Mayor's plan to drive up phone surcharge by 56 percent

SHARE Mayor's plan to drive up phone surcharge by 56 percent

The monthly surcharge tacked on to telephone bills in Chicago — both cell phones and land lines — would rise by 56 percent on Sept. 1, under a mayoral plan proposed Wednesday to chip away at Chicago’s $20 billion pension crisis.

Mayor Rahm Emanuel made a promise to Gov. Pat Quinn that he would steer clear of the property tax to meet the city’s new statutory obligations to put the Municipal Employees and Laborers pension funds on the road to financial health.

The promise persuaded Quinn to sign a bill increasing employee contributions by 29 percent and reducing employee benefits to save the two funds.

On Wednesday, Emanuel wasted no time in honoring the promise — by substituting the phone tax for the $50 million property tax he originally planned.

The ordinance was co-sponsored by no fewer than 36 of Chicago’s 50 aldermen. That’s how eager they all are to avoid a property tax increase — the third rail of Chicago politics — eight months before the election.

Beginning Sept. 1, the ordinance would increase the monthly surcharge tacked on to telephone bills by 56 percent per line — from $2.50 currently to $3.90. That’s the maximum increase recently authorized by the Illinois General Assembly. A 9 percent increase in the tax on pre-paid phones would take effect Oct. 1.

The $52 million in new revenue will be used to “fully-fund” Chicago’s 911 emergency center and the Office of Emergency Management and Communications that runs it, thereby freeing up $50 million “to be contributed for the first payment” to reform the Municipal Employees and Laborers pension funds, officials said.

At a news conference after Wednesday’s City Council meeting, Emanuel denied that the phone tax was part of a political “shell game” to get past the Nov. 4 gubernatorial election and the Feb. 24 city election for mayor and aldermen, then sock it to taxpayers.

“We’ve introduced this $1.40 addition as a way to avoid increasing property taxes and providing the time so we could search for other revenues so we can actually meet our obligation to secure 61,000 workers and retirees their pension and retirement checks,” the mayor said.

Emanuel’s original plan called for a $250 million property tax increase over a five-year period to save the Municipal Employees and Laborers pension funds.

He shelved it when Quinn said “no can do” to the property tax and demanded that language mandating it be stricken from the Chicago pension reform bill.

The phone tax provided an escape hatch, but it produces nowhere near the $750 million in property tax collections over five years that would have been generated by the mayor’s original plan.

That’s why Emanuel’s commitment to freeze property taxes lasts for only one year.

The mayor has made no promises about the remaining four years of the deal, well aware that Chicago is facing a state-mandated, $600 million payment to save police and fire pension funds even closer to running out of money than the other two.

Asked Wednesday whether a post-election property tax was inevitable, the mayor said, “First of all, you can ask the question next summer. This gives us the opportunity to actually do this the first year without a property tax and the opportunity to search for other revenue sources so we don’t have to do that” in succeeding years.

Pressed further, he said, “It’s a chance to avoid the property taxes and give us time to actually find other ways of doing this without that.”

The telephone tax was originally imposed to bankroll construction of Chicago’s 911 center, only to fall short after massive overruns on the $217 million project. Ultimately, former Mayor Richard M. Daley was forced to saddle another generation of property owners with the burden of paying off the project.


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