Chicago mayor to present massive tax hike in 2016 budget

Reuters News
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Posted: Sep 22, 2015 10:53 AM

By Karen Pierog

CHICAGO (Reuters) - Chicago Mayor Rahm Emanuel will present to a skeptical city council on Tuesday his 2016 budget proposal with an unprecedented property tax hike as he tries to dodge a financial crisis linked to unfunded pensions.

Emanuel, who was elected to a second term in February, is asking the city's 50 aldermen to approve a $543 million increase in property taxes - between now and 2018 - to cover police and fire pensions.

The stakes are high for Emanuel, as the third-largest U.S. city tries to overcome years of chronic deficit spending.

Facing a budget shortfall that could hit $745 million, Emanuel is also proposing a per-ride surcharge on taxi and ride-sharing services and a new monthly garbage fee of $9.50 per household. Garbage pickup is currently free for residences.

While Emanuel's proposals usually pass the city council easily, the property tax may meet resistance.

"Every time there was a property tax increase of any size ... there has been an aldermanic revolt. The aldermen hate to have property tax increases raised because their constituents hold them accountable, and they're likely to punish them at the next election. It's equivalent at the state level to passing a state income tax," said Dick Simpson, political science professor at University of Illinois at Chicago and a former alderman in the 1970s.

If the city cannot get its finances under control it faces further downgrades by credit rating agencies that will make it more and more expensive to raise funds through bond sales.

Moody's Investors Service, which has already cut the city's credit rating to junk, said on Tuesday it would not comment on the budget until it is passed by the aldermen.

The budget proposal depends on state lawmakers in Springfield approving an expanded property tax exemption for owners of homes valued at $250,000 or less.

Emanuel tried to lay the groundwork for the new fees, taxes and surcharges at a series of rare town hall meetings open to the public in late August and early September. But he was shouted down at the forums by residents angry over everything from school closures to the lack of economic development in poor neighborhoods. At the second of the three meetings he left early when protesters swarmed the stage.

(Additional reporting by Dave McKinney and Karl Plume in Chicago; Writing by Fiona Ortiz; Editing by Matthew Lewis)