In another desperate attempt to shore up city finances, Chicago City Hall sources, said on Tuesday that Mayor Rahm Emanuel wants to increase the city’s utility taxes to meet yet another pension fund - this time the Municipal Employees Pension which has 71,000 members and $18.6 billion in unfunded liabilities.
The Chicago Sun-Times reported that “Chief Financial Officer Carole Brown acknowledged that the city needs “in the ballpark” of $250 million to $300 million in new annual revenue to shore up a Municipal Employees Pension fund with 71,000 members and $18.6 billion in unfunded liabilities.”
The Emanuel administration is loath to add another property tax to property owners, which many have likened to a never ending mortgage payment, yet others have also said that additional property tax increases would be the easiest thing to do - and was even predicted by some city council members, with the last increase.
As the Sun-Times reported: “Last fall, Emanuel persuaded a reluctant City Council to raise property taxes by $588 million for police and fire pensions and school construction. He has agreed to raise property taxes by $250 million more for teacher pensions.”
Predicted this year, “utility taxes and fees on electricity, natural gas and telecommunications will bring in about $441 million — that’s 12 percent of all corporate fund revenue,”and represents low hanging fruit for City Hall accountants.
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Alexandra Holt the city’s budget director, at a luncheon, admitted that she did not know where the money would come from, only saying, “Everything’s on the table and we’ll hopefully be in the position of announcing both the benefit reforms and the funding plan in the coming weeks”
Brown, echoing Holt, said, “Everything is on the table and we’ll be telling you our solution shortly,” she said. “We’re looking at every option. The mayor is committed to putting forth a solution for the Municipal Fund. Right now, we’re publicly considering everything.”
Refusing to comment on the possibility of a utility hike, she would also not commit to how much is needed to even fill the hole. And at one point, she was “Pressed to say precisely how much new revenue is needed, but would only say, “We haven’t concluded the ramp. But it’ll be a ramp similar to what we proposed for Laborers. I don’t have the numbers off the top of my head, but it’s within that ballpark” of $250 million to $300 million a year.
In his luncheon introduction of Holt at the City Club, the mayor boasted about having “the smallest operating shortfall in a decade; about having identified recurring revenue sources to save three of the city’s four pension funds; and about the deal he’s about to announce to put the fourth and largest employee pension funds on a long-term road to solvency.”
Absent from that presentation was the high interest loans that he has been forced to take out, and that have relegated the city’s bond rating to junk status, but in what is now a familiar script, the mayor turns to spin, in a none too obvious slight of hand trick to refocus the attention of observers. But, the Potemkin like disguise is not working as many continue to question his leadership, as the nation’s third largest city veers more, and more, into the red.
To be fair, many of these problems were inherited, but for someone who ran on a platform of change and transparency Emanuel’s style seems more reminiscent of Daley, senior, than that of the liberal progressive that he often likes to portray himself as..
“For the first time, you can actually see the other side of the riverbank,” on pensions that were the “dark cloud” hanging over Chicago when he took office in 2011, he said. Afterward, the mayor made no apologies either for the massive burden already imposed on Chicago taxpayers or for the other shoe that’s about to drop."
Continuing he said, “I didn’t create this problem. We inherited a problem. Every one of the four pensions for the city — police, fire, laborers and municipal — were financially on a track to being insolvent, which means retirees were not gonna get the paycheck,” Emanuel said.
With a somewhat recalcitrant admission of dishonesty -- on both sides, he launched into the hoary, when he added, “Everything we’ve done painstakingly over the years — whether on the operating budget or with the pensions — is what does it take to solve the problem, but allow the economy to still grow? . . . I don’t make light of this. But we had to solve the problem. And we do it in a way that’s fair.”
“An argument can be made that we need to give the property taxpayer a rest for a while before we go back to that well,’ said Ald. Joe Moore, one of the mayor’s staunchest allies said about what are, in fact, regressive taxes, which, as pointed out by David Fernandez, public finance attorney, inherently fail when people find ways to get around them.
The water grew murky when Moore said, “We have to continue to close our structural deficit and we have a yawning gap in our pension obligations that we need to close. We need to come up with something. . . . Like last year, it’s a range of choices that go between bad and worse. We have to pick our poison.”
Some observers say that what is needed is $961.8 million. A figure that is at odds with the projected actual 2016 contribution of $153.1 million. With total contributions significantly lower, it will be hard for Emanuel to even tread water on this issue.
He also faces the need for legislative approval for any plan to be utilized, “just as the telephone tax increase used to save the Laborers pension fund needed sign-off from the Illinois General Assembly.”
Adding to the earlier obfuscation, on Wednesday, "in a speech to financial investors Wednesday afternoon, Mayor Rahm Emanuel proposed a new utility tax on Chicagoans' water and sewer bills to shore up the largest of the city's ailing pension funds", reported the Chicago Tribune.
"Under Emanuel's proposal, the tax would be phased in over the next four years, with the average homeowners' bill increasing $50 each year until it reaches $200 in the fourth year. The average Chicago homeowner's water and sewer bill is $114.30, billed every other month, city officials have said," reported the paper.
The plan only requires the approval of the Council, not the state, and the diversified risk is seen as less risky, politically, for the mayor; except those in low-income communities.
State statutes also limit the amount that can be raised, with one exception: “According to Civic Federation researchers, the Natural Gas Use Tax appears to be a home rule tax imposed at a rate of $0.063 per therm to generate $37.1 million in 2016. If so, it could be raised without state approval,” reported the Sun-Times.
Finding these funds, and securing pensions, could be the tipping point for Emanuel as he walks a tightrope in his second round dealing with city finances, and the very dangerous ground that lies beneath him.
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