Last week’s unanimous vote on the 2017 Chicago city budget pleased Mayor Rahm Emanuel to no end. Wreathed in smiles, he said, of the $8.2 billion budget, "You can say Chicago tomorrow is better because of the work you have done over the last five years," Emanuel told aldermen.
With the 48-0 vote, the $8.2 billion package is a heady combination of many things, but mostly dependent on things that were previously passed, such as four years of property tax hikes. Next year, City Hall property taxes, will go up by $109 million, following this year's $318 million increase. The money is earmarked for police and firefighter pension funds; raided in previous years when money was scarce, or underfunded for the benefits promised during more robust years.
Emanuel’s unenviable task was to put much of this debt to rest, in whatever way that he could, and the property tax increases seem to have been his solution. Yet, as many aldermen noted, coming back, hat in hand for future increases is not entirely out out of the picture. As The Chicago Tribune noted, “That won't be the end of the pension-related property tax increases. Total property tax increases of $106 million for the police and fire pension funds are slated for 2018 and 2019.”
Add to that another line item: “Chicago Public Schools property taxes will increase by $245 million in 2017, with most of that money going into the Chicago Teachers Pension Fund,” and the die is cast for even more hikes..
A significant chunk of the budget are a host of, what economists define as regressive taxes..A leading example is that ”Emanuel's budget includes a new 7-cent fee for each store-provided disposable bag, designed to raise about $13 million next year. It replaces a city ban on plastic bags that was deemed largely ineffective. People can avoid paying that tax by bringing reusable bags to the store,” noted the Tribune.
But, there is more much more - here is the breakdown:
- New parking meters, with 460 in the Loop and surrounding business district and 225 in neighborhoods. The $5.4 million raised by the new meters would partly offset the $12 million the city estimates it will pay to Chicago Parking Meters LLC for meters that are out of service.
- Parking rates at O'Hare International and Midway airports would rise, with the daily fee going up by as much as $12.25 under a complex system that varies by the type of lot used. The proceeds will be plowed back into city airport improvements and operations.
- A new so-called surge pricing to $4, from $2, at 820 parking meters near Wrigley Field, starting two hours prior to a game or event.
- Drivers also would pay to use “commercial loading zones with hourly parking rates set at $14 downtown and in two nearby wards. Once fully in place, the administration expects to collect $13 million to $18 million a year.”
- 545 new cops to be added in 2017; and $36 million over three years spent on expanding teenage mentoring programs.
- $994 in property tax hikes for City Hall and CPS. That's based on a $250,000 home.
- $50.40 for the 911 phone tax passed in 2014; based on a total of three phone lines, cell or land.
- $355 from water and sewer fees doubled from 2011.
- $134 from the water and sewer tax passed in September. That's for metered service. Those lacking meters can expect to pay $229.
- $25 from a 2011 city vehicle sticker hike. The increase was $10 per car and $15 for SUVs.
- $19.40 from a cable tax hike approved in 2014, based on an $80 monthly bill.
- $114 a year for garbage pickup approved in 2015: on $9.50 per unit a month for a single-family home.
Even the 2016 City budget had a lot of these types of taxes, including the property tax increases. When I interviewed David Fernandez, a New York based public finance attorney with Buchanan Ingersoll & Rooney last year, for my now defunct Examiner column, he said in an emailed statement, ”Perhaps it is time for Chicago to look back at NYC in the ‘70’s and find a way to create its own Municipal Assistance Corporation. The restructuring of debt within the constraints placed by the courts and utilizing creative ways to provide access to the markets while preserving both the requirements of the existing obligations and the reserves being held by the City are going to be paramount in allowing Chicago to avoid the drastic measures of increased property taxes.” Prescient words, yet the deed was done.
Also, culprit as the New York Times has noted, “Improvements in the housing market aren’t yet offering significant relief,” and, “on average, collections of local property-tax revenue trail changes in home prices by three years, according to the Congressional Budget Office.”
Regressive taxes are a weak way to shore up city finances, most economists feel, including municipal tax lawyers, and they take more not only from from lower income people, but also are easy enough to get around, and eventually will offer substantially less revenue.
They could lead to even greater, or dramatic turns. Resident, even corporate entities could simply leave Chicago. For the former if the above taxes are added up, then a mythical “owner of a $250,000 home can expect to pay about $348 in additional property taxes next year. Throw in the $53 in estimated new water and sewer taxes for the typical homeowner, total additional taxes next year would come to about $400” calculated the Tribune.
"More money. That's all the city wants, more money. More money. They don't fix the streets, they don't fix anything else. And they give us more taxes," said Melanie Pizano to ABC7 reporters.
Still others defend these taxes --- "These are the same people who want their garbage picked up and their graffiti removed and their trees trimmed. We have to pay for them," said Alderman Ricardo Munoz (22nd Ward).
With population growth abated, fleeing residents is not an unrealistic prospect with the increased taxes. Earlier this year, reports showed U.S. growth a little less than one percent in 2015. And, while many cities saw declines, “the biggest loser in the latest demographic analysis is the city of Chicago. Of all the metropolitan areas that lost population in the last year, it lost the most—more than the greater Los Angeles area, more than Boston, more than Minneapolis.” cited a blogster at Reason.com.
While the amount lost was smaller - in thousands compared to millions of residents - “The City of Chicago itself lost 6,263 residents. Nevertheless, the Chicago Tribune notes that this is the first decline in population for the city since 1990.
“By almost every metric, Illinois' population is sharply declining, largely because residents are fleeing the state. The Tribune surveyed dozens of former residents who've left within the last five years, and each offered their own list of reasons for doing so. Common reasons include high taxes, the state budget stalemate, crime, the unemployment rate and the weather.
”Studies from 2013 also saw trouble on the horizon when Steven Greenhut noted, "Chicago has high taxes and punitive regulations, large and bureaucratic government, and surly public-sector unions.
With the election of Donald Trump the presidency, and a tax plan that has faced its fair share of criticism, as well as uncertainty, and that promises “made during the campaign were big but vague,” as Tribune columnist Gail Marksjarvis noted. And, certainly his tax plan might make Chicago residency even less attractive with most planned savings going to high earners and in one example, “a single parent earning $75,000 would face a tax increase of $2,440.”
“But the depth of the city's problems is mind-boggling, and the results of a fiscal disaster there will be far more spectacular than bankruptcy in more obviously decrepit cities. Noted Greenhut.
“Chicago's metropolitan statistical area, defined by the U.S. Census Bureau, includes the city and suburbs and extends into Wisconsin and Indiana.The Chicago area lost an estimated 6,263 residents in 2015 — the greatest loss of any metropolitan area in the country. That puts the region's population at 9.5 million.,” reported the Tribune.
Normally departures can be offset by birth and migration -- but that has also lessened and many residents are leaving Chicago for southern states such as Texas and Arizona, where they face less taxes and political battles like that between Gov. Bruce Rauner and Speaker of the House, Michael Madigan.
A firewall, of sorts, for population control, is supposed to be Mexican and especially newly arrived Mexicans, but that has slowed to a trickle; and with the election of Donald Trump as president, might show even more, if he builds the proposed wall between the two countries; but, is also affected by a rapidly aging U.S. Mexican population.
As the Tribune notes, “More than any other city, Chicago has depended on Mexican immigrants to balance the sluggish growth of its native-born population, said Rob Paral, a Chicago-based demographer who advises nonprofits and community groups. During the 1990s, immigration accounted for most of Chicago's population growth. The number of Mexican immigrants rose by 117,000 in Chicago that decade, according to data gathered by Paral's firm, Rob Paral and Associates.”
There are things that can be done in coming years to mitigate the further exodus of residents from the state, said Michael Lucci, of the Illinois Policy Institute. He recommends refocusing on manufacturing jobs in the state and curbing property taxes.
"We're never gonna have Colorado's mountains or California's beaches," he said. "But we have historically had an attractive business and job market. The problem is that we don't have that anymore."
Late in the election,Trump perhaps wanting to be more compatible with House Republicans, Trump wants to lessen itemized deductions on Schedule A of both individual and married filers, and with increased standard deductions of $30,000 for joint filers and $15,000 for singles, “how many will want to file for mortgage interest or property tax write-offs, as they do today,” noted nationally syndicated real estate columnist Kenneth Harney, thus decreasing the incentive to own homes, in even a moderate market like Chicago.
An outlier in the decrease of residents has been the exodus of African Americans from Chicago, especially those with children seeking better schools and an escape from the violence which has reached a crisis stage in 2016 alone; with shootings and homicides, much of which affects their own communities.
The 2010 census reported a 17 percent drop in the city's black population over the previous decade. That number declined another an additional 4 percent through 2014, to 852,756. White people have left the state for years," Paral said. "But African-Americans? That's the one-two punch.”
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