Mayor Rahm Emanuel is poised to raise property taxes by $500 million for police and fire pensions and school construction and impose a garbage-collection fee to generate $100 million more, City Hall sources said Wednesday.
The $500 million property tax increase will cost the owner of a home valued at $250,000 roughly $500 more each year. The garbage fee — widely viewed as a back-door property-tax hike — will be a monthly assessment of roughly $11 to $12 per household.
The mayor’s 2016 budget also will include a tax on e-cigarettes and other smokeless tobacco products — roughly equivalent to the $7.17 tax slapped on a pack of cigarettes purchased in Chicago — and a $1 a ride surcharge on Uber and other ride-hailing services.
Sources said the surcharge will be part of a broader package of reforms to level a playing field that has allowed ride-hailing companies to siphon business from taxicabs.
A penny-an-ounce “fat tax” on sugary soft drinks aimed at curbing obesity might also make its way onto the smorgasbord of tax and fee hikes served up by the mayor, depending on the outcome of a public hearing spearheaded by the tax’s champion: Ald. George Cardenas (12th), chairman of the City Council Committee on Health and Environmental Protection.
The 60 percent increase in the city’s property tax levy, along with a garbage fee, ride-hailing surcharge and smokeless tobacco tax, make up the largest collection of tax and fee hikes Chicagoans have ever seen.
But City Hall sources said Emanuel is determined to eliminate the city’s structural deficit, put police and fire pensions on solid footing and eliminate risky financial practices that his predecessor and political mentor, former Mayor Richard M. Daley, used to mask the true cost of city government.
Struggling to solve a $30 billion pension crisis that has dropped the city’s bond rating to junk status, Emanuel needs, even under the best-case scenario, $754 million in new revenue to balance his 2016 budget and shore up police and fire pensions.
And that’s not counting the $9.5 billion pension crisis at the Chicago Public Schools.
During a Jan. 30 debate that preceded Round One of the mayoral sweepstakes, Emanuel ruled out a post-election property tax increase but pointedly confined the guarantee to the city’s operating shortfall.
That prompted then-Ald. Bob Fioretti (2nd) to warn of a “massive” property tax hike for pensions if Emanuel was re-elected. Budget Committee Chairman Carrie Austin (34th), one of Emanuel’s most powerful City Council allies, subsequently embarrassed the mayor by calling a post-election property tax hike inevitable.
Fioretti and Austin were right.
Sources said the 2016 budget that Emanuel will present to the City Council on Sept. 22 will include a $450 million property tax increase for police and fire pensions the mayor once hoped to shore up with revenues from an elusive Chicago casino.
In addition, Emanuel will ask aldermen to adopt a separate levy of $50 million to bankroll school construction and pay off old projects.
For more than 20 years, CPS has been empowered to impose a capital improvement tax but never activated it. In an audit that outlined the “breaking point” in CPS finances, the accounting firm of Ernst & Young suggested that the City Council take advantage of the school construction levy.
Emanuel has offered to raise property taxes by an additional $170 million for the schools, but only if teachers accept the equivalent of a 7 percent pay cut and the state reimburses CPS for “normal” pension costs.
That would require the City Council to cast a second vote — this time to reinstate the old, dedicated property tax levy for teacher pensions.
But sources said the mayor is unwilling to put that money on the table until the union and the Illinois General Assembly step up to the plate. That will obviously have to wait until the budget stalemate between Democratic legislative leaders and Republican Gov. Bruce Rauner has been resolved.
What Emanuel likes to call the “grand bargain” would also require the Legislature to lift the property tax cap on CPS. That’s no sure thing either at a time when Rauner is pushing hard for a property tax freeze.
Together, the increases for both the city and CPS have the potential to raise the annual property tax bill for the owner of a home valued at $250,000 by nearly $700.
The suburban-style garbage-collection fee could be a tough sell.
African-American aldermen have urged Emanuel to trash it on grounds that it will leave some neighborhoods filthy, breed widespread avoidance and possibly, cost laborers their jobs.
But sources said Emanuel is determined to forge ahead with the fee and portray it as leveling the playing field at a time when roughly 40 percent of Chicago households — living in anyplace above a four-flat — already pay for private garbage collection.
Four years ago, Inspector General Joe Ferguson estimated that a volume-based, annual fee of $100 for every 96 gallon cart used could generate up to $125 million a year — even if the fee triggers a 17 percent reduction in household refuse and a similar drop in the number of carts used.
But sources said Emanuel has chosen to go with a flat monthly fee to avoid penalizing families with two or three garbage carts.
With some suburbs using one-man crews, sources said the mayor has approached the Laborers Union about possibly reducing the size of the city’s three-man crews and reassigning those employees to other vital services, like tree-trimming and rodent control.
The city could purchase a “different kind of garbage truck” as older trucks are replaced due to the shift to smaller crews, sources said.
“They’re not all three-men crews. Sometimes there’s three. Sometimes there’s two,” said Chuck Loverde, secretary-treasurer of the Laborers District Council and president of Laborers Local 1092.
“Crew sizes are very efficient in what they’re doing. You see how clean the city is. If crew sizes were affected, the city wouldn’t be as clean as it is.”
James Ellis, business manager of Laborers Local 1001, did not return phone calls.
To generate revenue, union leaders have suggested city crews be given the green light to compete with private scavengers for the right to pick up garbage at more than 1,800 multi-unit residential buildings where city pick-ups were recently discontinued.
Ald. Joe Moore (49th), one of the mayor’s closest City Council allies, said the double-whammy of a property tax hike and garbage collection fee will be one of the toughest votes he has cast.
That’s especially true considering former Mayor Richard M. Daley had a political phobia to raising property taxes that prompted him to freeze them for 17 of his 22 years in office.
The result is that Chicago property taxes are unrealistically low when compared with rates for similarly sized homes in most suburbs.
But Moore said aldermen have little choice now but to swallow the bitter post-election pill and hope outraged constituents calm down by the 2019 election.
“We knew all along we were facing significant fiscal challenges. Without help from Springfield, our range of choices are pretty narrow. The choices are really between bad and worse,” Moore said.
Because of the make-up of his Far North Side ward, Moore said he’ll have an easier time than most voting for what he called a “user fee” on garbage collection.
“You can make an argument that it’s more fair because all of my constituents who are renters and condominium owners have had to pay for their garbage pick-up for decades. They can make an argument that they’re finally leveling the playing field. And it’s a user fee that many suburbanites and many other large cities, for that matter, already pay,” Moore said.
The garbage fee, the ride-hailing surcharge and the smokeless tobacco tax all originated with aldermen.
That allows Emanuel to share the political blame for the avalanche of tax increases that will be needed to steer Chicago away from the financial cliff.
There’s one more idea originating with the anti-Emanuel Progressive Caucus that the mayor is considering — and it has nothing to do with taxes.
To generate millions and give beleaguered motorists a break, sources said the mayor is considering another parking ticket amnesty program that could be extended to the $100 tickets churned out by red-light cameras and the $100 and $35 tickets generated by speed cameras.
In 2002, City Hall raked in more than $8.2 million and wiped 242,000 old parking tickets off the books with a six-week parking ticket amnesty.
Seven years later, the city collected $7 million and wiped 135,000 unpaid parking and red-light tickets off the books during a 10-week amnesty.
City Hall has been reluctant to offer frequent amnesty programs for fear of reducing collection rates by creating the expectation of periodic breaks. There’s still some concern that yet another amnesty would have that same effect. That’s why it’s not yet a sure thing for Emanuel.