Property tax hike, garbage fee, congestion tax all on the table
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When Mayor Rahm Emanuel asked aldermen to share their cost-cutting and revenue-raising ideas with his budget director, some City Council members smelled a rat.
They figured the mayor was trying to spread the blame around for the avalanche of tax increases that will be needed to solve the combined $30 billion pension crisis at the city and the public schools that has dropped Chicago’s bond rating to junk status.
But fear of wearing the political jacket did not stop aldermen from doing their homework and giving Budget Director Alex Holt some very real ideas to generate the $754 million in new revenue the city needs, even under the best-case scenario.
POST-ELECTION PROPERTY TAX INCREASE: Ald. Carrie Austin, outspoken chairman of the City Council’s Budget Committee, put Emanuel on the spot during the mayoral campaign when she called a post-election property tax hike inevitable. But she was right — especially now that a Circuit Court judge has overturned Emanuel’s plan to save two of four city employee pension funds.
The only question is, how much will property taxes be going up?
Emanuel has already offered to raise property taxes by $225 million for the Chicago Public Schools, provided teachers accept the equivalent of a 7 percent pay cut and the state reimburses CPS for “normal” pension costs.
If he relies heavily on the most dependable source of revenue to solve the city’s pension crisis, Chicago’s $824 million property tax levy would have to nearly double.
During the briefings, African-American aldermen seemed resigned to a mammoth increase. They want to get it over with and hope voters forget about it by 2019. White ethnic aldermen are far more leery of, what has been called the “third-rail of Chicago politics.” They’re looking for way to spread the burden around and insulate seniors and low-income residents before the mayor lowers the boom.
“The number that’s been thrown out there — in the hundreds of millions, close to $1 billion in property tax hikes over the next four years — is something that is not palatable for taxpayers anywhere in the city. They want us to look at a fairer and equitable tax and fee streams that will help alleviate just pushing through a property tax hike,” Ald. Scott Waguespack (32nd), leader of the anti-Emanuel Progressive Caucus, told reporters last month.
GARBAGE COLLECTION FEE: Ald. Roderick Sawyer (6th) has suggested that Chicago follow the lead of nearly every suburb and start charging a monthly fee for garbage collection.
More recently, rookie Ald. Brian Hopkins (2nd) called it a “matter of fairness,” now that city pickups are ending for more than 1,800 multiunit residential buildings, but continuing for 600,000 households, including single-family homes and all residential units with up to four units.
Four years ago, Inspector General Joe Ferguson estimated that a volume-based, “pay-as-you-throw” garbage collection fee could generate as much as $125 million a year and that Chicago could raise an additional $18 million a year by imposing a blue cart recycling fee.
Emanuel ignored both ideas, apparently concerned it would be viewed as a backdoor property tax increase. But now that aldermen are warming to the idea, so is the mayor, sources said.
There has also been talk of raising revenue by allowing city crews to compete with private scavenger services for the business of collecting trash at multi-unit buildings.
UBER: Ald. Edward Burke (14th), powerful chairman of the City Council’s Finance Committee, has resurrected his proposal for a $1 surcharge on taxicab rides with a twist. Now that Uber and other ride-hailing companies are siphoning business away from taxicabs, the $1 surcharge should also apply to them.
During briefings last week, aldermen appeared to be united in their desire to stop giving Uber a pass and start giving Chicago taxpayers a cut of the action. It doesn’t matter to them that Hollywood super-agent Ari Emanuel, the mayor’s brother, is an Uber investor. In fact, aldermen believe that additional regulation of the ride-hailing industry would serve the dual purpose of leveling the playing field with struggling cabdrivers.
CONGESTION FEE: In 2007, Burke proposed a London-style congestion fee to ease traffic jams, reduce air pollution and provide a bonanza of CTA funding, only to be shot down by then-Mayor Richard M. Daley.
At the time, Daley noted that London is a city “built centuries ago” with narrow streets and no alleys.
“I’m just saying it’s completely different. Let’s not rush to that and scare everybody off,” Daley said then.
Burke is resurrecting the idea of charging a fee on motorists who drive downtown during weekday business hours.
Four years ago, Ferguson estimated that imposing a $5 congestion fee on vehicles entering the Central Business District during the morning and evening rush periods could raise $210 million, even after a 20 percent reduction in traffic and a $300 million capital outlay for checkpoints equipped with cameras and electronic transmitters.
Now a congestion fee would raise even more money and makes even more sense, aldermen contend. That’s because it jibes with Emanuel’s broader campaign to discourage driving by installing bike lanes, expanding bike-sharing, building a bus rapid transit system and by repeatedly raising Chicago’s parking tax.
BICYCLE FEES: Now that Emanuel is, as one alderman put it, “giving away the streets” to cyclists, there’s talk of resurrecting a stalled plan for a $25 bike license.
Ald. Pat Dowell (3rd) suggested the idea two years ago — with a mandatory, one-hour safety course — as an alternative to Emanuel’s plan for a 50 percent increase in the amusement tax tacked onto cable television bills.
Her motive was twofold. Chicago needed money and needed to be more creative about getting it. And if the number of traffic lanes available to motor vehicles was shrinking to make way for cyclists, there should be some responsibility that accompanies those benefits.
Emanuel killed the idea amid concern about “diverting resources to enforcement when I really want police … majority focused on violent crime. And policing whether a biker has a license” is not a priority.
Now that could change.
GAS TAX: While the price of gasoline hovered around $2.50 a gallon most of the summer, raising Chicago’s nickel-a-gallon tax makes sense to almost everybody and would coincide with the anti-driving campaign. The gas tax is expected to generate a higher-than-expected $49.2 million this year, thanks to lower gas prices and increased travel tied to the improving economy. But Emanuel’s financial analysis calls that a temporary blip. It predicts that gas tax revenues that topped $61 million a decade ago would begin to decline again with more stringent federal fuel economy standards and the prevalence of fuel-efficient vehicles.
SALES TAX: This is literally the only revenue idea that Holt has taken off the table. She said Emanuel has “not been inclined to go to the sales tax.” Implied but not stated is the fact that the mayor is even less likely to do so now that County Board President Toni Preckwinkle has restored the penny sales tax increase that she got elected promising to repeal. But with Preckwinkle already taking most of the heat, an argument can be made that this is precisely the time for Chicago to tack on another one-quarter of 1 percent. Increasing Chicago’s 1.25 percent sales tax would also raise big money.
CITY INCOME TAX: Ald. Joe Moore (49th) has raised the specter of a city income tax that would apply to all wages earned in Chicago — whether by city residents or suburbanites. Unlike the state income tax, which is based on a flat rate, Moore favors a graduated income tax that would impose the highest rates on those who can most afford to pay. Ald. Ameya Pawar (47th) favors a corporate income tax.
The problem with both of these ideas is that they can only be authorized by the Illinois General Assembly. That’s no sure thing at a time when the state budget stalemate drags on between Democratic legislative leaders and Republican Gov. Bruce Rauner over Rauner’s demand for pro-business, anti-union reforms.
Pawar and Moore argue that, if Springfield is not prepared to throw Chicago a financial life raft, the least lawmakers and the governor can do is give cash-strapped Chicago the tools to help itself.
But lest they forget Emanuel is already assuming that Rauner will sign legislation — approved by the state House and Senate, but not yet on the governor’s desk — giving Chicago 15 more years to ramp up to 90 percent funding levels for the police and fire pension funds.
The mayor is also counting on Springfield to approve a Chicago casino with revenues dedicated to shoring up police and fire pensions and give the Chicago Public Schools $500 million in pension help by Dec. 31 to stave off mid-year classroom cuts.
Emanuel can’t possibly add a city or corporate income tax to that wish-list without the whole thing collapsing.
OTHER IDEAS: The Progressive Caucus has served up revenue ideas that run the gamut from a “luxury tax” on fur coats, boats, high-end jewelry and other “non-essential items” to an “alternative minimum property tax” and an increased real estate transfer tax, both of which would apply only in Chicago’s Central Business District.
Their painful menu also includes a “bad business fee” on companies that fail to pay their employees a living wage; “dynamic pricing” for parking meters during hours of peak demand; new regulations and fees on ride-hailing services and web-based travel services; and a “stormwater stress tax” on big-box stores and other business giants that put pressure on the sewer system.
Other aldermen have suggested everything from a 30 percent tax on smokeless tobacco and possibly e-cigarettes to a tax on sugary drinks, authorizing video poker in Chicago and legalizing and taxing recreational use of marijuana.
There’s even been talk of finding a legal way to impose a commercial lease tax like the one championed by then-Mayor Harold Washington during the mid-1980s.
A circuit court judge overturned the 6 percent lease tax in 1986. The City Council repealed the tax before the city’s appeal was heard.
Emanuel is expected to pick and choose a few of these ideas, if only to appease aldermen. But they’re small potatoes compared with the big money that could be generated by raising property, sales or gas taxes and imposing a garbage collection fee or congestion fee.