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Water, Sewer Tax Hike OKd By Council Finance Committee Despite Criticism

By Ted Cox | September 8, 2016 10:19am | Updated on September 8, 2016 4:09pm
 Ald. Scott Waguespack (32nd) said the City Council is leery of a major shortfall in city pension funding that would come due in 2023 despite Mayor Rahm Emanuel's proposed water and sewer tax hike.
Ald. Scott Waguespack (32nd) said the City Council is leery of a major shortfall in city pension funding that would come due in 2023 despite Mayor Rahm Emanuel's proposed water and sewer tax hike.
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DNAinfo/Ted Cox

CITY HALL — Mayor Rahm Emanuel's bid to float a floundering city pension fund through a new hike in water and sewer taxes cleared committee Thursday over objections from skeptics.

The Finance Committee voted 26-6 to pass the 30 percent increase in water taxes to be phased in over the next five years.

Yet criticism of the tax increase dominated debate on the matter Thursday.

"We have constituents who don't buy the line that this is going to solve the problem," said Ald. John Arena (45th).

"We all feel that we are being taxed to death," added Ald. Roberto Maldonado (26th).

"We can't keep asking people to give more when they are actually getting less," said Ald. David Moore (17th).

 Budget Director Alexandra Holt talks with Ald. Walter Burnett Jr. before the committee meeting.
Budget Director Alexandra Holt talks with Ald. Walter Burnett Jr. before the committee meeting.
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DNAinfo/Ted Cox

Moore called the tax "regressive," in that all households need water, with relatively little fluctuation from family to family.

"These numbers are off," charged Ald. Willie Cochran (20th) on estimates provided by the Emanuel administration. "They're way off from what they should be, in my opinion."

Emanuel pitched the tax hike a month ago, saying it would raise $56 million next year and $239 million per year when fully phased in — money that would go directly to a city employee pension account now estimated to be only 20 percent funded, and projected to be rendered insolvent by 2025.

The pension fund, the Municipal Employees’ Annuity and Benefit Fund, covers most city employees not already covered under Police and Fire Department pensions.

The Emanuel administration originally estimated the tax hike would cost the average homeowner an extra $4.43 a month next year and $19 a month when fully implemented after five years, an overall increase of 30 percent.

Chief Financial Officer Carole Brown testified Thursday that it would cost the average homeowner $50 a year next year, on top of a $250 increase in property taxes approved by the Board of Education for Chicago Public Schools pensions.

Ald. Ricardo Munoz (22nd) pressed Budget Director Alexandra Holt on an apparent $302 million shortfall in pension funding in 2023.

"We will need additional funding in the future," Holt admitted.

"At the end of this ramp-up in water fees, we still know we're going to need $300 million," Arena said. He called it "a pipe dream" to expect to discover more revenue, or to receive pension reform from Springfield.

"This administration has to show that they're fighting for residents and not just taking from them," said Moore, who called the tax "regressive."

Business interests also came out against the tax hike.

"The city is certainly in need of additional revenue, but City Hall must acknowledge that once again businesses will be most affected by this latest action," said Theresa Mintle, president of the Chicagoland Chamber of Commerce. "If passed, this new tax will be the next item on a long list of taxes, fees and mandates affecting Chicago’s employers, coming right on the heels of mandated paid sick leave, minimum-wage increases and a record-setting hike in property taxes."

"The cumulative effect of these actions are making living in Chicago more and more expensive," said Michael Mini, vice president of the Chicagoland Apartment Association. "Over half of Chicagoans rent their homes, and the reality is that renters with low and moderate incomes will be impacted the most by new taxes on necessities like water and sewer service, the cost of which already increased by 60 percent since 2012.  We understand the importance of getting the city back on sound financial footing, but funding our pension obligations at the expense of affordable housing is a risky proposition.”

In addition, aldermen worried about the effect on laundromats, which generally serve a low-income, minority clientele.

Aldermen voting against the hike included Cochran, Munoz, Arena, Leslie Hairston (5th), Patrick Daley Thompson (11th) and Scott Waguespack (32nd). Arena and Maldonado, however, said they might drop their opposition if they receive satisfactory additional information from the administration ahead of final passage set for next week in the City Council .

Waguespack, one of the leaders of the Progressive Reform Caucus, took issue Wednesday afternoon with how aldermen were just being briefed on the details, less than 24 hours before a vote on the tax hike was expected in the Finance Committee.

"It's an unfortunate move to wait this long when it's pretty obvious everyone has requested this," Waguespack said. "They're just trying to rush something through without taking a serious look at it."

Waguespack pointed to a "huge jump" in payments in 2023 that the additional water tax would not cover.

"Basically, what we have is a sixth-year gap that's unfunded, and the numbers just don't add up to what we were expecting," Waguespack said.

Acknowledging that it would be, in some ways, "kicking the can down the road" to leave the unfunded gap unaddressed, Waguespack said "There'd definitely be political concerns for future elected officials at that point."

He added, "I think a lot of people would be very concerned — enough to think about how that would affect them six years down the line. That's not very far away."

Waguespack said aldermen are feeling pressure after approving a record $589 million property tax hike last year and seeing Chicago Public Schools add another $250 million in property taxes this year.

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