CITY HALL — Mayor Rahm Emanuel is proposing a new tax on water and sewer use to make a pension fund solvent for city employees.
The mayor announced the proposal Wednesday. It's estimated to cost the average homeowner $4.43 a month starting next year and about $19 a month when fully implemented after five years.
It's expected to raise $56 million next year and $239 million a year when fully implemented.
Emanuel called it "an incredible milestone on the road to financial recovery" for the city and its Municipal Employees’ Annuity and Benefit Fund, paying largely for city employees not already covered under Police and Fire Department pensions. Those pensions were addressed last year with the record $589 million increase in property taxes.
"These are difficult decisions, and I know the solutions are not easy," Emanuel said in a statement, "but we will finally be honest about the cost of running the city, we will finally be able to confidently invest in our communities and we will leave Chicago better than we found it for our children and grandchildren."
If approved by the City Council, the water-sewer tax will be assessed on homes and businesses at a starting rate of $.59 per 1,000 gallons next year. As an average household uses an estimated 7,500 gallons a month, that would make a monthly addition of $4.43 on the city's new unified utility bill adopted this year with the tax on garbage pickup.
The tax will be phased in over five years, peaking at $2.51 per 1,000 gallons, or about $19 a month.
The deal also increases pension contributions by 3 percent for employees hired beginning next year, but they'll also have their age of eligibility lowered from 67 to 65. Employees hired after 2010 and before next year can opt to lower their eligibility age as well by accepting the same 3 percent increase in contributions.
Jorge Ramirez, president of the Chicago Federation of Labor, cheered the deal. "Many of our affiliated unions believe that this plan is the path forward to a secure pension system for city workers and support its implementation," he said. "While any plan that introduces a new revenue source is going to be controversial, this is a positive step forward in addressing the retirement security for the workers in the MEABF pension fund.
"In fact, what everyone agrees on is the pension system is at a critical level and it needs to be corrected quickly," he added.
The increase in pension contributions will need to be approved by the General Assembly, but the Emanuel administration estimated the fund would become insolvent by 2025.
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