Mayor Rahm Emanuel will unveil an alternative to his overturned plan to save two of four city employee pension funds within weeks, along with new revenue to pay for it, to satisfy Wall Street rating agencies, a top mayoral aide said Wednesday.
Chief Financial Officer Carole Brown said “everything is on the table,” including another increase in the monthly tax tacked onto Chicago telephone bills — both cellphones and landlines.
Brown made the promise on the same day the city sold $500 million in water bonds and borrowed an additional $100 million to follow through on Emanuel’s promise to convert the last of Chicago’s variable rate debt to fixed interest rates and close the book on interest rate swaps.
City Hall claims the bonds were “ten times over-subscribed,” allowing the city to “re-price the bonds” and reduce borrowing costs.
“We’re considering a wide range of revenue options to fund pensions. There’s nothing that we’re not considering. The telephone tax is one of the things on the table. But there isn’t a revenue option that isn’t on the table,” Brown said.
“The rating agencies trust we’re working on a plan. They expressed concern . . . and we’re working on it. We understand the importance of articulating our plans sooner rather than later. We hope to do that in a timely fashion so as not to negatively impact the positive gains we’ve made,” she said. “We’ll have something sooner than later. It could come over the next weeks and months.”
Emanuel refused to talk turkey about the taxes he plans to raise to save the Municipal Employees and Laborers Pension funds.
He’s still meeting with organized labor in hopes of squeezing through the window the Illinois Supreme Court cracked open, even as it overturned his plan to save two of four city employee pension funds.
“Everybody has a role to play, and we’re working through this in the shadows of a court decision that’s just a short time ago. But I started working on this issue on Day One. And every one of you know this,” Emanuel said.
“Pensions were not funded for years. You don’t get to $30 billion in three weeks of unfunded liabilities. . . . I will not rest until we fix it. I’m already six [agreements] into trying to work it out. The court made the decision on two,” he said. “Within days, we were back at the table trying to work through some issues, exploring something that the court said. . . . When I have an agreement, I’ll tell you.”
Pressed again to identify the taxes he plans to raise, the mayor said, “Fair question, but not the right question at the right time. I’m at the negotiating table working through the issue. What you don’t do is put all of your cards on the table today. It would not be a very good negotiation. . . . I’ve been willing to step up. But I want to do it in a responsible way.”
In late March, the Illinois Supreme Court dealt Emanuel an expected body blow in his fight to solve Chicago’s daunting pension crisis, but it wasn’t a knockdown.
In fact, the ruling that overturned Emanuel’s plan to save Municipal Employees and Laborers Pension Funds on pace to run out of money in eight and 12 years respectively all but invited the mayor and the unions to go another round.
The Supreme Court declared that, “as a matter of law, members of the funds did not bargain away their constitutional rights.”
That’s even though 28 of 31 unions signed off on Emanuel’s plan to raise employee contributions by 29 percent — to 11 percent by 2019 — and end compounded cost-of-living adjustments for retirees ineligible for Social Security.
But the ruling also stated, “The pension protection clause was not intended to prohibit the Legislature from providing ‘additional benefits’ and requiring additional employee contributions or other consideration in exchange.”
On Wednesday, two labor leaders who asked to remain anonymous confirmed that talks with the city were well underway and that they were making progress.
“We both know something needs to be done and, the sooner the better. It’s been collaborative. The city agrees and understands that a lot of new revenue will be needed to stabilize the funds. But we’re still trying to reduce the liability. The only holdup is working with the actuaries,” one union leader said.
“The most effective way to reduce the liability is to change the compounded cost-of-living [increase] to a simple COLA. Give the member something in exchange for agreeing to a different COLA,” the union leader added.
Emanuel initially proposed raising property taxes by $250 million over five years to bankroll the city’s increased contribution to save the two funds. He substituted a 56 percent increase in Chicago’s telephone tax for the city’s first-year contribution, only after then-Gov. Pat Quinn balked at a pre-election property tax increase.
Even if the new round of collective bargaining produces pension reforms that can pass legal muster, there is certain to be a massive shortfall that needs to be made up by Chicago taxpayers.
Another telephone tax increase is the easiest option. Chicago is legally authorized to raise its telephone tax to the highest rate charged by any municipality in the state. That means there’s room to grow.
More property tax increases are unlikely, considering the fact that Emanuel just raised property taxes by $588 million for police and fire pensions and school construction and has promised to raise them by another $170 million for teacher pensions, whether or not the state does its part to help the nearly bankrupt Chicago Public Schools.