Inside Chicago's Budget: A Record Property Tax Hike and New Netflix Tax

by | October 29, 2015 AT 11:40 AM

By Hal Dardick and John Byrne and Bill Ruthhart

The Chicago City Council on Wednesday overwhelmingly approved Mayor Rahm Emanuel's 2016 budget that will hit Chicagoans with more than $755 million in tax and fee increases.

The 36-14 vote on the spending plan followed by a series of other votes gives the green light to a record property tax hike, a new garbage pickup fee, ride-sharing and taxi fare and fee hikes and a new tax on streaming services like Netflix.

Emanuel told aldermen just before the votes that the city's deteriorating finances hung like "a shadow" over Chicago and its future.

"Is it a piece of art? I don't think anybody would ever say that," he said of the tax-laden budget. "But are we better off today getting this done? ... We're better."

Alderman after alderman stood up to talk about the difficulty of the votes. Many noted that the property tax hike was designed to start restoring financial health to two ailing public worker pension systems and reversing many years of relying on budget gimmicks.

"It is a bitter medicine we have to take, but it is the only realistic way to regain our fiscal health," Ald. Marty Quinn, 13th, said in a rare speech from the council floor. Quinn, who is House Speaker Michael Madigan's alderman, also noted that hundreds of city workers live in his Southwest Side ward, and the alderman said they could face layoffs without the tax hikes.

But Ald. Harry Osterman, 48th, who voted against the plan, said the city needs to cut more costs before asking homeowners to bear that burden.

"I question are we doing everything in our power to shrink the size of government before we go and ask the homeowners to pay more, and I can't say in good conscience that we have," Osterman said. "I think we need to do more to constrain and minimize the effect on homeowners before we ask them to pay more."

Ald. Edward Burke, 14th, tried to frame up the tough votes.

"Today, the members of the body have a choice. They can look to the next generation, or they can look to the next election," Burke said.

Chicago property owners will take the biggest hit: a series of property tax hikes the next four years that will raise the city's levy by $543 million a year. And people who live in single-family homes, duplexes and three- and four-flats will pay a new $9.50-a-month per-unit fee for trash pickup.

The council also authorized an additional Chicago Public Schools property tax hike of $45 million to pay for construction projects. All told, the typical property tax bill will increase by about 13 percent over the next four years. For the owner of a home worth $250,000, that represents about a $554 annual increase.

The property tax windfall will be spent on sharply higher city contributions to the police and fire pension funds as required under a 2010 state law.

The $62.7 million the city expects from the trash-hauling fee will be used to plug a shortfall in funding for day-to-day city operations and start weaning the city away from risky and costly borrowing practices much criticized the Wall Street rating agencies that have lowered the city's creditworthiness to junk status.

Ald. David Moore, 17th, said he could accept the property tax increase, but people from his ward had had urged him to vote against the garbage fee. "I have to stick with my residents," he said.

Other large cash infusions for the city will come in the form of new fees on ride-sharing and taxi services, which are expected to raise $48.6 million, and a new cloud tax in Internet-based services like Netflix, which is expected to raise more than $40 million.

The vote came after some last-minute agreements between the mayor and council members, with Ald. Michele Smith, 43rd, securing consideration for a residential property tax rebate program should the mayor's proposed homeowner's exemption increase fail to get approved in Springfield. Emanuel had been reluctant to focus on any rebate option for fear it would diminish passage of his exemption plan in Springfield.

Smith's largely affluent Lincoln Park residents will be hit particularly hard by the property tax increases but she ended up voting for the budget. She also got to put her name on a plan for a task force to study rates of city absenteeism. She has argued that budget hearings that the city could save money by cracking down on employee sick days.

There also were 11th hour tweaks to the new tax on electronic cigarettes that aldermen approved as part of the budget package.

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