Mayor’s property tax rebate won’t hold homeowners harmless

Before raising property taxes by $588 million for police and fire pensions and school construction, Mayor Rahm Emanuel vowed to double the homeowners’ exemption so homes worth less than $250,000 would be held harmless.

The plan went nowhere in Springfield.

The “hold harmless” pledge will hardly apply to the after-the-fact property tax rebate the mayor and aldermen are crafting to inoculate themselves from at least some of the political fallout.

According to an analysis prepared by the city’s Office of Budget and Management, the average rebate will range from $100 to $195, depending on which of four pending options the aldermen choose. With varying income limits and $160,000 the most generous, as few as 100,000 households would benefit. Renters could be in line for an average break of $254, if they are even included in the giveback.

That’s just a fraction of the average increase, which is estimated at 13 percent, or about $413, for a single-family home with a sale price of $225,000, according to tax rate figures released this week. Just over half of that 13 percent increase is tied to city government.

The overall price tag for the rebate will range from $10.4 million for a simple, $25 to $200 cash giveback modeled after former Mayor Richard M. Daley’s widely ignored 2010 offer, to $50 million for the soup-to-nuts version proposed by rookie Ald. Carlos Ramirez-Rosa (35th).

“Ald. Rosa’s has a higher income limit with relief to renters. That’s why his is higher. We had a conversation today about what the appropriate income cap might look like. There’s some desire to have a sliding scale based on federal poverty levels. Some wanted relief for renters. Other aldermen were not as interested in that,” said Budget Director Alex Holt.

Civic Federation President Laurence Msall has questioned whether a city that needs “additional tax revenue” to save its largest employee pension fund and an additional, $175 million property tax increase for teacher pensions can afford to bankroll a property tax rebate.

Given that claim, Holt was asked whether the city can afford a $50 million rebate plan.

“You’re right. We have a lot of priorities,” she said. “Certainly, the more expensive proposals will be harder to fund,” the budget director said after closed-door briefings with small groups of aldermen.

“We’ve got to find a balance between really helping people with this year’s increase and doing something we can try to fund. We haven’t reached that balance yet,” she said.

Holt said she doesn’t have a favorite among the four competing proposals, and she plans to work with aldermen to craft and fund a hybrid version that “takes elements from each.”

Pressed on how the plan would be financed, Holt said, “We’ll need to come up with a revenue source. We don’t have one yet. That’s part of the conversation: what the options are. We need to come up with a final option. We haven’t done that yet.”

Ramirez-Rosa said one specific revenue source was raised during his aldermanic briefing: a nickel-a-bag tax on paper bags to raise $10 million a year.

Two years ago, the Illinois Retail Merchants Association pushed hard for a 10-cent tax on paper bags that cost three times as much as plastic to allow retailers to recoup the cost of Chicago’s ban on plastic bags and give consumers an incentive to bring re-usable bags on shopping trips.

But Mayor Rahm Emanuel and Ald. Proco Joe Moreno (1st), chief sponsor of the partial ban on plastic bags, stood their ground against the tax idea.

They argued that there was nothing stopping retailers from imposing such a fee, but the City Council was not about to do it for them and wear the jacket for nickel-and-diming Chicagoans.

On Tuesday, Moreno changed his tune.

“Some environmentalists are urging us to do that. The Retail Merchants Association is, too. So, we could have a triple win on that. The fee would be directly used for a tax rebate on middle income folks,” Moreno said.

Ramirez-Rosa made no apologies for the $50 million cost of his Cadillac rebate plan. he called it an “opening salvo” for negotiations.

“I want to make sure we have a rebate that’s tied to household income that’s substantial and also provides relief to renters. As long as we have those three things, I’m willing to compromise and work with my colleagues,” he said.

Relief for renters is essential because renters comprise “the bulk of the work families who will feel the pain from this property tax increase,” the alderman said.

With property tax bills reflecting a $318 million increase for police and fire pensions due to arrive in Chicago mailboxes in July, Holt said, “We’re going to need to settle on something, probably in the next month.”

No matter what the final plan looks like, Holt said the city plans to enlist help from community groups and delegate agencies that “already work in neighborhoods with connections to the way to advertise and reach out to people” and encourage them to take advantage of the rebate.

“It will take a lot of aggressive action,” she said.

If Emanuel has his way, the rebate will be a one-time shot that lasts only for one year. The mayor plans to renew his push to double the homeowners’ exemption during the post-election veto session or, failing that, in January, top mayoral aides said.