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New Tax On Uber, Lyft Would Pay For CTA Improvements, Rahm Says

By Heather Cherone | October 17, 2017 3:57pm | Updated on October 18, 2017 11:37am
 The city is set to raise taxes on Uber or Lyft rides by 29 percent next year to fund improvements to CTA bus and train lines
The city is set to raise taxes on Uber or Lyft rides by 29 percent next year to fund improvements to CTA bus and train lines
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CITY HALL — The city is set to raise taxes on Uber or Lyft rides by 29 percent next year to fund improvements to CTA bus and train lines, Mayor Rahm Emanuel said Tuesday.

Emanuel, who is set to introduce his 2018 budget Wednesday, gave a brief preview of his spending plan Tuesday while celebrating the expansion of Walgreens' Chicago workforce by 300 employees.

If approved by the City Council next month, the city will add 67 cents to the cost of every ride hailed with a service such as Uber or Lyft next year, up from the current charge of 52 cents per ride.

In 2019, that surcharge will rise another 5 cents to 72 cents — a 38 percent increase from 2017 rates, according to the mayor's proposal.

Emanuel did not specify which CTA projects the tax hike will fund, but he said it would bolster the city's bid for Amazon's second headquarters, since company leaders have said they will favor cities with robust public transportation systems.

"'I've made a big effort to modernize our mass transit system," Emanuel said. "It's one of the big draws. Having a modern transportation system — roads, bike lanes, mass transit and aviation — is a lure for companies."

A statement from the mayor's office touted the proposal as a "unique way" for Chicago to embrace ride-sharing services while ensuring the "CTA can continue to invest in infrastructure upgrades to the train and bus lines that tens of thousands of people rely on every day."

"To do it, Chicago will become the first city in the nation to institute a fee on the rideshare industry dedicated specifically to mass transit and mass transit improvements," according to the mayor's spokesman, Adam Collins. "The funds generated will be dedicated solely to the CTA to modernize transportation in Chicago for every resident."

In 2016, ride-share taxes and fees generated $59.6 million, with 81 percent of the money coming from Uber and Lyft, said Molly Poppe, a spokeswoman for the city’s Office of Budget and Management.

In 2017, the city expects to collect $85.2 million, with 88 percent coming from Uber and Lyft.

But more people using ride-share service has meant a significant drop for other parts of the city budget, including parking garage fees, CTA fares and rental car taxes, totaling $40 million, Poppe said.

Scott Coriell, a spokesman for Lyft, said earlier this month city officials had used "creative accounting" to turn ride-sharing into a net loss for Chicago.

Representatives of Lyft Uber did not object to the increase in the surcharge.

"At Uber we believe that the future of urban transportation will be a mix of public transit and ridesharing, and that by encouraging residents to use a variety of options, we can all ride together to build a better Chicago,” said Uber spokeswoman Molly Spaeth.

""We appreciate the mayor working to build a sustainable future for ridesharing drivers and passengers in Chicago and look forward to continue collaborating on providing safe, convenient and affordable transportation options for the city," said Lyft spokesman Campbell Matthews.

RELATED: Comprehensive coverage of Emanuel's 2018 budget

City officials have promised not to raise citywide taxes to cover the budget gap they pegged at $114.2 million — or to bridge the remaining $80 million shortfall facing Chicago Public Schools. The city also has not announced how precisely it will cover the $60 million cost of hiring another 266 police officers, 100 detectives and 75 sergeants in 2018.

However, city residents still are paying several massive tax increases, including the largest property tax increase in Chicago's history — approved in 2015 — and a 30 percent increase in the water and sewer tax — approved in 2016.

In addition, the Chicago Board of Education, whose members are appointed by Emanuel, are expected to raise property taxes next year by $177 for the owner of a home worth $250,000.

Emanuel is expected to use $66 million of the city tax increment financing funds to cover the shortfall facing the schools and pay for officers to patrol the schools, officials said.

Those funds generated a surplus of $166 million, officials said.

TIF districts capture all growth in the property tax base in a designated area for a set period of time, usually 20 years or more, and divert it into a special fund for projects designed to spur redevelopment and eradicate blight.

Given the green light by legislation approved by state lawmakers, Emanuel will ask aldermen to hike taxes on cellphones and land lines by $1.10 per month per line. That will keep the laborers' pension fund out of the red, officials said.

In 2014, the Council agreed to hike the city's telephone tax by 56 percent to help the same pension fund — adding $1.40 per month to the bills for every landline and cellphone in Chicago.

However, Emanuel said the "city has put its fiscal house in order."

The city is expected to refinance up to $2.5 billion in debt under a new state law that could save taxpayers as much as $75 million a year, officials said. That method of debt management already is used in New York City, Philadelphia and Washington, and could raise the city's credit rating, officials said.

“This will be the first budget free of any…fiscal gimmicks that I inherited," Emanuel said, noting that his spending plan ends the practice of borrowing money to pay off other debt without reducing the principal or raiding the city's "rainy day fund" or selling off city assets.

"All of the things that I said we were going to change ... happened," Emanuel said.