Warning that a taxpayer “revolt is upon us,” aldermen on Tuesday gave the cold shoulder to Mayor Rahm Emanuel’s plan to raise utility taxes to save the largest of Chicago’s four city employee pension funds.
Top mayoral aides will hold a series of closed-door aldermanic briefings Wednesday to outline the mayor’s plan to reform and fund a Municipal Employees Pension fund with 71,000 members and $18.6 billion in unfunded liabilities.
Aldermen who draw their own retirement checks from the Municipal pension fund are going into those meetings loaded for bear. That’s after the Chicago Sun-Times lifted the veil on Emanuel’s plan to steer clear of a third straight property-tax increase and generate the $250 million to $300 million in new annual revenue needed by raising utility taxes instead.
“A utility tax hits the working class — my community — the hardest. Just like the gas tax. Just like the garbage fee. It’s an add-on. It hits the folks who can least afford it. Rents are going up. People will not be able to afford a home, let alone heat it,” said Ald. George Cardenas (12th), chairman of the City Council’s Hispanic Caucus.
“We can’t just keep imposing taxes. There’s an uproar ensuing. The revolt is upon us. … I understand we want to fix the pension problem. But, all our schools have lost enrollment. People are saying, ‘I’ve had enough. I’m done.’ If we keep raising these taxes, there’s gonna be nobody left to pay.”
Ald. Roderick Sawyer (6th), chairman of the City Council’s Black Caucus, said a “relatively new” City Council “not responsible for the laissez-faire” attitude toward Chicago’s pension crisis has no choice but to bite the bullet.
“We’re trying to right the wrongs of decades of mismanagement. … It’s a tough situation to be in,” he said.
But, Sawyer said utility taxes are “historically kind of a regressive tax. … It’s gonna hurt people more. That alone doesn’t start off well.”
Instead of socking it to those who can least afford it, Sawyer urged Emanuel to consider big-money revenue ideas the mayor has long dismissed: a “municipal” income tax; a “commuter” tax on suburbanites who work in the city; or a transaction tax on LaSalle Street exchanges — which is for now precluded by state and federal law.
“There have been a lot of good ideas out there that we need to start looking at to share that burden a little bit with those who work in the city and don’t pay taxes here,” Sawyer said.
Ald. Pat O’Connor (40th), Emanuel’s floor leader, helped persuade a reluctant City Council to approve a $588 million property-tax increase for police and fire pensions and school construction last fall.
He’s not looking forward to playing the political heavy again.
“We’ve got to find a revenue stream that’s reliable and significant. But I’m hoping the discussions will center around options, as opposed to decisions,” O’Connor said.
Asked to assess the prospects of rounding up 26 votes to raise utility taxes, O’Connor was surprisingly non-committal after months of pushback by aldermen emboldened by the Laquan McDonald scandal that has weakened Emanuel politically.
“I don’t know that you can predict what the Council will and won’t do. … Whether they go along with the recommendations of the administration remains to be seen,” O’Connor said.
“But, it’s clear that something has to happen. The status-quo is not a viable option. Everybody who’s been listening knows the pension funds need to be stabilized to stabilize our bond rating and our ability to borrow.”
Another Emanuel ally, who asked to remain anonymous, urged the mayor to consider raising the city’s sales tax — even after County Board President Toni Preckwinkle beat the mayor to the punch.
“She committed to getting rid of it, reimposed the penny and you don’t hear a word about it. There have been absolutely no repercussions for her,” the alderman said.
“I don’t know why the fact that Preckwinkle raised it pre-empts us from ever touching it. That spreads it around and captures money from people who are not property owners in Chicago.”
In late June, Emanuel agreed to raise property taxes by an additional $250 million for teacher pensions in exchange for up to $600 million in additional state funding.
But, the final language of that state bailout got aldermen off the hook to approve the increase. Instead, it’ll be a vote by the Emanuel-appointed Chicago Board of Education.
Allowing aldermen to escape another difficult vote was supposed to make it easier for Emanuel to win City Council approval of the tax increases needed to save the largest of Chicago’s four city employee pension funds.
It may not work out that way if the mayor insists on raising utility taxes, said Ald. Scott Waguespack (32nd), one of Emanuel’s most outspoken Council critics.
“It hits everybody’s pocket book the same way a property tax hike does. In some cases, it can be worse because of, in some cases, Chicago’s [frigidly cold] winters. We’ve got to be careful about that,” Waguespack said.
Waguespack urged Emanuel to consider a graduated income tax or the stormwater stress tax on big-box stores that was among a smorgasbord of revenue ideas proposed by the Council’s Progressive Caucus.
“We’ve got a lot of other revenue sources we’ve been providing to the mayor. We need to take a look at all of them before we just say that this is the silver bullet that he thinks it is,” Waguespack said.
“There’s other revenue sources that might not add up to half a billion or a quarter of a billion. But collectively, they might help alleviate a lot of that pain without going straight to everybody’s pocketbook.”