PI Original Ellyn Fortino Tuesday September 22nd, 2015, 5:17pm

Emanuel Pitches Nearly $600 Million Property Tax Hike To Chicago City Council

Progress Illinois breaks down Chicago Mayor Rahm Emanuel's 2016 budget address and rounds up reaction to his fiscal proposals, including a nearly $600 million property tax hike to cover police and fire pensions and school construction costs. 

Brace yourselves, Chicagoans.

Mayor Rahm Emanuel on Tuesday formally released his $7.8 billion budget proposal, which seeks to hike property taxes by a record $588 million over four years to cover costs for police and fire pensions and school construction -- on top of additional tax and fee increases to shore up the city's finances.

During his Tuesday budget address before the Chicago City Council, Emanuel touted city reforms and improvements made over the last four years, but stressed that Chicago's fiscal challenges, including a $30 billion pension crisis, are preventing that growth from spreading "to more of our residents."

"We in this room today did not create our current challenges, but we can and must be the ones to fix them," the mayor said. "The seeds of our financial crisis were planted many decades ago and were not addressed for far too long."

Emanuel detailed budget cuts that would be required for the city to pay its pension obligations with spending reductions alone. They include laying off 2,500 police officers and 2,000 firefighters; closing 48 fire stations; scaling back garbage collection to twice a month; eliminating recycling; and stopping rodent abatement, pothole filling and graffiti removal.

"Raising city property taxes is a last resort," Emanuel stressed. "But we must solve our pension challenge and there are only two options: we can make the damaging cuts that I spelled out and undermine all of the hard work and progress we made, or we can raise property taxes to meet our obligation to police and firefighters who answer our every call."

Emanuel's budget recommends a $543 million property tax hike, to be phased in over four years, that would go toward the city's woefully underfunded police and fire pension funds. Under the plan, property taxes would go up by $318 million this year and $109 million in 2016. Another $53 million would be added to the city property owners' tax bills in 2017 along with an additional $63 million in 2018.

An additional $45 million property tax increase would be used for construction at Chicago public schools. The tax hike for school construction would help the city address overcrowding and ensure that every classroom has air conditioning, Emanuel said.

Civic Federation President Laurence Msall was among those in attendance at the mayor's budget address.

Msall said the mayor's proposed property tax increase for pensions is "very significant," but "it's one that has been driven by years of failing to recognize the pension liabilities, failing to recognize that we were spending more than we took in."

"If the mayor is successful in passing this budget, our initial reaction is that it would be a very positive thing for the city's finances," he added.

Emanuel said his fiscal plan would put Chicago on a path to eliminating its structural deficit within the next four years. By 2019, "scoop and toss" budgeting, which involves kicking debt down the road, would no longer be in the city's bag of financial practices.

"With this budget, we will vote to end the tricks, gimmicks and financial shell games once and for all," the mayor said.

Emanuel acknowledged that his budget, as recommended, would be a difficult vote for aldermen.

"I know this budget is tough and, therefore, carries political risk," he said. "But there is a choice to be made: either we muster the political courage to deal with this mounting challenge or we repeat the same practices and allow the financial challenges to grow."

In an effort to ease some of the property tax pain for Chicago homeowners, Emanuel is hoping the state legislature, which is entrenched in its own budget battle, will act on lifting the homeowner exemption. But even if state lawmakers OK Emanuel's homeowner exemption proposal, it would still need the support of Republican Gov. Bruce Rauner, who is pushing for a state property tax freeze.

Under the mayor's homeowner exemption plan, owners of homes worth no more than $250,000 would be spared from the $543 million property tax increase.

"This will protect Chicagoans who can least afford it," Emanuel said.

Aldermen have also introduced two property tax rebate proposals that would provide relief from the tax hike to some Chicago homeowners, including one plan from Ald. Proco Joe Moreno (1st) and another from the council's 11-member Progressive Reform Caucus.

Ald. Milagros "Milly" Santiago (31st) said it was too soon for her to say whether she favors Emanuel's proposed property tax hike, but she was hopeful that the mayor's homeowner exemption plan would get the governor's support.

"It's too early for me to take a stand, but I am very optimistic that Gov. Rauner is going to have to compromise ... and get the tax exemption proposal passed, because we need it," Santiago told Progress Illinois after Emanuel's speech.

If the homeowner expansion is approved in Springfield, the city's central business district alone would cover one out of every four dollars of the property tax increase, according to the mayor. 

The Grassroots Collaborative, a coalition of 12 membership-based organizations in Illinois, was pleased to learn that the central business district would bear a good chunk of the property tax hike, if the homeowner exemption expansion is approved. However, the Grassroots Collaborative's Executive Director Amisha Patel said the group favors "a truly progressive property tax -- one that shifts the burden from longtime homeowners and renters to commercial property owners that have not been paying their fair share."

"To do this, we need an alternative minimum property tax to close the backdoor to huge tax breaks that clouted downtown corporations enjoy," she stressed. "Mayor Emanuel should drop regressive revenue like the proposed garbage collection fee and instead pursue new bold solutions like suing Bank of America to get our money back and work with other cities to collectively bargain a reduction in fees paid to the banks."

Other fee, tax increases

In addition to the record property tax hike, Emanuel's 2016 budget includes a first-ever city garbage collection fee of $9.50 a month for single family homes and smaller apartment buildings, with a 50 percent discount for seniors. Such a fee would generate over $60 million in revenue.

Ald. Roderick Sawyer (6th), chairman of the Chicago City Council's Black Caucus and a Progressive Reform Caucus member, weighed in on the garbage fee, saying it is "palatable now" at a proposed $9.50 per month, and $4.75 for seniors.

"It's bad, but it's not horrible," he said. "And if it helps us get out of our financial difficulty, we should seriously take a look at it."

Various fees on taxi cabs and ride-hailing services would also go up under Emanuel's budget to generate over $48 million, and $1 million would be raised by taxing e-cigarettes. The budget depends on another $13 million in new revenue from building permit fee hikes.

The e-cigarette industry expressed displeasure with the proposed $1.25 tax per bottle of e-cigarette liquid along with a 25 cent hike per milliliter of the fluid.

"Mayor Emanuel's new vapor product tax is designed to protect the tens of millions of dollars Chicago collects every year from its cigarette tax. This tax is not about protecting health or youth; it's about discouraging adult smokers from using these products to quit," said Gregory Conley, president of the American Vaping Association.

The proposed city budget also outlines $170 million in "savings, efficiencies and reforms."

Savings to the tune of $10 million would come from health care reforms, $20 million from "going after scofflaws," and $9.5 million from making changes to the garbage collection grid, among other areas, Emanuel said. The city also plans to surplus $113 million in tax increment financing (TIF) funds through reforms and closing some downtown TIF districts.

Investments outlined in the budget include moving 319 police officers from desk duty to the city's streets, opening five new school-based health clinics over four years and repaving 300 miles of neighborhood and arterial roads, to name a few.

Ald. John Arena (45th), a member of the Progressive Reform Caucus, was surprised to learn that Emanuel's budget seeks to save $1 million annually by "outsourcing" the city's 311 non-emergency operations.

"That's a big concern of mine," Arena said. "Are we gonna cut city jobs, and to what magnitude, and where are those jobs going? I don't want to see what we did with the water call center being done again here. That doesn't help Chicagoans. Can we find efficiencies in how we do operations (on) our own? Yes, let's do that before we look at outsourcing."

Arena and other members of the Progressive Reform Caucus are scheduled to host two budget town hall meetings in the coming days. The first will take place on October 1 at Amundsen High School, 5110 N. Damen Ave., and the other is set for October 6 at Southside Occupational Academy High School, 7342 S. Hoyne Ave. Both meeting start at 6:30 p.m. Tonight, Progressive Reform Caucus Alds. Susan Sadlowski Garza (10th), Scott Waguespack (32nd) and Carlos Ramirez-Rosa (35th), along with a number of community groups, are holding a public meeting to discuss the mayor's budget proposal at 6 p.m. at Avondale-Logandale School, 3212 W. George St.

Here's the full statement from the Progressive Reform Caucus on the mayor's budget address:

The Progressive Reform Caucus is encouraged that the Emanuel Administration is finally talking about taking steps to right the City's broken finances and ending poor fiscal practices like 'scoop and toss' bonding. But we have grave concerns about the impact on Chicago's neighborhoods and working families of the Emanuel Administration's proposed FY 2016 City budget.

The nearly $600 million property tax increase will have a disproportionate impact on low-income homeowners and seniors. That is why we support the administrations' efforts to expand the Homestead Exemption in Springfield. But with no end in sight to the gridlock in Springfield, passage of the expanded exemption is not assured. That is why we are offering a meaningful rebate program for working families who own their homes. Our ordinance will be introduced at Thursday's City Council meeting.

We are also troubled that the Emanuel Administration has not included a plan to implement an Alternative Minimum Property Tax on the Central Business District. This represents a serious deficiency in the Administration's property tax plan. Until the building owners in the Central Business District are stopped from gaming the system and are required to pay their fair share, those costs will continue to be passed on to homeowners in the neighborhoods.

We are alarmed that the Administration is floating the possibile 'outsourcing' of 311 jobs. Again and again, we've seen that privatization leads to reduced quality services and lower wages. The 311 operators are city residents. They live and spend money in Chicago communities. We must learn from past privatization mistakes and reject this plan.

While we were encouraged that the Emanuel Administration proposed increasing taxes on rideshare companies, the Progressive Caucus strongly opposes the proposal to open the airports and McCormick Place to rideshares. This will inflict real harm on the thousands of Chicagoans who drive cabs, creating negative ripple effects in local economies all over the city.

The Mayor's speech today was the beginning of the process. We look forward to working alongside the Mayor, his team, and our colleagues in City Council to ensure that the FY 2016 budget asks the very wealthy and big corporations to pay their fair share, rather than creating undue burden on working families and seniors.

The Chicago Teachers Union also issued a response following Emanuel's budget speech:

Today in his annual budget address, Mayor Rahm Emanuel said 'We must do everything we can, and leave no stone unturned' when it comes to Chicago's public schools. He did, however, leave some things out:

  • His administration's refusal to sue banks to recoup illegitimate losses tied to toxic interest rate swaps
  • His administration's refusal to levy the Chicago Public Schools (CPS) capital improvement tax for four years
  • His administration's passage of a school budget with $500 million in fake money that will, in the words of CPS CEO Forest Claypool, necessitate layoffs by Thanksgiving
  • His administration's closure of 50 schools and the disarray created for thousands of families
  • His expansion of selective enrollment options in lieu of relieving overcrowding
  • His administration's approval of $20 million in no-bid contracts for SUPES and the $200 million maintenance contract for Aramark that has resulted in mass layoffs and dirty schools
  • The absence of a promise to immediately surplus any tax increment financing (TIF) increases tied to his property tax increase
  • His administration's continuing push for Springfield action that's anything but assured
  • His administration's lack of action on specifics he campaigned for--like a tax on luxury goods and services
  • His administration's continued reliance first on regressive taxes such as hiked fines, fees and taxes on cell phone services
  • His administration's continuing willingness to pass costs to others--such as keeping closed mental health clinics shuttered--thereby forcing more and more people into Cook County jail
  • His administration's continued differential policing of low-level drug offenses that result in tickets for some and jail for others, and dragnet-style checkpoints in Black neighborhoods with low DUI incidents and no checkpoints in white neighborhoods with high DUI incidents

UPDATE (09/28/15): The location for the Progressive Reform Caucus' October 1 budget town hall meeting has changed. The meeting will now take place at the Copernicus Center, 5216 W. Lawrence Ave.

Image: AP Photo/M. Spencer Green

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