Chicago Budget Would Raise Taxes for 6th Time in 7 Years

by | October 19, 2017

By Bill Ruthhart, John Byrne and Hal Dardick

Mayor Rahm Emanuel on Wednesday revealed his seventh budget, and for the sixth time, he is raising taxes and fees, moves he said are needed to keep stabilizing the city's finances and foster economic growth.

Even as the mayor declared "Chicago is on firmer financial footing than we have been in many years," he wasn't ready to say Chicagoans are off the hook from more fee and tax increases in the near future. Asked twice after his budget address if taxpayers soon would be out of the woods on more tax increases, Emanuel did not directly answer.

Instead, he launched into a defense of his various hikes, noting that much of the money had gone toward shoring up woefully underfunded government employee pensions or modernizing the city's aging water system and roads.

"I'm not just willy-nilly about it. ... Nobody is for taxes, but do you spend right, do you invest right, do you get a return on that investment that's worthy of a fee?" Emanuel told the Chicago Tribune Editorial Board when asked about his philosophy on taxes. "I don't look to just raise taxes. I look at what do we need to do, what helps us grow the economy, what improves quality of life and then measure pain versus pleasure."

This year's pain: Emanuel wants to raise the city's 911 phone tax for the second time in four years to balance the budget, raise taxes on ride-sharing services like Uber and Lyft to pay for CTA upgrades and increase the amusement tax for concerts at larger venues while eliminating them at smaller theaters.

In addition, Chicago property owners next year will be hit with a previously approved water and sewer tax increase and a $63 million city property tax increase, the fourth and final consecutive annual hike in that levy approved in 2015 to dramatically increase pension contributions. That doesn't include a separate Chicago Public Schools property tax increase of $224.5 million.

Since Emanuel took office in 2011, he also has passed a series of massive property tax increases, a doubling of water and sewer fees, an additional new water and sewer tax and increases in garbage fees, cable taxes, city vehicle sticker fees and parking garage taxes.

To be sure, much of Emanuel's tax increases have gone toward digging the city out of the financial morass left behind by former Mayor Richard M. Daley, with the money going toward propping up the city's underfunded employee pension systems and cutting hundreds of millions of dollars from the city's annual budget shortfalls while refraining from raiding city cash reserves, eliminating risky borrowing practices and not selling off city assets to make ends meet.

"I want to thank all of Chicago's taxpayers for doing their part to solve Chicago's financial problems and usher in a better day," Emanuel said during his speech Wednesday, before trying to show them they have gotten some bang for their bucks. "In fact, we are already seeing results, whether measured by new jobs, new companies, new industries or new graduates."

Even so, the city's own projections still show that between 2021 and 2023, contributions to the city's four pension funds will spike by more than $400 million, with no plan in place on how to cover those costs. Asked how he'd confront that challenge, Emanuel did not offer specifics.

The lengthy budget speech was mostly a recitation of the progress he says Chicago has made in the last year, from taking on President Donald Trump on immigration to winning more money for Chicago Public Schools out of Springfield.

"Chicago has not let those headwinds shift us off course," Emanuel said. "We charted a better course."

But the purpose of Wednesday's council meeting was for Emanuel to introduce his 2018 budget blueprint. The $8.6 billion plan would spend about $289 million more than this year. The 911 tax would go up $1.10 a month, while fees would rise 15 cents on Uber and Lyft rides.

In addition, the previously approved CPS and city property tax increases are expected to cost the owner of a $250,000 home an additional $230 per year. That blow, however, will be softened for many by a newly increased homeowners exemption Emanuel won from state lawmakers in August that city officials estimate would lower the bill on a $250,000 home by about $148 next year.

While Emanuel has cut the city's deficit each year since taking office, the budget gap he had to close increased this year with his plans to hire 1,000 new police officers over the next two years and have the city pay for CPS building security costs.

Besides the tax increases, Emanuel hopes to save $94 million on debt payments, thanks to new bond restructuring approved by state lawmakers this year. Emanuel also announced he would declare a $166.9 million surplus in the city's special taxing districts, and will dedicate $66 million of that toward the $80 million CPS security costs.

"Now is not the time to take our eye off the ball or become complacent," Emanuel told the City Council in his speech. "We must continue to build on the foundation of progress that we made together."

Some aldermen, however, grumbled about Emanuel's push for the City Council to allocate money to CPS and the CTA -- so-called sister agencies of which aldermen "are reminded on a weekly basis that we have no jurisdictional authority over," as downtown Ald. Brendan Reilly put it.

"If the mayor wasn't suggesting that we go and give this large amount of money to CPS and CTA, I think we could be celebrating a budget that actually for the first time in decades is structurally sound and in the black," said Reilly, 42nd. "If we were flush with money and had billions of dollars in reserves, I'd be happy to discuss giving a helping hand to CPS and CTA, but we're barely out of the woods."

Latino Caucus Chairman Ald. Gilbert Villegas said he was considering proposing an ordinance to give the City Council oversight of CTA and CPS if they receive money from the city.

"We are answerable to the residents. I want oversight," said Villegas, 36th. "I want to see if they even need the money, whether they can make cuts instead."

Reilly called the move a "dangerous precedent," but Emanuel noted that in 2006 the City Council increased the city's real estate transfer tax for the CTA.

"This is for modernization of the CTA and for public school safety and very specific to that effort," Emanuel said. "Ald. Reilly knows full well these are investments that have to be made and done right, and there's precedent in every one of them."

Some aldermen also criticized the 911 phone tax increase for being regressive because it hits people regardless of their ability to pay. "That's the hardworking folks that have been getting hit over and over by these budgets, and we need to start looking at different ways to start funding that infrastructure," said Ald. John Arena, 45th.

The phone tax increase would add $30 million to the city's coffers, and city officials have said $11 million of it would go toward a required modernization of the 911 system, allowing it to receive text messages and photos that can be relayed to emergency responders, among other upgrades.

Emanuel defended the phone tax increase for that reason, noting it would be used "to pay for a mandated modernization of 911 that all of us in our worst moments are dependent upon when it comes to public safety. And it hasn't been modernized in decades."

The mayor spent a significant portion of his speech addressing public safety, as the city has been mired in a nearly two-year spike in street violence.

"We all agree the level of violence in some of our neighborhoods is totally unacceptable. Whether it is in your neighborhood or not, it affects Chicago, so it affects all of us," Emanuel said. "We simply cannot rest until every parent, in every neighborhood, is able to let their children go to the park, or play on the sidewalk, or sit on the front porch free from the fear of gunshots."

The mayor pointed to his plan to hire nearly 1,000 new officers and his deployment of new technology and training to help prevent shootings before they occur. At one point, he noted that the Englewood police district had not had a shooting in 10 days, a line that drew tepid applause.

Budget officials this week placed the added cost of continuing to increase the ranks of police officers next year at $65 million.

The spending plan also includes $24 million more for police reform efforts. That involves promoting 100 new field training officers and creating an Office of Reform Management with 26 civilian employees who would try to ensure officers are complying with new policies.

The new money also will allow the city to enhance "officer well-being to help support officers' ability to be successful at their jobs," according to the city's proposed budget overview. And the community policing program would get 30 more community relations coordinators, organizers and advocates.

Even so, spending on police overtime continues to increase. The city budgeted for $78 million this year, but by the end of July it already had topped $95 million. Inspector General Joseph Ferguson, in a recent report alleging overtime abuse, said police overtime spending is projected to reach $169 million by year's end. Next year's proposed budget includes $98 million for overtime.

Another theme Emanuel embraced was moving on from Chicago's days of budget trickery. Daley, the mayor's predecessor, has been an occasional target in Emanuel speeches, though not by name. That continued Wednesday.

"The days of fiscal smoke and mirrors are behind us. The days of selling off assets to balance the budget and pay Chicago's bills are behind us," said Emanuel, a reference to Daley's unpopular selling of the city's parking meters for an upfront cash infusion nearly a decade ago. "The days of raiding the rainy day fund to keep the city afloat are behind us."

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