Chicago aldermen approve increase in water, sewer taxes

FOX 32 NEWS / AP - Chicago aldermen have approved a new water and sewer tax that has the support of Mayor Rahm Emanuel.

City Council members voted 40-10 on Wednesday to approve the nearly 30 percent tax. Proceeds will go to the city's financially troubled municipal workers pension fund. The city owes the fund $18.6 billion.

The tax is to be phased in over four years. It will cost the average homeowner in Chicago about $53 more next year, going up to about $226 more in 2020. The city is poised to earn about $240 million from the tax in 2020.

After the vote Emanuel commended aldermen for having "collective courage" to approve the tax. Emanuel said "nobody likes to raise taxes" but the aldermen "helped save the city."

As painful as this water tax increase is, coming on top of big recent property tax increases, the crushing cost of government employee pensions will continue to soar. There's more pain ahead for taxpayers

The new tax will raise the average cost of water for a load of laundry from 24 cents to 31 cents. 

From 10 cents to 13 cents a day for the average person's five daily toilet flushes, according to a Tribune columnist.

By 2020, the new water tax will bring in $240 million a year. With newly-enacted property tax increases totaling $838 million a year, it's a huge boost for the city's pension funds, which have only 23 percent of the money they should have. It prompted one Wall Street credit agency to improve its rating of City Hall's fiscal outlook.

“It's in a better position financially, because we've done the necessary things to fix it,” Emanuel said.

True enough. But in the Year 2020, plans call for public employee pensions to take another big bite out of taxpayers, which is a potential new crisis.

“The next one is about four years down the road. We don't need a new fiscal crisis four years down the road,” said Ralph Martire of Center for Tax & Budget Accountability.

Tax and budget expert Ralph Martire notes the State of Illinois and dozens of suburbs face their own pension crisis. Political paralysis in Springfield now blocks any chance of a comprehensive solution. Until there is one, Martire predicts more fees and levies like the Chicago water tax.

In the wake of every new tax, come the special pleaders. Laundromats and other big water users want City Hall to give them an exemption. So far, the mayor says, "No!"

Chicago's unfunded pension debt is officially listed at $35 billion, but that assumes a big rate of return on investments. If those investments fall flat, the long term bill for taxpayers could be as high as $68 billion.

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