City Council budget vote comes with hefty price tag

SHARE City Council budget vote comes with hefty price tag
RAHMEMANUEL072815_999x795.jpg

The City Council is expected Wednesday to approve the city budget by a margin closer than Mayor Rahm Emanuel has ever experienced. | AP file photo

The City Council is poised Wednesday to take a giant step toward solving Chicago’s $20 billion pension crisis, but Chicago homeowners will pay a heavy price: a four-year, $588 million property tax increase and a separate fee for garbage collection.

By a margin closer than Mayor Rahm Emanuel has ever experienced, but still comfortably in the win column, aldermen are expected to take a vote that could cut short their political careers.

The council is expected to approve Emanuel’s $7.8 billion, lower-the-boom budget with more than $720 million in new taxes, fines and fees.

The $588 million property tax increase for police and fire pensions and school construction is the largest in Chicago history. It will be phased in over four years, with the largest chunk — $318 million — tacked on to property tax bills payable in August 2016.

That will be followed by successive increases of $109 million payable in 2017, $53 million payable in 2018 and $63 million tacked on to the property tax bill due in 2019.

The garbage collection fee, commonplace in the suburbs, is a first for Chicago. It will be added to water bills that arrive in mailboxes every other month. If homeowners refuse to pay the garbage fee, city crews would still pick up the trash to avoid exacerbating Chicago’s already serious rodent problem.

But City Hall could threaten to cut off water service and refuse to sell the homeowner city stickers until the fee is paid.

The garbage fee was the biggest point of contention — even more than the record property tax hike — and Emanuel fully understands why.

It’s a new fee for a service many homeowners believe “is kind of baked in” to the normal property tax bill that would add $114 to the annual cost heaped on 613,000 Chicago owners of single-family homes and two-, three- and four-flats that still get city pickups. Senior citizens would get a 50 percent discount.

Ald. Howard Brookins (21st), former chairman of the City Council’s Black Caucus, was so dead set against the idea, he wanted the mayor to cancel the garbage fee and hike the property tax even more to make up for the lost revenue.

“The average property tax increase is $110. The average garbage fee is $120. If you have a two-flat, it’s $240. It’s a hard sell for our residents,” Brookins has said.

“For that small amount of money, we should put it on the property tax bill. I would prefer the city fund basic operations out of the property tax, which is a more reliable tax going forward, and get away from fines and fees or come up with some other ideas.”

North Side aldermen are more upset about the $588 million property tax increase compounded by skyrocketing assessments and by Emanuel’s plan to double the homeowner exemption and shift the burden to commercial property owners and renters. They’re largely responsible for the Finance Committee’s 17-to-10 vote for the $543 million property tax increase for police and fire pensions.

To minimize dissent, Emanuel once again served up a series of compromises to throw aldermen a bone and help soften the blow of the most difficult vote any of them have ever cast.

To appease aldermen concerned that the garbage fee could escalate, switch to a volume-based system or be a prelude to privatization, Emanuel agreed to cap it at $9.50 per household until after the 2019 election and segregate the revenue generated in an enterprise fund.

To avoid turning a $45 million property tax increase for school construction into a blank check for the scandal-scarred Chicago Public Schools, the mayor agreed to require CPS to make periodic reports to the City Council on projects bankrolled.

Emanuel also agreed to shelve his controversial plan to privatize Chicago’s 311 non-emergency system, preserving the jobs of 73 call takers who know the city’s streets and alleys instead of handing them over to employees overseas who lack that intimate knowledge.

Finally, the mayor found a way to appease the taxicab industry’s City Council allies and still salvage his plan to allow Uber, Lyft and Sidecar to make airport pickups without requiring their drivers to get chauffeur licenses.

Instead of making chauffeur licenses a condition for making pickups at O’Hare and Midway airports, as aldermen had demanded, Emanuel agreed to study the idea and charge the burgeoning industry 2 cents more per ride in the meantime for a total fee of 52 cents.

At least some of the money would be used to help cabdrivers defray the cost of obtaining a chauffeur license, a hoop through which they alone still have to jump.

To confront Chicago’s $20 billion pension crisis and eliminate the structural deficit he inherited by the end of his second term, the mayor’s $720.7 million revenue package includes a four-year, $543 million property tax increase for police and fire pensions; a $45 million property tax levy for school construction; a $9.50-a-month garbage collection fee to raise $62.7 million; $13 million in higher fees for building permits; a $1 million tax on e-cigarettes; and $48.8 million in fees and surcharges on taxicabs and ride-sharing services that have siphoned business away from them.

There’s also a 15 percent increase in taxicab fares in exchange for giving Uber, Lyft and Sidecar the keys to the airport kingdom. Ride-hailing drivers who service the airports would be required to register with the city’s Department of Aviation.

The revenue package also includes a few late surprises for which the mayor’s office has provided no revenue estimates.

There’s a 66 percent increase in Chicago booting fees along with the green light for City Hall to start using “self-release” Denver boots with a daily fine of $50 if the boot is not returned within seven days.

There’s also a fivefold increase in the maximum penalty seldom imposed against property owners who fail to remove snow and ice from the sidewalk adjacent to their buildings.

Motorists who drive without insurance will find themselves in violation of the city code, with fines ranging from $500 to $1,000 for the first and second offense to $1,000 for every subsequent offense.

For the first time, City Hall will require companies that “aggregate and sell” parking spaces, including those selling spaces through mobile apps, to collect the city’s parking tax, which stands at 22 percent on weekdays and 20 percent on weekends.

Yet another last-minute change would tie the annual permit for overweight trucks to the Consumer Price Index to “better account for the impact of large trucks on city streets.”

Last month, Emanuel urged the City Council to go down in history “as the men and women who pulled Chicago back from the financial brink” and vowed to stand behind aldermen who stand with him — whether or not a second term is his last.

“Now is the time. This is the council. Let us commit to finishing this job,” Emanuel said then.

“Don’t worry about my re-election. Worry about the future of Chicago.”

To send as strong a message as possible to Wall Street rating agencies that have dropped Chicago’s bond rating to junk status, Emanuel is expected to insist on just one City Council vote on the budget and the $720.7 million revenue package.

In the past, aldermen took a series of votes, first on the mayor’s overall budget, then on the tax package. There were even separate votes on the property tax levy.

Emanuel was determined to avoid that for fear the vote would be close.

“We don’t ask what the size of the vote was for something like this. We want to know, does it pass or not?” said Standard & Poor’s analyst John Kenward, calling the mayor’s budget a “good first step.”

The mayor’s decision to insist on a single vote belies the claim the mayor made last week that he could care less about the margin of victory.

“Two other capitals — Springfield and Washington — are making no fiscal or financial progress. Some in the Republican Party in Washington are talking about shutting the government down. Down in Springfield, we have the longest period of time in Illinois history where there’s a standoff on the budget,” Emanuel said.

“Chicago will actually take a step forward in righting its fiscal ship. Yes, you’ll count the vote …. That’s the legislative process. What will be no doubt is making progress and righting the ship.”

The fiercely competitive Emanuel added, “I’m going to leave the prognosis and the predictions to others. I’m going to focus on making progress …. We’re going to meet exactly the goal I set out in my budget speech to right Chicago’s financial ship so we continue to take the one doubt that exists around Chicago’s economic and job creation [off the table]…. The one doubt around Chicago is our fiscal stewardship. It’s been building for years. We’re going to address it.”

Determined to bite the bullet and get it over with early in the four-year term, aldermen have questioned why Emanuel did not propose an even bigger property tax increase instead of assuming that Gov. Bruce Rauner will sign a bill that gives Chicago more time to shore up police and fire pensions.

“What I’m detecting here is an appetite to get this over with one way or the other, and not keep coming back and doing it again and again,” Ald. Edward Burke (14th), chairman of the City Council Finance Committee, said last week.

In proposing a four-year, $543 million increase for police and fire pensions, Emanuel made a rosy and risky assumption that, if he’s wrong, would make the financial hit absorbed by Chicago taxpayers significantly worse.

The mayor assumed that Rauner will sign legislation — approved by the Illinois House and Senate, but not yet on the governor’s desk — giving Chicago 15 more years to ramp up to 90 percent funding for the police and fire pension funds.

Chicago taxpayers would still be on the hook for $619 million in payments to the two funds next year — more than double the current payment. But that’s still $220 million less than the city would have been forced to pay and an $843 million break over the next five years.

“Would it not be more intelligent to levy at that amount — $220 million or whatever it is — and then abate … when the governor signs it?” Burke said.

Budget Director Alex Holt has said there had been an internal discussion about taking that approach, but it was ultimately rejected.

“Our concern is that the current law actually requires a $700 million increase in a two-year period versus the $428 million we’re discussing. And we’re confident and hopeful that the governor should accept [it] for a couple of reasons,” Holt said.

“One is that it is very much about local control, which is a tenet of his administration. Something that we’ve negotiated with police and fire. Second, he included our proposal in his own pension proposal. … Since it only impacts the city of Chicago and it’s been consistent with his approach that it shouldn’t cause any issues.”

That’s not the only risky assumption involving Rauner that has raised eyebrows among aldermen.

Emanuel has also assumed that his old friend will go along with the mayor’s plan to double the homeowners exemption from $7,000 to $14,000 so that homes worth less than $250,000 would be shielded from the record property tax increase.

Rauner, who wants to freeze property taxes for two years, has made it clear he strongly opposes Emanuel’s plan.

“What people are looking at is, they keep hearing about this exemption but they don’t see any action on it. They’re obviously worried that they’re going to get stuck with thousands of dollars in extra property taxes that’ll get passed on to either renters or small businesses that are already kind of hanging on by a thread,” said Ald. Scott Waguespack (32nd).

Holt has argued that the property tax relief doesn’t need to be approved until the end of the year or later because the 2015 increase won’t be payable until next August.

And the budget director has said she she expects Rauner to come around and support the mayor’s plan. She noted that the last exemption passed by “almost a unanimous” vote.

“We understand the governor’s point of view. But we certainly think this is a better way to protect homeowners than what he’s been discussing to date. And it’s also purely local. It would be about the city of Chicago and our taxing base and not about any other community,” Holt said.

Ald. Pat Dowell (3rd) has said she’s “not as hopeful as you are,” then pressed Holt to outline Plan B.

The fallback is similar to the widely ignored, 2010 plan offered by then-Mayor Richard M. Daley. Daley set aside $35 million for rebate checks; in the end, only $2.1 million was distributed because most homeowners didn’t bother to apply.

“With a rebate, homeowners have to come out of pocket first and then get reimbursed. For some lower-income homeowners, that’s going to be difficult. We’d rather see that discount taken off their tax bill. And second, City Council and the administration would have to come up with a funding source to pay the rebate,” Holt has said, pegging the cost at $35 million to $40 million.

Weeks before, what was arguably the most important City Council vote in a generation, if not Chicago history, Emanuel flatly predicted that he has the votes to do just that.

There was never any doubt the mayor would deliver on that bold prediction. The only question was how many dissenting votes would there be after all of Emanuel’s arm-twisting and horse-trading.

Burke has pointedly referred to the language of state legislation. It uses the word “shall” not “may” to describe the City Council’s obligations to shore up police and fire pensions.

The chairman also argued that not enough attention has been paid to what he called the “sword of Damocles” hanging over the City Council’s head.

It empowers the state to withhold Chicago’s share of state income and sales tax revenues within 90 days of any missed pension payment.

“We’re damned if we do, and damned if we don’t,” Burke said.

If Emanuel succeeds in persuading Rauner to hold harmless homes valued at less than $250,000, Emanuel has said that would literally mean that “one of every four dollars of this property tax increase will come from the Central Business District.”

Downtown Ald. Brendan Reilly (42nd) is not at all certain that’s a good thing. He has noted that commercial property is already assessed at 2.5 times the rate of residential property in Cook County.

“I represent downtown stakeholders. … This could be a very heavy burden for them to carry,” Reilly has said.

“There’s a general principle that those who can afford to pay should pay a bit more. The question is, at what point do we hit a tipping point for the city of Chicago’s economy?”

The Latest
Archer Courts, 2242 S. Princeton Ave., will soon get a new hot water system, ventilation system and rooftop solar panels through a grant from the U.S. Department of Housing and Urban Development.
Leasure will make his major league debut on Thursday.
The funds will help target a big problem for a city opening its doors to President Joe Biden and the Democratic National Convention in August. Just 17.94% of registered voters in suburban Cook County and 25.7% of registered voters in Chicago voted in person or by mail in the March 19 primary.
Playing time has dwindled for Tinordi, a physical defensive defenseman who was a pleasant surprise for the Hawks last season but hasn’t found nearly as much success without Connor Murphy.
His surgeons spent 10 hours transplanting his new lungs and liver in September. Six months after the operation, Dr. Gary Gibbon remains cancer-free, able to breathe on his own and celebrated his 69th birthday on Wednesday.