City Council approves water-sewer tax to save pension fund

Chicago homeowners have already seen their water rates double and a $9.50-a-month garbage collection fee attached to that water bill in the five years since Mayor Rahm Emanuel took office.

They got soaked again Wednesday, this time to help solve the $30 billion pension crisis that has sunk Chicago’s bond rating to a junk status shared only by Detroit among major cities.

By a lopsided vote of 40 to 10, the City Council approved the mayor’s plan to slap a 29.5 percent tax on water and sewer bills to save a Municipal Employees Pension Fund with $18.6 billion in unfunded liabilities that’s due to run out of money in 2025.

The 10 “no” votes were cast by Leslie Hairston (5th); Susan Sadlowski Garza (10th); Patrick Daley Thompson (11th); Toni Foulkes (16th); David Moore (17th); Chris Taliaferro (29th); Scott Waguespack (32nd); Gilbert Villegas (36th); Anthony Napolitano (41st) and John Arena (45th).

Ald. George Cardenas (12th) walked off the Council floor prior to the vote to protest the mayor’s opposition to a TIF subsidy ordinance that would funnel up to $150 million to the cash-strapped Chicago Public Schools.

The tax will be phased in over a four-year period to minimize the burden on beleaguered homeowners and businesses already reeling from $838 million in property tax increases for police, fire and teacher pensions and school construction.

The average homeowner will pay $53.16 more next year; $115.20 in 2018; $180.96 in 2019 and $225.96 in 2020 and 2021. During the phase-in, the city’s annual take will rise from $56.4 million next year to $240.1 million in 2020.

Prior to the final vote, Finance Committee Chairman Edward Burke (14th) “reserved the right to close” the debate, only to learn that there would no debate.

When Burke asked if any other alderman wished to talk about the tax, he got no takers — even though the City Council has spent hours debating far less weighty issues.

That left Burke to sell the mayor’s tax as the “alternative that makes the most sense” to save the largest of four city employee pension funds.

“We simply cannot saddle Chicago residents with another property tax increase,” Burke said. “The gradual phase-in of the water tax, while not the hoped for panacea to cure the pension deficit, will nevertheless go a long way toward achieving financial stability and head off a potential disaster, which is only nine years down the road.”

After the vote, Emanuel rose to commend aldermen for their “collective courage” to “change the course” of city finances. He acknowledged that saving the “fourth and final” city employee pension fund will not come “without some political cost.”

“They stepped up where other councils in the past were willing to pass on the bill. They stepped up and said, ‘OK, we’re gonna start paying this bill,’” Emanuel said.

“It isn’t popular. Nobody likes to raise taxes. I don’t want to raise taxes. But I know there’s a cost if you don’t do what you have to do — both to the retiree and to the overall health of the city of Chicago.”

The mayor openly acknowledged that the largest of four city employee pension funds would still be left with a gaping hole in 2023 — even after the utility tax is fully phased in. That hole will require “more revenue” to honor the city’s ironclad commitment to reach 90 percent funding over a 40-year period.

But he argued that does not diminish the importance of Wednesday’s vote and its impact on city finances.

“Each of the funds have a revenue stream that gets them through the ramp to the arc. And there will be additional revenue [needed]. Nobody’s ever said that’s not the case,” Emanuel said.

“But now they have individual revenue sources to fund the obligations for retirees. And that’s why the rating agencies, i.e. Fitch, even prior to this vote upgraded their outlook on Chicago. And when I introduced it, S&P also said this would be a positive step.”

Emanuel played cat-and-mouse when asked how he managed to convince 40 aldermen to walk the tax plank with him.

“There’s no secrets here. You approach each alderman based on their interests, based on where they are, things that they would like to work on together. I talk to them and work with them on the basis of what I think is in the overall interest of the city as well as in their interest of what they would like to see. Economic growth, job improvement, quality of life improvement in the wards,” he said.

Pressed to identify specific projects promised in exchange for votes, the mayor laughed and said, “Are you kidding?”

“I didn’t say projects. You just said that. I didn’t say it,” the mayor said. “People care about their ward. We work together on doing those efforts. And I’m gonna continue to do that because, guess what? It’s not just their wards. It’s the city of Chicago.”

Emanuel has accused the Illinois Supreme Court of putting a straight-jacket on Chicago by overturning his plan to save the city’s largest and smallest pension funds.

He has now found a way out of those legal constraints, albeit at a heavy price for Chicago taxpayers and a potential political price for himself and the aldermen who walked the tax plank with the mayor.

Zoning Committee Chairman Danny Solis (25th), the mayor’s most powerful Hispanic ally in the City Council, has predicted a wave of aldermanic retirements and incumbent defeats after the series of difficult votes aldermen have been forced to take in recent years.

A General Assembly mired in its own marathon budget stalemate still needs to sign off on the employee concessions tied to the mayor’s plan to save the Municipal Employees and Laborers pension funds.