Determined to bite the bullet and get it over with, aldermen on Monday questioned why Mayor Rahm Emanuel is not proposing an even bigger property tax increase instead of assuming that Gov. Bruce Rauner will sign a bill that gives Chicago more time to shore up police and fire pensions.
“What I’m detecting here is an appetite to get this over with one way or the other and not keep coming back and doing it again and again,” said Ald. Edward Burke (14th), chairman of the City Council’s Finance Committee.
In proposing a four-year, $543 million increase for police and fire pensions, Emanuel is making a rosy and risky assumption that, if he’s wrong, would make the financial hit absorbed by Chicago taxpayers significantly worse.
The mayor is assuming that Gov. Bruce Rauner will sign legislation — approved by the Illinois House and Senate, but not yet on the governor’s desk — giving Chicago 15 more years to ramp up to 90 percent funding level for the police and fire pension funds.
Chicago taxpayers would still be on the hook for $619 million in payments to the two funds next year — more than double the current payment. But that’s still $220 million less than the city would have been forced to pay and an $843 million break over the next five years.
On Monday, the City Council’s Finance Committee held four public hearings — one for each year that the massive property tax increase would be phased in.
Only a handful of people chose to testify. But the mayor’s budget team spent nearly an hour answering questions from Chicago aldermen who must risk their political lives by casting the difficult vote.
That’s when Burke shined the light on the mayor’s risky assumption and raised the possibility of an even bigger property tax hike.
“Would it not be more intelligent to levy at that [higher] amount — $220 million or whatever it is — and then abate . . . when the governor signs it?” Burke said.
Budget Director Alex Holt said there had been an internal discussion about taking that approach, but it was ultimately rejected.
“Our concern is that the current law actually requires a $700 million increase in a two-year period versus the $428 million we’re discussing. And we’re confident and hopeful that the governor should accept [it] for a couple of reasons,” Holt said.
“One is that it is very much about local control, which is a tenet of his administration, something that we’ve negotiated with police and fire. Second, he included our proposal in his own pension proposal . . . Since it only impacts the city of Chicago and it’s been consistent with his approach, it shouldn’t cause any issues.”
That’s not the only risky assumption involving Rauner that raised eyebrows among aldermen.
Emanuel also is assuming that his old friend will go along with the mayor’s plan to double the homeowners exemption — from $7,000 to $14,000 — so that homes worth less than $250,000 would be shielded from the record property tax increase.
Rauner, who wants to freeze property taxes for two years, has made it clear he strongly opposes Emanuel’s plan.
“People . . . keep hearing about this exemption, but they don’t see any action on it. They’re obviously worried that they’re going to get stuck with thousands of dollars in extra property taxes that’ll get passed on to either renters or small businesses that are already kind of hanging on by a thread,” said Ald. Scott Waguespack (32nd).
“I don’t think we’ve effectively explained to them what that actual hit is going to be. If you’re relying on the aldermen to go out there and say, ‘Suck it up and take it,’ we need to be more forthright and tell them, ‘This is what you’re going to get stuck with.’”
A bill reflecting the mayor’s desire to double the homeowners exemption — forcing commercial property owners to absorb an even bigger share of the burden — was filed late Monday in Springfield.The Illinois House Revenue Committtee is expected to vote on the legislation on Tuesday.Once again, Holt said she expects Rauner to come around and support the mayor’s plan. She noted that the last exemption passed by “almost a unanimous” vote.
“We understand the governor’s point of view. But we certainly think this is a better way to protect homeowners than what he’s been discussing to date. And it’s also purely local. It would be about the City of Chicago and our taxing base and not about any other community,” Holt said.
Ald. Pat Dowell (3rd) said she’s “not as hopeful as you are,” then pressed Holt to outline Plan B.
The fallback is similar to the widely-ignored, 2010 plan offered by then-Mayor Richard M. Daley. Daley set aside $35 million for rebate checks; in the end, only $2.1 million was distributed because most homeowners didn’t bother to apply.
“With a rebate, homeowners have to come out of pocket first and then get reimbursed. For some lower-income homeowners, that’s going to be difficult. We’d rather see that discount taken off their tax bill. And second, City Council and the administration would have to come up with a funding source to pay the rebate,” Holt said, pegging the cost at $35 million to $40 million.
Emanuel is hoping for a lopsided vote on the massive property tax increase to prove that the City Council is united in its resolve to join him in pulling Chicago “back from the financial brink.”
The mayor has flatly predicted that he has the votes to do just that.
If there was any doubt the mayor will deliver on that bold prediction, Monday’s debate put those questions to rest.
Burke pointedly referred to the language of state legislation. It uses the word “shall” not “may” to describe the City Council’s obligations to shore up police and fire pensions.
The chairman also argued that not enough attention has been paid to what he called the “Sword of Damocles” hanging over the City Council’s head.
It empowers the state to withhold Chicago’s share of state income and sales tax revenues within 90 days of any missed pension payment.
“We’re damned if we do and damned if we don’t,” Burke said.
Burke’s Finance Committee is scheduled to vote on Emanuel’s $712 million revenue package, including the property tax increase, on Tuesday.
