Emanuel paints dire future without record property tax hike
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Bill Ruthhart, Hal Dardick and John ByrneContact ReportersChicago Tribune
Mayor Rahm Emanuel called on the city's 50 aldermen Tuesday to summon the courage to pass the largest property tax increase in modern Chicago history, and told them they could sell it to voters by painting a dire, if not quite dystopian, alternative.
If Emanuel cut the budget instead of raising taxes, then one out of five police officers would be dismissed. Half the fire stations shuttered. Rats would overrun graffiti-ridden alleys filled with overflowing Dumpsters as the city stopped rodent control and trash got picked up just twice a month. Streets would be riddled with even more potholes and little money to fix them.
"Our city would become unlivable," Emanuel said. "That would be totally unacceptable."
The mayor's acceptable choice: increase property taxes by a record $588 million over the next four years to shore up police and fire pensions, and approve an unprecedented series of other fee and tax increases to help close the city's yearly budget shortfall. The other hits to Chicagoans' wallets range from a new garbage-hauling fee and building permit fee increases to a new tax on electronic cigarettes and ride-sharing and taxi fee increases.
"I know this budget's tough and therefore I know it carries political risk. I get it," Emanuel told aldermen in a 33-minute speech, short by his standards. "But there's a choice to be made, make no mistake about it. Either we muster the political courage to deal with the mounting challenges we inherited, or we repeat the same practices and allow the financial challenges to grow."
The mayor's City Hall budget, much like his spending plan for public schools, relies on help from a gridlocked state government. And amid the mayor's calls for intestinal fortitude, many aldermen were squeamish on committing to a "yes" vote. The reception was tepid, and at one point Emanuel had to repeat an applause line before the hand-clapping commenced.
The theater that unfolded as Emanuel commanded Chicago's political stage during his annual budget address reflects the top-heavy nature that has dominated the city's political structure for decades: The mayor lays out his budget and tells a group of aldermen unable to collectively offer their own comprehensive spending plan to vote for it.
For the next month, those aldermen will get their once-a-year chance to dig through the staffing and spending of each department, ask questions and propose changes. But their suggestions are typically piecemeal at best, and tend to be based on the mayor's original plan, which usually garners overwhelming council support.
Ald. Patrick O'Connor, the mayor's council floor leader, said as much.
"I think there's some compelling arguments in there, and it's my hope that people who ran for election in this trying time all ran with their eyes open as to what was there," said O'Connor, 40th. "There could be some tweaking and some changes a little bit, but I think the general framework is in place."
The political reality is this: Emanuel is asking aldermen to put their jobs on the line and vote for a massive property tax hike while the mayor himself has not decided whether he too will face the voters again. Even if Emanuel does seek a third term, he has taken a step many politicians take: stack all the unpopular tax hikes and fee increases in the first year of the new term, the one furthest away from the next election.
Though the Washington-schooled political-operative-turned-mayor wants aldermen to take the toughest vote of their careers, Emanuel insisted that addressing the gravity of Chicago's financial problems should rise above politics.
"You don't make a decision that's important for the city's future based on your re-election. You ran for public service to serve the public and do what's right for future generations," Emanuel said Tuesday afternoon when discussing his budget before the Chicago Tribune's Editorial Board. "I think the best politics is to do the right policy."
Pension bill comes due
Emanuel finds himself poised to sharply raise property taxes to cover a major increase in police and fire pension contributions following a December 2010 measure approved by lawmakers and then-Gov. Pat Quinn. The law followed a series of Tribune stories that detailed how woefully underfunded police and fire pensions were in Chicago and many suburbs.
The mayor has known the pension hit was coming since before he took office. This year, Emanuel got the Democrat-controlled House and Senate to approve a bill that reset the pension payment schedule to give him more breathing room. The city would still have to come up with hundreds of millions of dollars, just not quite as much as quickly as the 2010 law required.
That bill, however, has yet to be sent to Gov. Bruce Rauner, who could sign it, veto it or allow it to become law without acting.
If the bill does not become law, Emanuel's record property tax increase for next year would still be $219 million short of what's needed to make the required pension payments. Asked if he had a Plan B, Emanuel said, "First of all, if I had a Plan B, the worst thing to tell the legislature is that you have a Plan B."
Under the mayor's budget proposal, property taxes would be increased $543 million over the next four years — $318 million of it next year alone — to pay for police and fire pensions. A separate $45 million property tax hike would go toward construction projects at Chicago Public Schools to alleviate overcrowding in some neighborhoods.
Had Emanuel's proposed property tax increases been in effect this year, the total property tax bill on a home worth $250,000 would have increased by nearly $342, to $4,504. Over four years, that tax bill would increase by more than $550. Commercial buildings would be hit even harder.
But Emanuel is seeking an expanded homeowners exemption in Springfield that would inoculate those who own and live in a home worth $250,000 or less from having to pay more in property taxes to City Hall. And while Democratic leaders in Springfield are supportive, the measure also would need approval from Rauner.
Asked why a Republican governor who is seeking a statewide property tax freeze would sign off on legislation that would help Chicago enact a property tax increase, Emanuel replied, "I wouldn't be proposing something if I didn't have some confidence in the road ahead."
Rauner was silent on Emanuel's budget Tuesday, ignoring a question from a Tribune reporter on the topic during a Thompson Center appearance.
Digging deep
While pieces of his property tax-backed pension payments are reliant on Springfield, a host of other tax and fee increases Emanuel has proposed are not.
To help balance the $7.8 billion spending plan, the mayor has proposed new fees on taxi and ride-sharing services that would generate $48.6 million per year and a tax on electronic cigarettes that would bring in another $1 million. Increased building permit fees would reel in an additional $13 million per year.
But Emanuel's most controversial fee increase is charging owners of single-family homes, duplexes and four-flats $9.50 per dwelling unit per month for garbage-hauling service that currently is covered by other taxes. The fee, which would be tacked onto water bills and include a break for seniors, would generate $62.7 million a year.
Several African-American aldermen have come out against the garbage fee, arguing it disproportionately hurts people in single-family homes with lower assessed values that are common in many of the neighborhoods they represent. Alds. Anthony Beale, 9th; Jason Ervin, 28th; Howard Brookins, 21st; and Pat Dowell, 3rd, said they will push for an even larger property tax increase to cover what would be generated by the garbage fee.
"Garbage collection, to me, is an essential city service," said Dowell, who represents parts of Bronzeville and the South Loop. "So if we're going to have this tax, I think it should be rolled into the property tax."
The issue for Emanuel, however, is that garbage-hauling costs would be shared even by condo dwellers who already pay for private waste haulers.
As for the property tax hike, Emanuel suggested it would fall predominantly on downtown building owners and wealthier homeowners.
Ald. Brendan Reilly, 42nd, who represents most of those corporate skyscrapers in the Loop, said he's got his work cut out for him.
"I think the mayor did a good job of painting how dire our fiscal situation is, that there's some tough choices ahead, but I think it's incumbent upon me as the downtown alderman to work very hard to identify more cuts in this budget," Reilly said. "I think we need to do more."
Emanuel said his budget includes $170 million in cuts and efficiencies, but has released few details on many of them. In a sign of the intense lobbying against the mayor's budget, the association representing downtown building owners also called on Emanuel to reduce his property tax increase by making more budget cuts and opposed his exemption plan for homeowners.
"We still believe the city likely can and should do more to reduce its costs where possible and mitigate these massive tax increases," said Ron Tabaczynski, director of government affairs for the Building Owners and Managers Association of Chicago. "If this passes, it means thousands of small businesses in buildings across the city will be hit with huge increases in operating costs. Many may face little choice but to cut jobs, move away or even close their doors."
Aldermen react
Emanuel, however, insisted that the police and fire pension issue could be solved only by a massive property tax hike or dire, across-the-board service cuts. He rejected the suggestion that a combination of cuts and new taxes could be the answer.
"You're down to two choices: All these cuts in police, fire and basic neighborhood services — that's a set of choices and I'm against those cuts — or a property tax," Emanuel told the Tribune Editorial Board.
Still, Emanuel's property tax increase would far exceed what the mayor himself said during the campaign was the largest property tax increase in Chicago history. In 1987, under Mayor Harold Washington, property taxes rose by $79.9 million, which would be $167.8 million in today's dollars after adjusting for inflation. In 2008, under Mayor Richard M. Daley, property taxes rose by $86.5 million, or $96 million in today's dollars.
Emanuel's four-year increase would be more than double those two historic property tax increases combined.
During his budget speech, however, Emanuel had a different type of history in mind as he urged aldermen to get on board.
"With this budget, we can be remembered for stepping up to the challenge rather than stepping aside. With this budget, we will be counted among the doers rather than among those who dithered," Emanuel said from the City Council dais. "With this budget, when we look back at our public service, our individual names will be in the history book rather than the guest book. We owe it to our city and to the generations who come after us to do what is right — even when it is hard."
Not everyone was sold on the lofty political imagery.
"There was a lot of rhetoric about us doing the right thing, blah, blah, blah, blah. That aside, we have to find a way to pay for these pensions. We've know that for four years. It's there," said Northwest Side Ald. John Arena, 45th. "For the last four years, the mayor did the same thing as the previous administration and got away with not having a major tax increase, which was politically savvy, but it's put us in this position where now we're loading everything up on one property tax increase. There's some culpability there."
Emanuel took umbrage at that suggestion.
"Coming up with a property tax increase in 2011 would have been a pretty dramatic hit when some people were still in a recession in their pocketbook and there's still parts of Chicago that are in a recession in their pocketbook," Emanuel said. "The (pension) bill was due in 2015."
While City Council members such as Alds. Carlos Ramirez-Rosa, 35th, and Roberto Maldonado, 26th, said they were adamantly opposed to such a large property tax increase, some colleagues said they were taking a wait-and-see approach. For many, Emanuel's proposal puts them in the politically awkward position of either voting for a huge tax hike or against retirement benefits for police officers and firefighters.
"It's a difficult budget. It's probably the most difficult one we've seen in about a decade. You're talking about tax increases, but these are things that need to be done," Chicago Federation of Labor President Jorge Ramirez said. "It's time. There's nothing else we can do."
The Tribune's Rick Pearson and Kim Geiger contributed.
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