The City Council yesterday voted to approve the Mayor’s proposed 2016 budget. The vote came after weeks of hearings, negotiations and changes to the Mayor’s initial budget proposal. I was one of the 35 aldermen to vote in favor of the budget, as amended, and I’m writing to tell you why.
To put it succinctly, the budget puts the City on a path to fiscal stability, reducing our structural deficit while continuing to make investments in Chicago’s youth, neighborhood services and infrastructure. It also satisfies our statutory obligation to place our police and fire pension funds on sound financial footing.
To view the City budget and supporting documents, CLICK HERE.
The property tax increase and, to a lesser degree, the garbage collection fee have garnered the most public attention. Before I discuss those two issues, allow me to highlight some of the less discussed, but nonetheless important initiatives in the budget we adopted yesterday:
The 2016 City Budget Includes Substantial Savings and Reforms.
The budget includes $170 million in savings and reforms, bringing the total saved over the past five years to $600 million. Some of those savings and reforms in 2016 include:
- Substantial healthcare reforms and savings for active employees and retirees, saving $40 million;
- Eliminating 150 vacant positions, saving $14 million;
- Putting street sweeping on a grid, saving $3 million;
- Closing Central Business District TIFs and other TIF reforms will provide $113 million to the City, CPS and other local governments, the largest in years;
- Further enhancing garbage collection efficiency, saving $9.5 million;
- Utilizing zero-based budgeting to reduce non-personnel costs by $21 million; and
- Through greening of city building infrastructure and energy hedging contracts, saving $16 million in energy costs.
The 2016 Budget Provides Enhanced Services.
Thanks to these reforms and efficiencies, the City will be able to upgrade its delivery of City services in a number of vital areas, with little or no additional cost to the taxpayers, including:
- Adding five rodent baiting crews, ensuring all rodent requests are closed within five days, and adding ten tree trimming crews to eliminate the backlog of tree trimming requests by the end of 2016;
- Moving 319 police officers from behind desks to the beat;
- Investing in our youth by creating 27,000 youth afterschool opportunities, 25,000 summer youth jobs, 5,500 pre-school slots, and opening 15 new early learning centers at Chicago Public Library Branches;
- Transforming over the next four years five school-based clinics into “Community Health Clinics,” serving 3,000 patients annually per site;
- Providing an additional 5,000 uninsured women with access to free breast health services and mammography screenings; and
- Expanding primary care health services to 2,000 low-income individuals living with HIV/AIDS.
Understandably, these savings and service upgrades have been overshadowed by the debate over the property tax levy, which is intended solely to pay for our pension liabilities. It goes without saying that voting for a budget that includes a substantial property tax increase is not politically popular, but I believe it was the right decision for the future of our City. Far too often in this day and age, our elected officials make decisions based on what is politically expedient, rather than what is right.
In casting my vote yesterday, I tried to do what is right.
The City is required by Law to make a $544 Million Contribution this year to the Police and Fire Pension Funds.
I’ve written on several occasions, including as recently as a month ago, about the incredible fiscal challenges facing our City. We labor under a $12 billion pension liabilitythat has dropped the City’s bond rating to junk status. The Mayor and other City officials have tried for the last few years to negotiate payments to the pension funds that would protect the long-term solvency of the funds while at the same time protecting the City’s taxpayers.
Despite these efforts, the Illinois General Assembly enacted legislation requiring the City this year to make at least a $544 million down payment on its pension debt to the police and fire pension funds.
The Property Tax is the only Viable Option for Meeting our Legal Obligation to the Pensions.
If the City failed to make good on its legal obligation, the City’s already shaky credit rating would be downgraded even further and the long-term retirement security of our first responders would be jeopardized. In short, we need to make this payment and the property tax is the only viable option.
Cutting our budget by a half billion dollars is not an option.
Over the last five years, the City Council and the Mayor have enacted cost-cutting savings and reforms that have saved taxpayers over $600 million. This includes $170 million in identified savings in the upcoming year. Though we must continue to find ways to deliver government services more efficiently, we cannot cut an additional half billion dollars from the City budget without some very serious and drastic reductions in the quality of City services.
The City has no significant revenue raising options other than the property tax.
The property is the only option available to the City that can raise the kind of revenue necessary to satisfy its legal obligation to the pension funds. Some have suggested levying a financial transaction tax on trades in commodities and futures. Others have suggested a tax on suburban commuters or a progressive City income tax. As meritorious as those ideas might be, the City does not have the authority to levy such taxes without approval by Congress and/or the Illinois General Assembly.
TIFS are not an option for satisfying our pension obligation.
Finally, some have suggested accessing funds in the City’s various tax increment financing (TIF) accounts. This is based on the false assumption that TIFs contain a huge reservoir of untapped funds.
In fact, of the $1.38 billion contained in the City’s 147 TIF districts, $1.24 billion is already committed to projects, the vast majority of which are neighborhood capital projects, including improvements to schools, public transit stations, streets, sidewalks and the like. This leaves only $141 million in uncommitted TIF reserves.
This year’s budget calls for the distribution of $113 million of those reserves. The City cannot keep all that money, however. Far from it. State law entitles all the taxing bodiesin the County to receive their pro rata share of any TIF disbursements. As a result, the City will receive only 17.5% of the TIF proceeds, or approximately $20 million.
What about the remaining $28 million in uncommitted TIF reserves?
TIF remains one of the only tools available to the City to incentivize economic development, so simply emptying the TIF districts of all their reserves would be an extremely penny wise and pound foolish approach. But even if we emptied the TIFs of all their reserves, the City would only be entitled to its 20% pro rata, or approximately $4.9 million, a mere drop in the bucket compared to our $544 million pension obligation.
In short, no one who opposed the property tax increase offered a viable alternative for coming up with the money necessary to satisfy our half-billion dollar obligation to the pension funds.
I Support Efforts to Protect Low- and Moderate-Income Homeowners from the Tax Increase
I’m fully aware that many low and moderate-income homeowners will have a tough time absorbing the property tax increase. This is why I fully support the Mayor’s proposal todouble the state homeowners’ exemption from $7,000 to $14,000 to ensure that the property tax burden is borne by those who can best afford it.
All homeowners will see relief if and when the $14,000 homeowners’ exemption is enacted, but those owning homes valued at less than $250,000 will be held nearly harmless over the four year phase in of the property tax increase, with many seeing a decrease in their bill.
The Mayor’s proposal to double the homeowners’ exemption requires a change in state law. The proposal passed the Illinois House Revenue Committee earlier this month and will be considered by the full House next month.
If the legislature fails to act, I have a back-up plan. I’m supporting Alderman Joe Moreno’s proposal that would offer a rebate to middle and lower income homeowners on their property tax bill. The City does not require any approval by Springfield to enact the rebate proposal and the Mayor’s Administration has indicated support for our proposal if the exemption increase fails to win approval in Springfield.
The Garbage Fee Helps Close the City’s Structural Deficit and Makes it More Fair for those who don’t receive City Garbage Pick- Up.
The 2016 budget also contains a $9.50 monthly fee per household for City garbage collection. This fee is expected to generate over $60 million and will help significantly close the City’s “structural deficit,” which has been reduced by two-thirds over the last five years.
In adopting a garbage collection fee, Chicago joins nearly every suburban community in the Chicago area and most major cities in the U.S. Some Cities charge a fee as high as $100 a month.
The City currently picks up garbage from buildings of five units or less, while owners of buildings larger than five units are required to hire a private scavenger service to pick up their refuse. In the 49th Ward, over 80 percent of the households live in buildings larger than five units and pay for their garbage pick-ups either through their condominium assessments or rent. Though I understand those who receive City garbage pick-up may feel “nickel and dimed” over the implementation of this new fee, it does mean that all residents will now be treated equally regardless of the size of their building.
A Vote for Our City’s Future
After reading this explanation of my vote, I hope you have a better understanding of the very difficult challenges and limited options the City Council faced this year when presented with the proposed 2016 budget. Voting for property tax and fee increases is never pleasant, but the alternative–continued fiscal instability, a further downgrade of the City’s credit rating and the insolvency of the pension funds for our first responders–is far worse.
A few of my colleagues voted against the proposed budget and many other individuals have spoken out against the City Council’s action yesterday largely because of the property tax increase. Significantly, not one of those who opposed the budget has offered a viable alternative. Not one.
In passing this budget, we confronted our fiscal challenges head on rather than passing them on to next generation. As a result, Chicago will regain its financial footing and become a stronger more prosperous City.