CHICAGO – Chicago’s City Council easily approved a budget plan Wednesday that includes a massive property tax hike and other fees to help close a shortfall and improve the city’s underfunded pension system, votes many aldermen called the most difficult of their political careers.
Mayor Rahm Emanuel proposed an incremental $543 million property tax increase for police and fire pensions, along with a separate $45 million property tax hike for school construction, a $9.50 monthly household garbage pickup charge and other fees.
The former White House chief of staff said the measures were necessary to restore the financial health.
While much of the debate before Wednesday’s 36-14 vote on the $7.8 billion budget was supportive, many aldermen said the consideration of it and connected revenue measures was a last resort. Part of Emanuel’s plan to shield more vulnerable residents from the property tax increase needs state lawmaker approval.
“None of this is easy,” said South Side Alderwoman Carrie Austin who voted in favor. “Absolutely none of it.”
Chicago has the worst-funded pension system of any major American city, along with a school system drowning in debt that credit rating agencies have rated at “junk” status. The problems have worsened over the years the city didn’t contribute enough to pension funds and continued questionable borrowing tactics, some of which continued into Emanuel’s tenure.
Emanuel, who won a second term this year after a tense campaign, said public finances hung over the city “like a dark cloud.”
“Those finances were beginning to erode people’s confidence in this city,” he told aldermen before the votes.
He tried to make the property tax increase, which takes effect over four years, more palatable by pitching a relief plan targeted toward those whose homes are worth $250,000 or less. He said most of the burden of the increase would fall on the city’s downtown business core.
Emanuel has pushed to double a homeowners’ exemption from $7,000 to $14,000, or the amount cut from the home’s assessed value before taxes are calculated. The idea is to ease or erase the tax hike’s impact.
The proposal needs state legislative approval and Republican Gov. Bruce Rauner has been cool to the idea. Business groups and a renters’ association have testified at the Capitol against the exemption, saying the property tax hike would get passed on to consumers.
As a backup, aldermen floated a home rebate program similar to years past, which Emanuel’s administration said there’s time to pursue if the exemption isn’t approved. Such a program could cut homeowners reimbursement checks.
Still, most aldermen said raising property taxes was painful.
Alderman Anthony Napolitano, who is a firefighter and northwest side alderman, said he’d rather have been in a burning basement than take up such a controversial idea. Others questioned if Emanuel’s administration had made enough efforts to cut spending and if the monthly garbage fee – a first for city homeowners – was necessary.
Alderman Jason Ervin, whose West Side ward includes impoverished areas, called it “regressive fee that burdens our poor residents the most” even with a cap until 2019. In a fiery speech, he said considering that none of the relief plans were a done deal, he couldn’t vote in favor.
“I will not send my folks off the cliff,” he said.
For the owner of a home worth $250,000, the annual property tax bill will be roughly $550 more. Over four years, a homeowner’s property tax bill could equal 13 percent more.
Chicago saw property taxes rise in 2008, but the last major increase was in 1987.
Over the course of budget negotiations, Emanuel dropped a plan to privatize the city’s 311 information and service line. The budget approach also impacts ride-sharing services, allowing companies such as Uber to make pickups at the city’s airports. In return, those companies will pay more, including a 2 cent per ride charge expected to generate up to $2 million a year.