Since news leaked last week that Mayor Rahm Emanuel is considering a record high property tax increase of $500 million, the mayor says he’s confident the City Council will stand with him and his plan to overcome the city’s massive financial hurdles.
We ask aldermen to sound off on the property tax increase and other tax proposals, such as a garbage collection fee, a surcharge for ride-sharing services like Uber, and taxes on e-cigarettes and smokeless tobacco products, that were first reported in the Chicago Sun-Times.
One question rising to the surface: Even if the mayor proposes a $500 million hike in property taxes, is that going to be enough?
"The tax increase only is enough to cover our pension obligations," said Ald. Pat Dowell (3rd Ward). "We still have a structural deficit of about $233 million that we have to address. So, the property tax is going to be part of a mix; there has to be other revenue-generating options. I believe that I can support some property tax increase. I believe that [$500 million] is a good number, but there has to be other things that go along with that. I will not support a tax on garbage. That's just too much."
"If we increase our budget by $500 million, it would not cover our whole pension payment," said Ald. Patrick O’Connor (40th Ward). "But you combine that with the $300 [million] that we currently pay: now we've paid our pension fund. But we have a core requirement for police, fire, streets and [sanitation], that has to be paid for on top of it, and that is part of the structural deficit. So $500 million is not enough to solve our financial woes, but no one's ever said it is."
And will the sugar-sweetened beverage tax be a mere drop in the bucket?
"It may be a drop in the bucket, and I don't particularly like the way that that was structured," said Ald. Howard Brookins Jr. (21st Ward). "I would prefer that tax – if we're going to put a tax on sugary drinks – that it be for consumption, meaning we tax an individual Big Gulp. If you're thirsty, and you want a Big Gulp, you're not going to drive to Indiana to get it. You pay a nickel extra for it – everybody would assume that tax and it wouldn't be a big deal – but I don't like running people out of the city of Chicago to go elsewhere to avoid that type of tax."
Hear our full conversation with Aldermen Brookins Jr., Dowell, and O'Connor by watching the video above.
Potential Property Tax Increase
Last week, it was reported that the mayor was considering a $500 million property tax increase to help pay for police and fire pensions and construction projects for Chicago Public Schools.
According to the Cook County Clerk’s Office, a $500 million property tax hike would result in additional annual payments of the following:
- $470 for the owner of a $250,000 home
- $995 for the owner of a $500,000 home
- $1,300 for the owner of $250,000 commercial property
- $3,500 for the owner of $1 million commercial property
The tax increase is expected to be included in the 2016 budget, which Emanuel will unveil on Sept. 22.
On Tuesday, the potential property tax hike was discussed during a City Club of Chicago sponsored forum, titled “Fiscal Cliff: What’s Next for City of Chicago Finances?” Watch the forum below.
“[It] would be the largest property tax increase in modern history for the city of Chicago, but it’s not the full answer and it’s not going to be enough if that is what the mayor is going to present,” the Civic Federation President Laurence Msall said Tuesday at the City Club of Chicago forum.
While the mayor has not yet announced his plan, city of Chicago CFO Carole Brown said the mayor would not use revenues generated from a property tax increase to balance the budget.
“The mayor has always said he would not use property taxes to balance the operating budget—understand that we look at the operating budget different than other people do, meaning we do not include the cost of our pensions in our operating budget,” Brown said. “If he were to pursue a property tax increase, the mayor would use that for police and fire pensions.”
“Any tax increase would have to be progressive and it would have to be fair, and we would not ask those who could least afford [it] to bear the cost of a potential property tax increase,” she added.
In addition to new revenues, the city must reduce spending and end bad borrowing practices (such as scoop and toss), Msall said.
“The biggest problem is not the tax increase, but it’s the reaction to the tax increase,” Msall said, adding if people and business don’t think things will change in Chicago, they will leave.
Other Possible Sources of Revenue
In addition to a possible property tax increase, several other ideas have been floated as sources of revenue for the cash-strapped city, including a penny-per-ounce sugar-sweetened beverage tax.
That tax, sponsored by Ald. George Cardenas (12th Ward), got a hearing Wednesday at City Hall but failed to gain traction, according to the Chicago Tribune.
Emanuel is spearheading a monthly garbage collection fee of $10-$12 per home. On Tuesday, the mayor said adjustments to the garbage grid beginning this fall will lead to a savings of $7 million in 2016, according to the Tribune.
Another potential source of revenue could be a surcharge on ride-sharing services like Uber and Lyft. The $1-a-ride surcharge originated with Ald. Ed Burke (14th Ward), according to the Chicago Sun-Times, and could be part of other reforms to level the playing field between ride-sharing services and the taxicab industry.
The Chicago Sun-Times also reported the 2016 budget will include a tax on e-cigarettes and smokeless tobacco products that is comparable to the $7.17 tax added on to a pack of cigarettes purchased in Chicago.