Chicago mayor prepares large property tax hike

CHICAGO (AP) — After watching for years as their city's financial troubles piled up, Chicago homeowners will be told this week that it's time for them to start paying the tab.

Mayor Rahm Emanuel is expected to propose a $543 million property tax increase on Tuesday to help eliminate pension debt, along with a schools tax for construction, according to details released late Monday by the administration.

Residents will also face more taxes and fees on garbage collection, ride-sharing services and e-cigarettes, all with the goal of easing a budget hole and repairing low credit ratings.

The steps would help reverse the city's financial slide but could dent Chicago's reputation for a relatively affordable cost of living. Median home prices in the nation's two larger cities, New York and Los Angeles, are double Chicago's.

"There's no way around it," said Alderman George Cardenas of the additional taxes. "If we don't face the consequences, you pay more (later), your children will pay more and that's no way to run a city."

It's unclear how residents and businesses will respond. Emanuel has faced raucous crowds at public budget hearings, but the political fallout for the former chief of staff to President Barack Obama could be delayed because he doesn't face re-election until 2019.

Some homeowners, landlords and business owners complain they already pay more than other cities in gasoline prices, sales taxes and parking. Chicago's sales tax rate is 10.25 percent, the nation's highest.

"Paying for picking up garbage? That's ridiculous. That's what my taxes are for," said homeowner James Young, 48, who works for a textile company. "Your pay check doesn't increase every time the taxes increase."

However, there have been few signs the proposal would fail in the City Council, which has largely been a rubber stamp for the mayor.

Chicago's property tax rates rank 12th nationwide, higher than Los Angeles and New York, but higher property values in those cities mean property owners pay thousands more a year, according to a Lincoln Institute of Land Policy study.

Laurence Msall, executive director of the Civic Federation, a tax and policy research organization, said the key will be persuading Chicago residents that the additional revenue will be used correctly.

"One of the biggest problems is not the tax increase but the reaction to the tax increase," Msall said. "If people don't think we're going to solve things, they will leave."

The city's financial problems have been mounting because of inadequate contributions to the pension system and questionable borrowing, mostly under former Mayor Richard M. Daley.

Chicago has the worst-funded public pension system of any major American city and a budget shortfall of at least $750 million. Illinois' governor, Republican Bruce Rauner, has even suggested that the city school district — which credit rating agencies have rated at "junk" status — declare bankruptcy.

Emanuel has cut government costs and sought other ways to raise revenues, such as a bringing casino gambling to the city, but without success.

Emanuel's office announced ahead of Tuesday's budget speech that the property tax will be phased in through 2019 and put toward police and fire pensions. Emanuel's aides estimated that it would cost a resident with a $250,000 home roughly $540 more a year.

Chicago saw property taxes rise in 2008, but the last major increase was in 1987.

Emanuel also plans to ask council members to approve a $45 million tax for Chicago Public Schools, along with a $9.50 per-dwelling garbage collection fee, higher costs for ride-sharing services and taxis, and a tax for e-cigarette liquid.

The revenue push comes as Emanuel attempts to strike a softer image, conceding during his re-election campaign earlier this year that his bullish style turned off some people. The mayor dropped hints that he'll seek property tax exemptions for low income and elderly residents. But state approval is needed for the tax hike and exemptions.

"We are going to address our challenges, and I think when the governor looks at the whole budget he will see that we didn't leave any stone unturned," Emanuel said. "It is fair, it is equitable. It's progressive."


Associated Press writer Sara Burnett contributed to this report.


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