Mayor likely to get utility tax, but pension hole not filled yet

Mayor Rahm Emanuel likes to “put points on the board” and take a victory lap every time he does.

Expect more of the same on Wednesday, even though the “victory” means more pain for Chicago homeowners and businesses already reeling from $838 million in property tax increases for police, fire and teacher pensions and school construction, a new garbage collection fee, and a doubling of water rates in the mayor’s first term.

After weeks of behind the scenes lobbying, the City Council is expected to approve Emanuel’s plan to slap a 29.5 percent tax on water and sewer bills to save the largest of Chicago’s four city employee pension funds.

It’s the final piece of the pension puzzle that Emanuel was elected to solve after his political mentor, former Mayor Richard M. Daley, pretty much ignored the festering problem and made it worse by freezing property taxes for 19 of his 22 years in office.

Emanuel’s victory would be sweeter if not for the fact that the parade of tax increases is not over.

The Municipal Employees Pension Fund would still be left with a gaping hole in 2023 — even after the utility tax is fully phased in — that would almost certainly require a steady stream of additional tax increases to honor the city’s ironclad commitment to reach 90 percent funding over a 40-year period.

An Illinois General Assembly mired in its own marathon budget stalemate also needs to sign off on the employee concessions tied to the mayor’s plan to save the Municipal Employees and Laborers pension funds and replace pension rescue plans overturned by the Illinois Supreme Court.

In addition, there’s no guarantee Chicago will shed the junk bond rating — shared only by Detroit among major cities — that has cost taxpayers tens of millions of dollars in penalties and higher interest rates.

Quite the contrary.

Moody’s Investors managing director Naomi Richman has warned that Chicago will wear the scarlet letter “J” until its massive pension debt stops growing. That would take $1 billion or two more property tax increases to match the record increase that Emanuel pushed through the City Council nearly a year ago.

“It’s letting the problem get worse at a slower pace,” Richman has said of the record increase.

Still, Emanuel and aldermen who walk the tax plank with him can rightfully take a bow for finally facing up to a pension crisis decades in the making, political consequences be damned.

Ironically, one of the only aldermen expected to vote against the increase is Ald. Patrick Daley Thompson (11th), Daley’s nephew.

Thompson’s Bridgeport ward — cradle of Chicago mayors — reportedly has the highest number of city employees per capita of any ward in the city.

But after casting one of only six “no” votes in the Finance Committee, the grandson of one Chicago mayor and the nephew of another argued that Emanuel’s water and sewer tax would impose an “unreasonable burden” on his constituents.

“Fully funding our pensions for Chicago’s municipal workers is both our moral and legal obligation,” Thompson was quoted as saying in a press release that could be seen as hinting at a 2019 campaign for mayor.

“But we must pursue this goal in a way that does not solely rely on the same group of taxpayers who are already facing an array of other increased taxes,” he said.

The rookie alderman said he is “willing to take the tough vote.” But he urged Emanuel to seriously consider “alternative revenue sources,” like a sales tax on services that only the Illinois General Assembly can approve, or video gaming, which Emanuel has emphatically and repeatedly rejected.

Asked Tuesday whether his vote against the utility tax was a prelude to a 2019 race for mayor, Thompson said: “Absolutely not. It’s a reaction to my community.”

Even without Thompson, the mayor is expected to have more than enough votes to pass the utility tax. It will cost the average Chicago homeowner $225.96 more annually by 2020, when the four-year phase-in is completed, and poor people who wash their clothes at laundromats are expected to see that cost go up by roughly 40 cents per load.

What’s expected to be a surprisingly lopsided vote was helped along by three major factors:

• Emanuel got aldermen off the hook for approving the $250 million property tax increase for teacher pensions. That increase was authorized by the mayor’s hand-picked Board of Education.
• With the immediate pension crisis behind Chicago and the smallest operating budget shortfall in a decade, the mayor has promised to hire hundreds of additional police officers to confront a 50 percent spike in homicides and shootings.
• The reality that doing nothing is not an option. It would allow the city’s largest pension fund — from which aldermen draw their own retirement checks — to go bankrupt in 2025, forcing the city to pay retirees on an as-you-go basis. That would take an additional $900 million to $1 billion per year that Chicago taxpayers don’t have.