CITY HALL — Aldermen scrutinized the cigarette tax and development funds as budget hearings got underway Monday.
Beginning what's expected to be a monthlong process, the City Council grilled Budget Director Alexandra Holt on what Ald. Roderick Sawyer (6th) called "the human costs" of more than doubling the city tax on cigarettes.
"The human costs in a lot of the lower-income communities are devastating," Sawyer said, calling the increase a "regressive" tax that would be "hurting the poorest the hardest." He and Ald. Jason Ervin (28th) both suggested the higher tax would trigger an "underground economy" in loose cigarettes sold on street corners.
"It has the impact of creating a very large black market in minority communities," said Ald. Leslie Hairston (5th). "This tax will disproportionately impact communities of color."
Ervin said it doesn't make "fiscal sense" to increase the tax so much that it would reduce sales and overall revenue.
Ald. Brendan Reilly (42nd) also spoke of the "unintended negative impact," especially on convenience stores and gas stations on the city borders. He said a carton of cigarettes would cost $48 less in DuPage County and $54 less in Indiana after the tax hike.
Holt allowed that the proposed 75-cent increase would hike the city tax from 68 cents to $1.43 a pack and bring total local taxes to $6.41, counting state and county taxes. Yet she added that recent state and county increases of $1 a pack had not affected overall sales-tax revenues.
Even accounting for reduced sales, she said, the budget projects $25 million in cigarette-tax revenue in 2014, up from $16 million this year.
"It will drive some people across the border," she allowed, but added that it would also dissuade smokers, pointing out that the added funding would also go to child health initiatives including enrolling the eligible in Medicaid and widening a vision program in Chicago Public Schools.
Reilly was sympathetic.
"No one should ever pick up this horrendous habit. I can speak from experience," he said. "Part of the purpose of a sin tax is to discourage the use."
Hairston suggested increasing the proposed hike of fines for parking near a fire hydrant instead of increasing the cigarette tax. She also suggested a crackdown on enforcement in collecting the current cigarette tax, with a one-year suspension of a business license for violators.
Aldermen also questioned a surplus in Tax Increment Finance funds, which are separate from the city budget. Holt said 34 of the city's 154 TIF districts had a surplus, allowing $49 million to be redistributed, with about half of that going to CPS and 20 percent back into the city budget.
Ald. John Arena (45th) said the city has $1.7 billion in TIF funds with $1.5 billion allocated to community-development projects. He appreciated that the city was declaring a surplus with 25 percent of the excess, up from 20 percent previously, but added, "Why not go to a higher percentage? We have revenue here that is sitting in accounts."
Holt said the actual surplus was estimated closer to $160 million and that the necessity to keep $1 million in some funds reduced the available surplus.
Arena asked for "a clear breakdown of what you've got" and called for "less nickel-and-diming of taxpayers with money they've already been taxed."
Ald. Walter Burnett (27th) got Holt to specify that about $12 million of the $49 million declared surplus was coming from TIFs in his ward. "I'm doing my part," he said.
Hairston said she wanted more "consultation" with aldermen on use of the TIF funds.
"Reports we've put out have maybe not been as clear as they could be," Holt said.
Holt repeated Mayor Rahm Emanuel's position that the Police Department will add 740 recruits and remain at "full strength."
Yet Ald. Scott Waguespack (32nd) wondered "what 'full strength' really means," adding, "We seem to be bouncing around from year to year as to what that means."
Holt said current police staffing was for about 12,500 officers, with about 1,000 civilian employees in the department. She added that the 2014 budget allowed for $75 million in police overtime, down slightly from this year, because new recruits have allowed the department to reduce OT in efforts to cut gun violence. Ald. Joe Moreno (1st) asked why pay overtime instead of hire more cops?
Holt said it was a "better management tool" for the department, adding, "You have more flexibility." She said paying overtime meant not paying the additional costs on pensions and benefits for additional employees.
Moreno said more cops would be cheaper when the overtime is chronic from year to year. Holt responded that she didn't know the "tipping point" for that cost-benefit analysis.
Moreno added, "The amount of hours you're buying are from human beings who get tired," especially working the 11th or 12th straight hour of a demanding job. Ald. Willie Cochran (20th), a former Chicago cop, asked Holt to prepare a comparison of overtime against hiring additional police.
Budget hearings continue with a department-by-department accounting before the council into next month.