Emanuel seeks 56 percent hike in telephone tax

After playing cat-and-mouse for days, Mayor Rahm Emanuel’s administration came clean Thursday: Chicago wants to raise the monthly fee tacked on to hardline telephone and cell phone bills by 56 percent — to $3.90.

Instead of simply asking the General Assembly to renew a $2.50-a-month surcharge due to expire July 1, cash-strapped Chicago is seizing the opportunity to get more money — by asking state lawmakers to raise the cap to “the highest monthly wireline surcharge imposed by any county or municipality” in Illinois.

The highest monthly telephone tax around the state is the $3.90 imposed in Putnam County. Under the bill Emanuel is hoping to push through in the waning days of the Legislature’s spring session, Chicago would be empowered to match that $3.90 — and go higher if any other city or town goes first.

The new and higher tax would apply to both cell phone bills and wireline phones, according to a summary sheet of the legislation distributed by City Hall. The bill would also empower the city raise the fee imposed on prepaid cell phones from the current “seven percent of the transaction amount” to nine percent.

Last week, Budget and Management spokeswoman Kelley Quinn, Emanuel’s newly-appointed communications chief, would only say that City Hall was “working with the General Assembly on an extension bill.” She refused to say whether city was seeking an increase.

On Thursday, Quinn gave the Chicago Sun-Times the summary sheet that outlines the proposed, 56 percent increase. It does not say how much money Chicago hopes to raise from the increase or what the money would be used for.

Last year, the city collected $90 million from the surcharge on all three types of phones. At that rate, a 56 percent increase would generate an additional $50.4 million.

“The city is supporting this legislation that will reauthorize the imposition of the current fee that is placed on wireless and landline telephones. As part of this legislation the city is seeking the ability under its home rule authority to change the rate of the fee, and the fee would be capped so that it will not exceed the next highest fee in the state,” Quinn wrote in an e-mailed statement.

Aldermen have been searching everywhere for alternatives to Emanuel’s plan to raise property taxes by $250 million over five years to save the Municipal Employees and Laborers pension funds. State law also requires the city to come up with an additional $600 million next year to shore up police and fire pension funds in even worse shape than the other two.

Chicagoans have been paying the telephone tax since 1990, when then-Mayor Richard M. Daley imposed a $1.25-a-month tax to bankroll a new 911 emergency center.

Cost overruns on the $217 million project ultimately forced Daley to use general obligation bonds backed by property taxes to help finance the project that won’t be retired until the year 2023. That’s because the telephone surcharge, originally billed as the primary funding source, fell short of revenues needed to retire the bonds in 1999.

The telephone tax applied only to land lines until 1997, when it was extended to cellular phone service to take advantage of an exploding market.

Eleven years later, the telephone tax was doubled — to $2.50-a-month — to raise an additional $48 million.