Posts Tagged Chicago property tax increase for pension payments

Chicago property tax increase for pension payments (more)

Excerpts from

Mayor Rahm Emanuel told aldermen Tuesday the city must raise property taxes by $543 million to shore up police and firefighter pension funds, or face laying off thousands of firefighters and police officers.

The mayor’s budget plan includes phasing in that $543 million property tax over the next four years, with the bulk of it scheduled for this year. He also proposed a new garbage collection fee, and a bevy of other new taxes and fees, as he aims to eliminate the city’s structural budget deficit, and solve the city’s pension crisis. Emanuel also called for an additional $45 million property tax hike to fund school construction.

If approved by at least 26 aldermen, the mayor’s budget plan would amount to what analysts have called the largest property tax hike in modern Chicago history.

Emanuel called the proposed property tax hike a “last resort” to avoid massive cuts to essential services.

The mayor said, to meet police and firefighter pension obligations through spending cuts alone would mean laying off 2,500 police officers — 20 percent of the current force — and 2,000 firefighters — about 40 percent of the force. The city also would have to close 48 fire stations, reduce trash collection from once a week to twice a month, eliminate recycling services altogether, stop repairing potholes, halt rodent abatement programs, and eliminate graffiti removal.

“In short, if we were to fund our pensions with cuts alone, our city services would become unreliable. Our City would become unlivable. And that would be totally unacceptable,” he said. “We must solve our pension challenge and there are only two options: we can make the damaging cuts that I spelled out and undermine all of the hard work and progress that we made, or we can raise property taxes to meet our obligation to police and firefighters who answer our every call. The bill is due today. And that is the choice that is in front of us. I know where I stand.”

Emanuel’s plan would call for a $318 million increase in the 2015 property tax levy, payable in 2016, followed by a $109 million hike in the 2016 levy, a $53 million increase in the 2017 levy, and a $63 million increase in the 2018 levy. Additionally, the city would authorize a $45 million increase in property taxes in the 2015 levy to fund school construction.

All told, the $588 million in property tax increases would cost the owner of a $250,000 home about $588 more per year.

In addition to the property tax hike, Emanuel called for a $9.50 per month garbage collection fee to raise roughly $60 million a year in new revenue; a 50-cent-per-ride surcharge on taxis and ride-sharing services, to generate close to $50 million; a 15 percent increase in cab fares; authorizing ride-share companies to pick up customers at O’Hare and Midway airports, in exchange for a$5 fee for every dropoff and pickup at the airports and Navy Pier; new taxes on e-cigarettes to bring in $1 million; and an increase in building permit fees to generate another $13 million.

The mayor also stressed he has included $170 million in “savings and reforms,” to cut costs before turning to higher taxes.

Ralph Martire, director of the Center for Tax and Budget Accountability, said he expects some Chicago residents aren’t going to like what they hear in terms of new taxes and fees.

“Folks are certainly going to react negatively to an entire series of tax increases that seem like nickel and diming in some instances – the additional cab fee, the additional garbage fee,” he said.

However, Martire said – especially during former Mayor Richard M. Daley’s tenure – the city has used one-time revenues and borrowing to pay ongoing operating expenses, while police and fire pension debt ballooned without proper payments.

“You know, he [Emanuel] will have to make some distasteful choices. That’s the bad news, and I think the worse news is some of these choices should have been made years ago, possibly even a decade or so ago,” he said.

Martire said drastic steps by the city and the state are needed to get the city’s budget and employee pension systems on solid footing.

However, top Democratic lawmakers and Republican Gov. Bruce Rauner havent’ been able to agree on anything.

Tags: , ,

Chicago property tax increase for pension payments

Excerpts from the

Mayor Rahm Emanuel is set to call for the largest property tax increase in modern Chicago history to raise enough money to make a major pension payment for police and firefighters next year, the mayor’s City Council floor leader and a City Hall source told the Chicago Tribune late Wednesday.

The mayor also plans to push a new garbage collection tax, a new per-ride fee on taxis and ride-hailing services such as Uber and a new tax on electronic cigarettes and smokeless tobacco products.

Ald. Patrick O’Connor, 40th, said the idea is to cut down on the annual budget hole that has plagued the city budget for years and further scale back some of the poor financial practices. That includes scoop-and-toss borrowing, in which the city takes debt that’s coming due and kicks it out into the future at a higher cost. The administration also wants to put the police and fire pension systems on a road to solvency.

The mayor is considering a property tax hike of between $450 million and $550 million for police and fire pensions, but he has yet to settle on a final number, a City Hall source said. O’Connor put the figure at $450 million for police and fire pensions, plus another $50 million for a Chicago Public Schools construction program. Aldermen would authorize the CPS property tax increase, and the Chicago Board of Education would approve it.

Chicagoans also would be set to join the residents of many suburbs in paying a garbage hauling fee. O’Connor put the garbage tax at $10 to $12 a month for single-family homes and two-flats. The veteran alderman said the tax would not cover the entire cost of garbage pickup, but would put a pretty good dent in it.

Fewer details were available on the e-cigarette tax and new taxi and ride-hailing fees. Ald. Edward Burke, 14th, previously had proposed a $1-per-ride fee on rides from taxis and companies such as Uber and Lyft. Emanuel alluded to that proposal this week when he was asked whether such a tax could be included in the budget he’ll unveil Sept. 22.

During his first term, Emanuel avoided major tax hikes in favor of a series of smaller tax, fee and fine increases that together resulted in the equivalent of a 60 percent increase in city property taxes for the average homeowner. Still, come re-election time this year, Emanuel was able to tell voters he hadn’t raised property, sales or gas taxes during his tenure.

Emanuel, however, did not set aside money for a major increase in police and fire pension payments that has been looming over City Hall since the General Assembly approved a state law when Mayor Richard M. Daley was in charge. Now the bill is due.

Pension payments this year total about $478 million. Next year, payments to police and fire pension funds will increase by $538 million under current state law, although Emanuel is hoping Gov. Bruce Rauner signs a bill that would allow the city to phase in the higher payments more gradually. Lawmakers approved that bill at the end of May, but have yet to send it to Rauner amid a broader stalemate at the Capitol.

The property tax increase Emanuel is mulling would far exceed what the mayor himself said during the campaign was the largest property tax increase in Chicago history. In 1987, under Mayor Harold Washington, property taxes rose by $79.9 million, which would be $167.8 million in today’s dollars after adjusting for inflation. In 2008, under Daley, property taxes increased by $86.5 million, or $96 million in today’s dollars.

For weeks, Emanuel has held a series of closed-door meetings with top aides to determine how to come up with enough money to make good on the city’s pension commitments while also working to scale back the city’s most expensive borrowing practices. Many aldermen have long suspected a major property tax increase would be a big part of the answer.