rule of law had prevailed — and California’s troops would be heading home.

The judge ruled in part, the actions violate the state’s sovereignty.

“The historical tradition boils down to a simple proposition: this is a nation of constitutional law, not martial law,” Immergut wrote in the Friday ruling.

“Defendants have made a range of arguments that, if accepted, risk blurring the line between civil and military federal power — to the detriment of this nation,” the judge wrote.

The Civic Federation’s Ferguson said the Trump administration’s actions create a climate that threatens the economic vitality of its targets.

“Uncertainty that is driven by fear leads people to be more cautious and conservative,” he said. “A sense of safety, openness, freedom and reliability is fundamental to a vibrant business environment and economic activity, and that is what is threatened by this particular moment.”

S&P Global Ratings Director Scott Nees said the rating agency is monitoring the deployments for a material impact on the city’s economy or revenue performance.

“It is too early to tell, but we’ll be watching how these events unfold to determine if there is a credit impact on our rated entities,” he said by email.

The city of Chicago did not respond to questions by press time.

The Department of Homeland Security did not respond to a request for comment.