Mayor Rahm Emanuel still wants to raise Chicago property taxes as part of a plan to shore up city pension systems, but he no longer is asking state lawmakers to do the dirty work.
Faced with blistering criticism from Gov. Pat Quinn and significant reluctance from state lawmakers, the mayor on Monday revised his pension proposal to ensure that the politically unpalatable task of a property tax hike instead would fall solely to the Chicago City Council.
That change makes it easier for lawmakers to vote for the city pension bill and could help Emanuel score a big political victory this spring. But approval of the measure still would do nothing to solve the most immediate financial problem at City Hall — a $600 million increase next year for the pension funds of police and firefighters who would not be covered by the legislation in Springfield.
The flurry of movement on the city pension situation started with Quinn, who last week declined to weigh in on the mayor’s plan. On Monday, however, the re-election seeking Democratic governor, who would have to sign the bill into law, announced that he didn’t like the property tax increase.
“I don't think that's a good way to go,” Quinn said at an unrelated morning news conference. “And I say it today and I'll say it tomorrow, they've got to come up with a much better comprehensive approach to deal with this issue. But if they just think they are going to gouge property tax owners, no can do. We're not going to go that way.”
The governor, who has called for a property tax cut in return for extending the 2011 Illinois income-tax hike, would not say how the city should find more money for its government worker pension systems. “Chicago has to address its own situation when it comes to pension reform, but I think they need to be a whole lot more creative than I've seen so far,” Quinn said.
Hours later, a new version of the pension bill surfaced in Springfield. The latest revision no longer requires the city to create a separate “pension stabilization levy” solely dedicated to increasing payments to the municipal and laborers pension funds that serve nearly 57,000 workers and retirees.
The measure states that the city make the additional payments with property tax revenue or “other lawfully available funds.”
Still in the bill are two provisions to penalize the city if it does not make the pension payments. The state comptroller would be allowed to divert millions of dollars in annual state payments away from the city and into the pension funds a provision that was made stronger in the most recent version.
The proposal also spells out that pension boards could sue to get the state to divert millions in city funding to the pension funds.
All told, the city would need to make additional annual payments of $50 million in each of five successive years — or $250 million in the fifth year. That translates to a fifth-year tax increase of about $250 for the owner of a home with a market value of $250,000 and about $675 for the owner of a commercial property worth the same amount, according to an analysis by officials in Cook County Clerk David Orr’s office, where tax rates are calculated.
In addition, city workers would pay more toward their retirement — a total of $1,500 more a year after five years for the average city worker — and retired workers would get significantly smaller cost-of-living increases.
The new plan also includes a minimum cost-of-living increase of at least 1 percent every year for retired workers who are getting pensions of $22,000 or less. The bulk of retirees would get annual increases of half the rate of inflation or 3 percent, whichever is less, based on the amount of their annual pension payments upon retirement. Currently, all retirees get 3 percent, based on their previous year’s pension income.
“Working with legislative leaders, bill sponsors, the governor, and our partners in labor, we have addressed their concerns,” Emanuel said in a statement. “I reject the false choice between allowing the pension funds to go belly up, delivering thousands of pink slips to city workers, or enacting a massive property tax increase. This plan will secure these pension funds while ensuring the taxpayers don’t have to shoulder the burden alone.”
The latest version also includes a new provision that would allow Emanuel to change the makeup of the two retirement boards that oversee the laborers and municipal funds. It would terminate the terms of current members next year and allow the mayor to recommend how new members of the board should be appointed.
The idea behind the changes is to make it easier for state lawmakers support it — and perhaps the governor to sign the bill — by taking out the property tax hike aspects. House Speaker Michael Madigan’s first version would have had lawmakers voting on a bill that required the city to raise property taxes. A later version watered that provision down to suggest that’s how the city would come up with more money for pensions. Now that’s removed and City Hall gets to determine whether property taxes are raised.
Even with the changes, approval is not assured at the Capitol, where lawmakers took a tough vote on state pension cutbacks that angered unions in December. At City Hall, aldermen haven’t exactly embraced the notion of a property tax hike before all 50 of them stand for re-election in February 2015.
In Springfield, backers are trying to drum up enough support for a potential vote this week.
“This is a necessary action to stanch the bleeding of the city’s credit rating and preserve benefits for its employees,” said Rep. Elaine Nekritz, a Northbrook Democrat and pension expert.
While Democrats control the House and Senate, they’re calling for Republican votes to help approve the city pension bill.
“This bill has gone through major machinations in the last 72 hours, including a pronouncement by Gov. Quinn that he’s opposed to it,” said Patty Schuh, spokeswoman for Senate Republican leader Christine Radogno of Lemont. “What’s he think of the latest version? Does it satisfy him? The governor’s either going to sign it or veto it.”
“It still doesn’t address the issue of, ‘What’s the other shoe that’s going to drop?’ “ Schuh said. “It’s not in the taxpayers’ best interest to make these decisions pretending they’re in a vacuum.”
Emanuel has been “making calls nonstop to rank-and-file legislators and legislative leaders since the bill was introduced,” said city spokeswoman Kelley Quinn.
Even if he does convince legislators to pass the bill, and somehow gets it past the reluctant governor, he then has to convince aldermen to raise taxes.
“I think any tax increase is going to be tough facing an election year, and we’re right in the thick of it now,” said Ald. Howard Brookins, 21st, who noted the deal is opposed by three of the 31 affected unions.
“I think it’s tougher if the teachers union is saying no and other unions are saying no, so while the others are saying yes, that just makes it difficult," Brookins said. Unions often get involved in election contests by contributing money and campaign workers, he added.
As the debate over Emanuel’s pension legislation plays out, the major bond ratings firm that has downgraded the city’s creditworthiness more than any other because of pension liabilities called the mayor’s proposal “modestly credit positive.”
But the Moody’s report also stressed that Emanuel’s plan does nothing to address the $600 million the city is required to pay into its police and pension funds next year absent changes to state law.
That amount is 12 times greater than the city would pay into the other two funds next year under Emanuel’s proposal and has left some aldermen — including Ald. Patrick O’Connor, 40th, the mayor’s floor leader — questioning whether they want to vote for one tax increase without knowing how the other tab will be covered.
Tribune reporter Bill Ruthhart contributed.
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