Chicago property tax increase for pension payments
Excerpts from the ChicagoTribune.com:
Mayor Rahm Emanuel is expected to announce a significant property tax increase, potentially the largest in recent Chicago history, aimed at covering a major pension payment for police and firefighters next year, according to sources close to the mayor and City Council leaders.
In addition to the property tax hike, the administration is considering new taxes on garbage collection, ride-hailing services like Uber and Lyft, and electronic cigarettes. The goal, as explained by Alderman Patrick O’Connor of the 40th Ward, is to address the city’s long-standing budget deficit and reduce reckless borrowing practices, such as “scoop-and-toss,†where debt is rolled over at higher costs.
The proposed property tax increase is estimated to range between $450 million and $550 million, with O’Connor suggesting $450 million specifically for police and fire pensions, plus an additional $50 million for school construction. These measures would require approval from aldermen and the Chicago Board of Education.
A separate garbage tax is also in the works, with estimates of $10 to $12 per month for single-family homes and two-flats. While it won’t cover the full cost of waste removal, it’s expected to make a meaningful impact on the city’s expenses.
Details on the e-cigarette tax and ride-hailing fees remain unclear, but Alderman Edward Burke had previously supported a $1-per-ride fee on taxis and ride-sharing services. Mayor Emanuel hinted at including such a tax in his upcoming budget, which will be unveiled on September 22.
During his first term, Emanuel avoided large-scale tax hikes, instead implementing smaller increases that collectively equated to a 60% rise in property taxes for the average homeowner. However, he was able to claim during re-election that he hadn’t raised property, sales, or gas taxes during his time in office.
Despite this, the mayor did not set aside funds for the rising pension obligations, which have been looming since a state law under former Mayor Richard M. Daley made these payments mandatory. This year, the city paid out around $478 million in pension benefits, and next year, that figure is expected to jump by $538 million under current law.
Emanuel is hoping Governor Bruce Rauner will sign a bill allowing for a more gradual increase in pension payments. Although the legislation passed in May, it has yet to reach the governor due to political gridlock in Springfield.
The proposed property tax increase would surpass the previous record set in 1987 under Mayor Harold Washington, when taxes rose by $79.9 million (about $167.8 million today). In 2008, under Mayor Daley, the increase was $86.5 million ($96 million today).
For weeks, Emanuel has been holding secret meetings with senior staff to find a way to meet pension obligations while also curbing expensive borrowing. Many aldermen believe a major property tax hike is likely to be part of the solution.
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