Emanuel tries to make property tax hike more palatable to council

Written By Fran Spielman Posted: 04/15/2014, 10:49am

Mayor Rahm Emanuel is trying to make the bitter pill of a five-year, $250 million property tax increase to save two city employee pension funds a little easier to swallow for aldermen 10 months away from re-election.

At the behest of Aldermen Will Burns (4th) and Ameya Pawar (47th), Emanuel has promised to declare as a surplus all of the new property tax revenue — generated by a $250 million tax increase — in Chicago’s 175 tax increment financing districts.

That would return roughly $10 million to the Chicago Public Schools, which has its own pension crisis, and $4.6 million to the city to be used toward pension payments.

“We have the potential to offset a property tax increase with increased funding to schools. There will still be an annual TIF surplus. But this money is on top of that. Any time you can get more dollars to schools, it’s a good thing,” Pawar said.

“This is what TIF reform looks like. We can say it’s not a lot of money. I get that. But, we want to make sure we’re building trust with taxpayers.”

Pawar acknowledged that the mayor’s pledge will come as little comfort to those who want to eliminate TIF districts to solve the city’s pension crisis.

But, he said, “You can’t bust TIF [districts] today. It’s just not possible. [Former] Mayor Daley issued $1 billion in bonds for Modern Schools Across Chicago. If you want to get rid of them and create a centralized fund, I’m all for that. But, that’s five or ten years down the road. And you need to put a plan together.”

He added, “It just looks to me like political maneuvering to avoid a tough decision. I understand that, if I vote for a tax increase, it might cost me my job. But voting `no’ just to save your political hide is the wrong reason to be in politics.”

RELATED: Lawmakers discuss Chicago’s pension reform and potential statewide impact (video)

Within TIF districts, property tax revenue for local governments remains the same for 23 years.  Any revenue growth is put back into a fund to be used for infrastructure improvements or economic development.

Instead, Emanuel has promised to declare whatever new money is generated by the $250 million property tax increase as a surplus and forward half of it to the Chicago Public Schools.

Kelley Quinn, a spokesperson for the city’s Office of Budget and Management, acknowledged the mayor’s pledge.

“Aldermen Burns and Pawar came to the administration with the idea that any additional funds generated in TIF’s would immediately be declared a surplus. It was a good, creative idea that the Mayor fully supported,” she wrote in an e-mail to the Sun-Times.

“This means that CPS will get 50 percent of the surplus, while the City will receive 20 percent, of which will go towards pension payments.”

Last week, the Illinois House and Senate approved Emanuel’s plan to raise property taxes by $250 million and employee contributions by 29 percent to shore up the Municipal Employees and Laborers Pension funds.

The same-day approval came after Emanuel stripped out any reference to the property tax and shifted the political burden to Chicago aldermen. Gov. Pat Quinn, who had said “no can do” to the property tax hike, has 60 days to act on the bill and has hinted he might take all of it before deciding how to handle the political hot potato.

Republican gubernatorial candidate Bruce Rauner has urged the governor to veto the bill despite his close friendship with Emanuel.

Ald. Pat O’Connor (40th), the mayor’s City Council floor leader, has warned that the $250 million property tax increase faces an uphill climb in the City Council because of the election year timing, the rarity of property tax votes and the fact that union leaders are neutral or opposed.

On Monday, Pawar said the mayor’s concession on TIF surplus makes the property tax hike palatable for him.

“We still have to figure out what we’re gonna do with police and fire, but I’m not going to run from my responsibilities. I knew this term was about making tough decisions. There’s a reason why 17 aldermen retired,” Pawar said.

Last fall, Emanuel signed an executive order that calls for Chicago to declare an annual surplus in each of its 175 TIF districts and return at least 25 percent of the cash balance to the city and public schools.

Budget Director Alex Holt unveiled the new, more “formal” TIF policy after disclosing that Emanuel’s 2014 budget would declare a TIF surplus in the $40 million-to-$50 million range, generating a $20 million to $25 million windfall for CPS. 

Chicago Teachers Union President Karen Lewis said then that Emanuel was obviously “responding to us and responding to this cry about some fairness in where money gets spent.”

But, she argued that an executive order with strings attached was  not the way to go about it.

“It’s not going to do the kinds of things TIFs should be doing for schools,” Lewis said then.

“Taxpayers have asked for transparency around TIFs.  The TIF surplus ordinance that’s stuck in the Rules Committee gives us that — not an executive order. This is him trying to control the process.”

Members of the City Council’s Progressive Caucus, who introduced the TIF surplus ordinance, echoed Lewis’ concerns.

They argued that the executive order was mere “window dressing” because there are so many conditions and because so much money is already committed to the mayor’s pet projects.

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