With the first installment of property tax bills reflecting a $588 million increase due to arrive in mailboxes within weeks, Chicago aldermen are bracing for a flood of complaints and praying that Mayor Rahm Emanuel will throw them a life raft before they drown politically.
Emanuel had hoped to persuade Gov. Bruce Rauner and the General Assembly to double the homeowner’s exemption from $7,000 to $14,000 so that homes worth up to $250,000 would be held harmless from the record property tax increase for police and fire pensions and school construction.
The homestead exemption was the mayor’s preferred option because it would have been an automatic discount taken off the tax bill. That’s compared to a rebate that would require beleaguered low-income homeowners to lay out the money, apply for the rebate, and be reimbursed.
But when the General Assembly adjourned its spring session without a budget or even a stopgap plan to fund public schools, the homestead exemption became yet another casualty of the marathon stalemate between Rauner and Democratic legislative leaders.
It was a long shot anyway since Rauner wants to freeze property taxes for two years and had made it clear he strongly opposed Emanuel’s plan.
Now the Emanuel administration is scrambling to craft a replacement in time to inoculate aldermen from at least some of the political fallout that’s coming.
“It’s something that should have been a high priority for the mayor. It wasn’t. Now he’s scrambling before the bills come out. They should have been working on this . . . and had a plan in place. This wasn’t something that came up out of the blue. We’ve been talking about this since last October,” said Ald. Scott Waguespack (32nd).
Ald. Roderick Sawyer (6th), chairman of the City Council’s Black Caucus, said he can only hope the rebate is approved “before the bills hit. . . . Otherwise, it’s gonna be ugly. It’s gonna be a rebellion, particularly in higher rent districts. Those areas are gonna be up in arms.”
Ald. George Cardenas (12th), chairman of the Hispanic Caucus, said he’s meeting with top mayoral aides later this week to hear details of the rebate plan.
“My concern is, is it gonna work? Will it be something people will take advantage of or will it be just another ruse?” Cardenas said.
If City Hall “publicizes the hell out of” the property tax rebate and offers it for at least six months, Cardenas said, he has little doubt that beleaguered homeowners will take advantage of it, unlike past rebates that were widely ignored.
“When they got hit with garbage fees, you should have seen people berating us. They were charged for months and months. It was backloaded onto their water bill. . . . [T]hey had this huge liability they didn’t expect,” Cardenas said.
Aldermen were so convinced that Springfield would do nothing to insulate Chicago homeowners, they tripped over themselves to propose local alternatives.
Three competing proposals are still pending in the City Council. All are 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.
The rebate plan championed by Ald. Proco Joe Moreno (1st) would be an “opt-in” plan that would apply to owner-occupied households whose annual incomes do not exceed $100,000. It would create a “rebate rate” by subtracting household income from $100,000, then multiplying by the difference in tax rates from year to year and assessed value.
The plan proposed by rookie Ald. Carlos Ramirez-Rosa (35th) and embraced by the City Council’s Progressive Caucus would apply to those with incomes under four times the poverty level, estimated at $47,000 for an individual, $64,000 for a couple and $97,000 for a family of four. Based on the tax increase and the property’s assessed value, the plan would likely produce a $400 rebate on a $475 increase, sponsors said.
The third plan was tailor-made by Lincoln Park Ald. Michele Smith (43rd) to prevent “longtime” residents from losing their homes. It would be available to homeowners who have an annual income of less than $100,000 or are older than 60 and have lived in their homes for more than 18 years.
If any of those criteria is met, the homeowner would qualify for a “rebate rate” calculated much like Moreno’s. If the new assessed value is more than 30 percent greater than the previous year’s assessment, Smith would offer a rebate.
On Wednesday, the Emanuel administration refused to say which of the three alternatives it would choose or whether the mayor intends to craft his own plan.
Top mayoral aides were equally tight-lipped on how the cash-strapped city would bankroll the rebate.
Budget Director Alex Holt has pegged the cost of a citywide rebate at between $35 million and $40 million. She has challenged aldermen to come up with a funding source. Moreno proposes to replace Chicago’s $9.50-a-month garbage collection fee with a volume-based, “pay-as-you-throw” fee for each container that would have the added advantage of encouraging recycling.
Earlier this year, a Chicago Sun-Times analysis revealed that the 42nd Ward — which includes downtown office buildings and condominium high-rises — is Chicago’s property tax king, paying $1 of every $4 tax dollars collected in the city last year.
Seven other wards, most of them ringing the 42nd Ward, accounted for another 25 percent of the city’s total property tax tab.
That’s why Waguespack is concerned about how the rebate is structured.
“The impact was in a handful of wards. That’s a concern for people — that we’re not continuing to push the burden to just one pocket of taxpayers. We need to make sure it’s spread out evenly,” he said.
The rebate plan is particularly important considering Emanuel has offered to raise property taxes by an additional $175 million for teacher pensions whether or not Springfield does its part to bail out the nearly bankrupt Chicago Public Schools.
Civic Federation President Laurence Msall said he “understands the city’s wish to lower the tax burden” on homeowners with $318 million of the $588 million increase due to hit this year.
But he said it is “difficult to see how the city could afford a property tax rebate plan given the current state of its finances and lack of reserves.”
“Because there is no long-term plan for some of the city’s pension funds, it would be premature to issue property tax rebates when the City will eventually need additional tax revenues.”
Msall also noted that rebate offers are “much less efficient” than other kinds of property tax relief.
“The most efficient way to do so would be through a means-tested, state-administered circuit breaker program,” he said.
A circuit breaker program provides relief when a homeowner’s property tax liability exceeds a certain percentage of their annual income.