As Mayor Rahm Emanuel prepares to seek his third term at the city’s helm, his budget team on Tuesday ruled out any major tax increases to close a relatively small projected budget shortfall in the coming year.
The 2018 Annual Financial Analysis, a starting point for shaping next year’s spending plan, pegged the 2019 operating budget shortfall at $97.9 million — the lowest predicted gap since Emanuel took office in 2011, when the mayor had to close a 2012 budget chasm of $636 million.
Budget Director Samantha Fields said a property tax increase would not be needed to balance next year’s books.
“We don’t expect to have a tax increase that you’ve seen in the past, but we’ll have a better idea of how we’ll solve for the gap in the next few months,” she said, before flatly ruling out a property tax increase. “We may have small recommendations from the departments on revenues here or there, but I don’t anticipate any large ones that will move heaven and earth.”
The relatively good news on the budget front is reminiscent of 2014, when Emanuel proposed a budget for the following year that included a few relatively minor increases in targeted taxes to raise $61 million. Months after winning re-election in early 2015, he pushed through a phased-in $543 million increase in property taxes to boost contributions to pension funds for city police officers and firefighters.
If he emerges victorious from what is shaping up to be a large field of mayoral contestants in next year’s election, he may again have to deliver bad news to city taxpayers. The financial analysis shows that the city in 2023 will need more than $2.1 billion to make its required contributions to the city’s four worker pension funds, up from about $1.2 billion next year.
The city projects that spending for day-to-day operating costs will increase next year to more than $3.8 billion, an increase of nearly $50 million over budgeted spending for this year. That’s attributable to rising personnel costs and some expansions of city services, Fields said.
The city also could find itself facing higher costs that were not included in the projected budget forecast. Those potentially include tens of millions of dollars for raises and back pay for police, firefighters and some other city workers whose unions are negotiating new contracts — as well as any costs added to the expense of running the Police Department as a result of a proposed federal consent decree aimed at restoring community trust in the long-troubled department.
Emanuel in his first term tried to reduce the city’s pension fund obligations, but the Illinois Supreme Court overruled the changes, saying they violated a state constitutional clause that state pension benefits, once granted, “shall not be diminished or impaired.” That left him little choice but to turn to tax increases.
In addition to inheriting a huge pension funding hole when he took office in 2011, he faced whopping budget shortfalls that were the result of the Great Recession, combined with former Mayor Richard M. Daley’s reliance on one-time infusions of revenue — such as the much-criticized long-term lease of city parking meters — to balance budgets near the end of his 22-year tenure.
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To solve the budget and pension problems, as well as upgrading the city’s aging water and sewer pipes, Emanuel pushed through the City Council property tax increases, a doubling of water and sewer fees, a new tax on water and sewer service, a garbage-hauling fee, higher 911 emergency fees on telephone bills, and other increases in less broad-based taxes, fees and fines. Property taxes also have increased significantly at Chicago Public Schools, which the mayor controls, largely to restore health to the teachers’ pension fund.
As a result, the overall taxes and fees being collected in 2018 by the city and CPS are nearly $2.2 billion more than when he took office, according to a Tribune tally. All told, the average family will pay $1,813 more this year in taxes and fees to the city and schools than it would have in 2011.
The mayor also has ended certain risky borrowing practices that ended up driving up city costs; found new, less-expensive ways to borrow money; and cut health care expenses.
Even if there are no major tax increases in next year’s budget, taxpayers will still end up paying more because of increases set in motion during previous years. A $63 million increase in the property tax, the last of four to boost police and fire pension funding, is in store for next year. And the water and sewer taxes, which are being used to increase contributions to the municipal workers’ pension fund, also will increase again.
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