Rahm Emanuel Pushes Largest Property Tax Hike in Chicago's History

Mayor Rahm Emanuel on Thursday defended the massive property tax hike he's set to propose in his new budget, even as some of the aldermen who will be asked to approve it are balking at the idea of voting for what would easily be the largest property tax increase in modern Chicago history.
by | September 4, 2015 AT 11:00 AM

By Hal Dardick and John Byrne

Mayor Rahm Emanuel on Thursday defended the massive property tax hike he's set to propose in his new budget, even as some of the aldermen who will be asked to approve it are balking at the idea of voting for what would easily be the largest property tax increase in modern Chicago history.

Still, the mayor predicted he'll have the votes needed to approve his new spending plan, which sources said could include a property tax increase of $450 million to $550 million, a new monthly garbage hauling fee of $10 to $12 per home, a tax on ride-hailing services and taxi rides, and the expansion of cigarette taxes to chewing tobacco and electronic cigarettes.

Facing the prospect of selling the series of tax hikes, Emanuel framed the significant property tax increase, which would be poured into the city's underfunded police and fire pension systems, as a matter of respect for the city's public safety personnel.

"As it relates to police and fire pensions, we will also put that on a course to respect the hard work of the men and women who protect us every day and do it in a way that's also consistent with our values of being fair and progressive," said Emanuel at a hastily arranged photo opportunity in which he read to kids at a Near West Side day care center.

Asked if he can muster the votes -- he'll need at least 26 of the 50 aldermen -- Emanuel said, "If you're asking me do I think we're going to get it done, the answer is yes, because I actually believe the aldermen are up to the task of charting a new course for Chicago's future."

Chicago mayors have long enjoyed a mostly compliant City Council, but Emanuel could end up asking aldermen to take a series of tough votes -- to cover next year's property tax increase, a budget containing the new fees and taxes and authorization for Chicago Public Schools to raise its property taxes by another $50 million.

The pension shortfall has been well-known at City Hall for years, and Emanuel warned of a major property tax hike near the end of the mayoral campaign if he didn't get help from Springfield. Aldermen hoped the bite would be less severe, however.

"I think that's a bit more than people were expecting," said Ald. Roderick Sawyer, 6th, who said many aldermen were anticipating a property tax increase of about $250 million. "We thought that was somewhat palatable for the citizens, but $450 (million), $500 million, it gets a little hairy at that point."

An increase of $500 million would raise the city portion of the property tax bill by 60 percent. The city, however, only accounts for about a fifth of the bill, so the bottom line for owners of businesses and homes would be less dramatic.

A $500 million increase would boost the overall tax bill on a $250,000 home by around $470, or about 11 percent, said Courtney Greve, spokeswoman for Cook County Clerk David Orr. The owner of that same Chicago home received a total property tax bill of nearly $4,200 this year, she added.

That kind of hit on homeowners, and indirectly on renters after landlords pass along the costs, is difficult for politicians to support. And just as aldermen fear alienating voters, they also worry about increasing property taxes to a point that businesses decide to leave the city.

"There is certainly a tipping point, but it's one for each individual building and commercial tenant who ultimately bear the property tax burden," Ron Tabaczynski, director of government affairs for the Building Owners and Managers Association of Chicago, said in a statement. "It's easy to see how increasing the tax burden on commercial real estate . . . risks creating a cascading problem and threatens the economic engine that powers Chicago."

Under Cook County's property tax structure, owners of retail, office and industrial buildings pay taxes at a much higher rate than homeowners. For example, the owner of a commercial property worth $250,000 this year received a tax bill of nearly $11,600, Greve said. The $500 million city increase would have raised that tab by a little more than $1,300.

The owner of a $1 million commercial property would have seen their $46,000 tax bill increase by nearly $5,300, Greve said. For the owner of a $50 million building, that tab is now more than $2.3 million and would have increased by about $262,000.

But flight to the suburbs would not necessarily cut costs for the city's businesses. Chicago now has the lowest tax rate of all municipalities in Cook County and nearly all cities, villages and towns in the collar counties. If the $500 million increase had been in place this year, Chicago would have had the fourth lowest rate in Cook County, Greve said. Only Barrington, South Barrington and Northfield would have had lower rates, she said.

It's the wrath of voting homeowners that many aldermen fear the most. Sawyer said it would be easier to sell the tax increase if all of the money were not going to make payments to police and fire pension funds -- as Emanuel has proposed -- and the mayor's proposal were not also coupled with the first-ever fees for garbage pickup at single-family homes and two-flats.

"If it softens the blow to lower-income people and if we can really show the citizens of Chicago that they're really getting something for this money," Sawyer said. "We really have to show that there's going to be some investment in the city of Chicago.

"We can't excuse it as a way to pay pension debt and other debt -- people aren't going to be too inclined to go for that," Sawyer added. "We do have to show that there's going to be a commitment to investment in the neighborhoods. Downtown looks fine, let's be honest. We've got probably one of the most beautiful downtown areas in the world, but our neighborhoods are struggling, and they need some investment. They need a shot in the arm."

Freshman Ald. Susan Sadlowski Garza, 10th, a member of the Progressive Reform Caucus that often opposes the mayor, said she plans to vote against the spending package because it leans too heavily on new revenue from working-class homeowners like those in her Far Southeast Side ward who can least afford to pay. "Where's the money from the Mercantile Exchange, the banks?" she asked. "Right now, I'm a strong 'no' (vote) on a property tax increase."

Possibly anticipating that argument, Emanuel said his property tax would be implemented "in a fair and progressive way," adding that he was concerned about "seniors and working families." But he did not elaborate.

Ald. Proco "Joe" Moreno, 2nd, said Thursday that the mayor has shown support for the basic outlines of Moreno's plan to offer property tax rebates to lower-income Chicagoans. "You get a check back, you get a rebate back, which will obviously offset some, but not all, of your increase," Moreno said.

Another freshman and a member of the Progressive Caucus, Ald. Carlos Ramirez-Rosa, 35th, said he too will be hard-pressed to support the property tax increase, adding that many homeowners in his neighborhood "are still underwater from the mortgage crisis."

Not every alderman expressed surprise. Ald. Willie Cochran, 20th, said the property tax part of Emanuel's plan is in line with what aldermen have been bracing themselves for, and Ald. Ameya Pawar, 47th, said the amount was dictated by the payments due next year to the police and fire pension funds.

"There's no doubt that we need a significant pot of new money to make good on pensions, and the courts have ruled that pensions are inviolate," Pawar said.

Emanuel, meanwhile, cautioned that nothing is set in stone and his budget plans could change before he unveils the final product. Starting out with such a huge number could provide the mayor wiggle room to negotiate it downward and look like he compromised.

"We go through this line by line -- I wouldn't jump to conclusions," Emanuel said. "I will give the budget speech on Sept. 22. I'd like to reserve that right to give that speech, if that's OK."

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