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Emanuel eyes senior discount, more meters to soften tax hit

A residential water meter installed by the city of Chicago. | Sun-Times file photo

Senior citizens would be in line for a 50 percent discount — and more homes without water meters could get them — to soften the blow of Mayor Rahm Emanuel’s plan to slap a 30 percent tax on water and sewer bills to save the largest of Chicago’s four city employee pension funds.

Last year, a first-ever garbage collection fee of $9.50 a month emerged as the biggest point of contention in Emanuel’s tax-laden 2016 budget — even more so than a $588 million property tax increase for police and fire pensions and school construction.

To ease the burden on those living on fixed incomes, Emanuel agreed to give senior citizens a 50 percent discount.

Now the mayor is planning to offer seniors a 50 percent discount to ease the burden of the 30 percent tax he wants to add to the “unified utility bill” that includes water, sewer and garbage fees, City Hall sources said Monday.

Already, 66,000 seniors who have a water meter and receive a separate sewer bill are eligible for a sewer exemption.

Under the mayor’s plan, those same seniors would be exempt from paying the 30 percent tax on the sewer portion of their bill. Sewer fees currently amount to 100 percent of water fees, or $3.81 for every 1,000 gallons.

Seniors living in condos, assisted living or apartment buildings where they do not receive a sewer bill are already eligible for a $50 sewer rebate.

To round up the 26 votes he needs to approve his plan to save the Municipal Employees Pension Fund, sources say Emanuel is also looking at beefing up the $5 million pool earmarked to install water meters in Chicago households — roughly half of which still don’t have them. Since the new utility tax will be based on water usage, installation of meters in homes without them would promote water conservation and, if it works, ultimately reduce the tax burden.

“No one wants to raise revenue, but the alternative is unacceptable. The mayor has been clear that he’s opposed to raising property taxes again and he’s opposed to cutting basic services like graffiti removal, garbage collection and tree-trimming,” Molly Poppe, a spokesperson for the city’s Office of Budget and Management, said in an email.

“Unfortunately, there may have been more options if this had been dealt with years ago and now, there are very few viable paths to shore up our retiree pension.”

Earlier this month, Emanuel put in place the final piece of the pension puzzle he was elected to solve, but his regressive approach will impose another heavy burden on Chicago homeowners reeling from rising property taxes compounded by reassessment.

To generate $239 million over five years to save the Municipal Employees Pension Fund, Emanuel wants to slap a new and escalating “utility tax” on water and sewer bills.

The plan is to start with a roughly 7 percent tax, double it in year two, impose a 21 percent tax in year three and end at 30 percent in years four and five.

After that, the tax would rise annually to meet the “actuarially required contribution” to achieve a 90 percent funding ratio by 2057 for a Municipal Employees pension with $18.6 billion in unfunded liabilities that is due to run out of money in 2025.

The average Chicago household currently pays $686.04 a year for water and sewer services that use 7,500 gallons of water.

Emanuel is pressuring the City Council to approve the new tax at its meeting Sept. 14. It is expected to cost the average homeowner $4.43 more monthly, or $53.16 a year, in 2017. In the fourth year, the added annual burden will be $225.96.

Although aldermen have complained about the impact on homeowners who can least afford to pay, Emanuel has ruled out alternatives and blaming Wall Street rating agencies.

The mayor has said rating agencies want a single, reliable revenue source to put the Municipal Employees Pension Fund on solid footing and it has to be a tax the City Council can enact without relying on the General Assembly.

But that was not enough to raise Chicago’s BBB bond rating or persuade Standard & Poor’s to remove the “negative” outlook that could signal a further downgrade.

The City Council’s 11-member Progressive Caucus demanded Monday that Emanuel provide assumed investment returns and “actuarial” proof that the 30 percent utility tax will generate enough money to put the city’s largest pension fund on the road to financial health.

Budget Director Alex Holt has said the administration “does not yet have actuarial studies” to support the mayor’s claim and she’s not certain when those studies will be available.

“As everyday Chicagoans have faced drastic property tax increases, we as elected representatives need to ensure that the proposed fee will, in fact, cover the payment schedule that has been laid out before we can even consider voting on this,” Progressive Caucus Chairman Scott Waguespack (32nd) said in a news release.

The Progressive Caucus, comprising Emanuel’s most outspoken critics, have asked the City Council’s financial analyst to conduct an independent study of the mayor’s tax plan.

“We are troubled by the Emanuel administration’s request that we simply take their word for it that their accounting is accurate, when other analysts and experts have raised doubts,” Ald. Susan Sadlowski Garza (10th) added. “This matter is too important to ram through without proper analysis.”

The free flow of water to Chicago customers has been a controversy for decades.

In 1989, then-Mayor Richard M. Daley took office armed with a transition report that recommended water meters. Two months later, the idea was shelved. The price tag — then $100 million — was deemed unaffordable.

In 2009, Daley embarked on a 17-year, $290 million plan to entice Chicago homeowners to volunteer to have water meters installed instead of paying a flat fee for unlimited use.

The City Council signed off on the “Meter Save” program after then-Water Commissioner John Spatz offered participants a guarantee that for seven years their water bills would be no higher than they would have been at flat-fee rate.

Since the mid-1970s, all commercial properties, newly constructed homes and residences undergoing major renovation have been required to have meters.

But when the Meter Save program was launched in 2009, 327,000 single-family homes and two-flats still lacked meters that accurately record water use and charge customers accordingly in bills that arrive every two months.

Instead, they paid a flat fee twice a year based on lot size and number of faucets, toilets and hose connections.