People who wash their clothes at Chicago laundromats will get soaked by Mayor’s Rahm Emanuel’s plan to slap a 29.5 percent tax on water and sewer bills to save the largest of four city employee pension funds, an industry trade group charged Tuesday.
Paul Hansen, president of the Illinois Coin Laundry Association, branded the new tax designated by the mayor to shore up the Municipal Employees pension fund “immoral” because of the disparate impact it would have on low-income residents who can least afford it.
Hansen said that in Emanuel’s first term, laundromat owners “tried to absorb most” of the mayor’s plan to double water rates to rebuild Chicago’s crumbling water and sewer system. This time, however, laundromats will have no choice but to pass the new tax on to consumers, Hansen said.
Chicago laundromats charge anywhere from $2.50 for a small, top-loading, home-style washer to $11 for a machine with a much larger capacity that can hold up to eight regular loads of laundry.
“There’s no way to effectively do a small, 7 percent or 14 percent increase as this thing rachets up. They’re gonna have to increase their prices by 25-cent increments. Which means they’ll either have to over-charge or under-charge. People are not gonna be able to wash their clothes as often,” Hansen said.
“They need to find another revenue source, instead of putting this on the backs of the poor and working class. It doesn’t matter what your income is. You’ll have to pay this tax and it’ll hit poor people twice. They’ll pay it at home and they’ll pay it again when they wash their clothes. That’s not a luxury. It’s a necessity.”
Hansen noted that the tax on water and sewer bills comes on the heels of a series of property tax increases that have nearly doubled the city’s levy.
The business community has also taken a series of financial hits, thanks to mandates imposed by the City Council. They include: a higher minimum wage; an ordinance requiring Chicago employers large and small to provide their employees with at least five paid sick days-a-year and a partial ban on plastic bags.
“Many laundromats are already teetering on the edge of insolvency with all of these other costs that the city has heaped upon us over the last several years. As many as 25 laundromats have closed. It’s gonna be harder and harder to find a place to wash your clothes. People will have to travel farther. It’ll be harder to get there,” Hansen said.
Molly Poppe, a spokesperson for the city’s Office of Budget and Management, said the mayor “does not take the decision to raise revenue lightly.” But, Emanuel has “very limited options available” to confront a massive pension liability that’s the “result of decades of underfunding,” she said.
“We understand the possible impact on Chicagoans, which is why the mayor was adamant that we ensure seniors receiving the senior sewer exemption are also exempt from paying the water-sewer tax on the sewer portion of their bill,” Poppe wrote in an email.
Last week, Emanuel intensified his efforts to round up the 26 City Council votes needed to slap a 29.5 percent tax on water and sewer bills to save a Municipal Employees Pension Fund with $18.6 billion in unfunded liabilities that’s due to run out of money in 2025.
In a series of closed-door briefings, aldermen were handed a summary sheet that shows how the utility tax would impact his or her constituents over a four-year phase-in period, how many would qualify for the 50 percent senior discount and how favorably Chicago water and sewer bills would compare to the suburbs and other major cities, even with the tax increase.
The schedule calls for Chicagoans to pay a tax of 7.7 percent of their combined water and sewer bill next year. That tax will rise to 16.1 percent in 2018, 24.3 percent in 2019 and 29.5 percent in 2020.
In the Southwest Side’s 23rd Ward, that would cost the average owner of a single family home $5 more-a-month and $60 a year in 2017. In the fourth year, the added annual burden would be $252.
Aldermen were also handed results of a new poll conducted for the Illinois Economic Policy Institute that could ease their concerns about walking the political plank — again.
It shows that: 61 percent of the 600 Chicago voters surveyed support the mayor’s plan to save the Municipal Employees pension fund; voters are more concerned about education (35 percent) and crime and police issues (34 percent) than they are about taxes (15 percent); and that twice as many people would rather see the city “raise property taxes and other fees” to solve the city’s pension crisis than cut services like schools and police officers.
Most aldermen emerged from their second set of briefings resigned to the difficult vote they will be asked to cast on Sept. 14.
Doing nothing is not an option. It would allow the city’s largest pension fund to go bankrupt and require paying retirees their benefits on a pay-as-you go basis. That would take an additional $900 million to $1 billion per year.
Rookie Ald. Michael Scott Jr. (24th) was the only alderman to voice major reservations about the utility tax. But, even he did not offer an alternative.
“When you continue to add taxes like the water tax that’s flat across the board and the garbage fee, which is essentially a tax, you continue to hit the people who need it the most greatly. That is my community. I need to protect them,” Scott said last week.
Emanuel has argued that Wall Street rating agencies want a single, reliable revenue source to put the Municipal Employees Pension Fund on solid footing and that it has to be a tax the City Council can enact on its own without relying on authorization from an Il. General Assembly embroiled in its own marathon budget stalemate.