This week, Mayor Rahm Emanuel delivered his annual mayoral address at City Hall to unveil his recommendations for the 2018 budget.
Despite numerous new tax and fee hikes and a highly criticized new financing scheme for city debt, the mayor declared that “every bad financial practice we inherited in 2011 has now been eliminated from the budget.”
The mayor’s $8.6 billion plan increases spending $288 million over the previous year. The biggest spending increases will go toward the city’s pension funds and spending in public safety, public education and neighborhood development.
An allocation of $80 million will go to Chicago Public Schools (CPS) for student security measures. A large portion of the CPS funds will come for the $116.9 million surplus in tax increment financing (TIF). There are currently 145 TIF districts in Chicago. The mayor is proposing to sunset three TIF districts at the end of 2018. There is a 2018 TIF surplus of $166.9 million, of which $88 million will go to CPS and $40 million to the city.
In addition, $65 million has been allocated to hire 425 police officers and $24 million for improved training and supervision within the Chicago Police Department.
To help pay for this year’s budget increases, the mayor has proposed increasing taxes and fees on ride-sharing, phone taxes and tickets to events in the city. A 15-cent fee hike for ride-sharing services like Uber and Lyft will supplement the CTA budget for unspecified projects. The fee is set to bring in $16 million the first year and $21 million the next.
The mayor’s budget plan also includes an increase of $1.10 a month to the 911 phone tax. The city’s increase comes on top of a 911 fee increase the state legislature passed this year. The state will increase 911 fees from $0.87 to $1.50; Chicago will increase its 911 fees from $3.90 to $5 per month per line.
The mayor also proposed to hike the amusement tax from 5 percent to 9 percent, raising an additional $15.8 million a year. For-profit venues with 750 to 1,499 seats will no longer be taxed, but venues with 1,500 seats or more will pay 9 percent.
The mayor touted the city ending “one last gimmick” that hovers over the city’s finances. The financial maneuver, called “scoop and toss,” involves selling new long-term debt to raise funds to pay off maturing bonds, effectively extending the timetable for retiring municipal debt. The city will no longer use the scoop and toss method to balance the budget, one year ahead of schedule.
However, for this year’s budget, the mayor pushed through the controversial sales tax securitization plan, a potentially even riskier financial practice for the city.
The sales tax securitization ordinance will allow the formation of a legally independent corporation for the sole purpose of issuing bonds. The corporation will have a five-member board of directors comprised of city financial officials and members of City Council.
Emanuel’s budget relies on $94 million in savings from future sales tax for the 2018 budget, despite the city’s chief financial officer, Carole Brown, warning of the plan’s unpredictable outcomes to City Council during the Finance Committee meeting a few weeks ago.
Although Mayor Emanuel claims to have put an end to the fiscal shenanigans of the past while investing in the strengths of Chicago future, the 2018 budget represents a potentially risky financial future for Chicago taxpayers.
Emanuel claimed that Chicago has moved each of its four pension funds from a path of insolvency to a path of solvency, and that the pensions are a factor driving Chicago’s fiscal stability. “When S&P upgraded their outlook for the City of Chicago to stable last year, they noted our pensions as a reason,” said Emanuel. However, Chicago’s pension funds are only being 21 percent funded, with critics pointing to the fact that credit ratings agencies many times are more concerned with the well-being of bondholders instead of taxpayers.
Although the budget was generally well received by aldermen, a few raised concerns after the mayoral address.
Alderman Ameya Pawar (47th Ward) pointed to the $600 million spent by the city on police settlements over the past seven years, stating that the budget proposal does nothing to address this increasing amount or strengthen police accountability.
Alderman Carlos Ramirez-Rosa (35th Ward) said a record low amount of TIF surplus was awarded to educating CPS students, as a large chunk of the $80 million is allocated solely to security concerns. According to the alderman, only $17 million will go toward education.