Mayor Rahm Emanuel’s property tax hike will likely continue to go up after 2018 and may not be enough to cover pension costs, the garbage fee could be amended over time, and the Chicago Police Department will again spend $100M on police overtime, according to testimony from Budget Director Alex Holt Monday. She fielded a marathon of questions from aldermen on the first day of budget hearings in Council Chambers, sitting in the hot seat for most of the six hour hearing alongside Chief Financial Officer Carole Brown and Comptroller Dan Widawsky.
Budget Chairman Carrie Austin (34) and Vice Chairman Jason Ervin (28) took turns leading the hearing, which started a little after 10:00 a.m. and concluded around 5:30 p.m.
Each alderman was allocated 10 minutes for questions, and spoke in order of seniority. It will likely be one of the best-attended budget hearings of the coming weeks. Only Ald. Will Burns (4), Ald. Ed Burke (14), Ald. Derrick Curtis (18), Ald. Emma Mitts (37), and Ald. Deb Silverstein (50) did not make an appearance. Ald. Curtis’ former campaign manager, Scott Biszewski, said Curtis got married over the weekend.
Holt, who fielded the most questions, had to sometimes answer the same ones multiple times, as aldermen came and left the chambers throughout the day. She rarely paused to refer to documentation and recited most figures and estimates from memory.
The most frequently discussed topics:
PROPERTY TAX HIKE – The proposed property tax hike will not be sunsetted or rolled back, and will need to go up after 2018, according to CFO Brown. Answering questions about a potential, sunset or rollback, Brown said proposed property tax hike will remain in place until the City’s pensions receive the “actuarially required contributions“. In other words, because the new tax would be devoted to payment of police and fire pensions, pension payments would need to match the schedule set in SB777, the pension payment extension bill awaiting Gov. Bruce Rauner’s signature. If the costs of payments were to go up at some point in the future, for instance because of a growing number of retirees or increased benefits, the payments would have to go up as well.
Holt also acknowledged that if SB777 is not enacted, and SB1922, which stretches out laborer and municipal worker pensions, is not approved by the Illinois supreme court, the proposed increase will not be enough. “We’re going to need Plan B,” she said. “We’re going to have to come up with some sort of alternative.”
“We’re moving forward with a budget that largely does not need support from Springfield,” Holt said, with the exception of the passage of SB777. Without it, the City’s pension obligation will jump from $328M to $550M. Holt, like Mayor Emanuel, believes the Governor will sign the bill, which has passed in both chambers of the state legislature.
Each alderman was provided a property tax breakdown for their individual ward, detailing how many homes would see a bigger property tax bill next year, and which homes would qualify for the exemption. Several aldermen asked why they didn’t get a citywide breakdown instead. A representative from the Mayor’s office circulated this citywide property tax worksheet to reporters later that afternoon.
Ald. Anthony Napolitano (41) asked what he could tell his constituents, many of whom are police and firefighters relying on a pension, about what will happen to their tax rate after 2018.
Brown says the rate will keep climbing, but not as rapidly. “In 2020, we start paying at the actuarially required contribution, and so it’s a smaller increase, but they still increase. The City would not be in the position to roll back the property tax increase, but what we’re hoping is by doing these gradual ramps that the impact of an increase in the out years would not be as severe as it could be.” After 2018, the rise is “just based on investment returns and wage growth” Holt said, and becomes more “manageable.”
Some aldermen worried whether 2015 property assessments might lead to a “double hit” for homeowners. Ald. Harry Osterman (48) said he wouldn’t want to approve a budget without a clearer picture from the Cook County Assessor, and Ald. Michele Smith (43) read from a prepared statement about a resident whose assessment jumped 77%. A rise in property value doesn’t necessarily mean an equal hike in taxes, Holt said, and property values are rising across the board.
When asked about the feasibility of a property tax rebate, should Springfield shoot down the Mayor’s exemption, Holt said any rebate program would force the city to find additional revenue to pay for checks to homeowners. The City would need to find an extra $15M to fund a rebate program for Chicagoans that make $35,000, and $40M to fund a rebate program for homeowners whose property is valued at $250,000 or less.
GARBAGE FEE – Mayor Emanuel’s proposed $9.50 a month garbage fee for homeowners is just a starting point, according to Budget Director Alex Holt, in response to persistent questioning over the fairness and enforcement from many Black and Latino Caucus aldermen.
The Department of Streets and Sanitation based the fee structure on the number of homes that rely on city run garbage collection, not the number of bins at each household. Streets and San doesn’t have an official bin count. “There is potential inequity there,” Holt said, adding that the city will keep the door open for a volume- or cart-based fee structure down the line. “That is going to take us some time to look at that and think about the structure to think about the implementation, and also to make sure that we are doing that in a way where we don’t have people incentivized to throw their garbage in the alleys or to put their garbage in their neighbor’s carts,” Holt said.
South Side Ald. Anthony Beale (9) was one of the most vocal opponents of the proposed garbage fee, criticizing the city for moving forward on the plan without knowing the number of bins across the city. He asked why the City couldn’t fold the garbage fee into the property tax bill. Holt noted half of the City’s residents pay for private collection, which costs significantly more than that mayor’s proposed fee. “I hope we go through the amendment process, and you look to amend this, and put this garbage proposal right in the garbage,” Beale said.
The garbage pickup fee is one of few actionable items the city can take to raise revenue, Holt reminded aldermen throughout the day. The City chose to add the fee to the water bill, because roughly 96% of Chicagoans pay their water bill, Widawsky says. Ald. Leslie Hairston (5), the only person to vote against an end to free garbage pickup for residential buildings with four or more units, suggested those buildings be included in the $9.50 a month fee instead of hiring a private company to haul their garbage. In July, the City Council ended free pickup for multi-unit buildings in response to a 2014 Inspector General report that found the Department of Streets and Sanitation was wasting $3.3 million collecting trash from buildings that were no longer exempt under the city’s grandfather clause.
Aldermen continued to question Holt on garbage pickup as the meeting extended into the evening. Ald. Joe Moreno (1) suggested the city look to a pay-as-you-throw system, which Inspector General Joe Ferguson estimated could generate $125M in a 2011 report.
TIF REVENUE – TIF surpluses aren’t the answer to fund pension obligations, Holt told several aldermen who wondered if those funds could pay for pensions in lieu of the garbage and property tax fee.
“There’s a lot of conversation about TIF being the savior of our financial future, but for most neighborhoods, TIF is a source of community investment,” Holt said. Of $1.38B in TIF revenue collected in 2014, $1.24B was committed to capital projects, she said.
The city projects a $113M TIF surplus for next year. $97M will come from freezing and sweeping the surplus revenue from four of the seven of the largest TIFs, all of which are located in the central business district. This means revenue collected but not committed to existing, planned or emergency infrastructure projects will be split between the City and the school district. Those four TIFs are Canal Congress, Chicago Kingsberry, Jefferson Roosevelt, and River West. The other three central TIFs–LaSalle Central, River South and Roosevelt Canal–didn’t report a surplus for next year, but will be included in the TIF sweep the following year.
Ald. Danny Solis (25) asked how much the city expects to recoup from expiring TIFs over the next four years. Holt said from now until 2019, the City expects to collect $2M in revenue from expired TIFs, with projections growing significantly after 2019 ($8M in 2020, $9M in 2021, and $17M in 2022). Those numbers are based on property values, and are subject to change.
PUBLIC SAFETY – Police overtime will cost the City an additional $100M this year, Holt told Ald. Anthony Beale, who asked if CPD was stretching its overtime payment for the second year in a row.
“Are we still paying $100M in [police] overtime?” Ald. Beale asked Holt. “Yes, [CPD’s] overtime projection for the end of the year is approximately $100M, $60M of which, roughly, is the regular overtime, extension of tour of duty, and court overtime.” The remaining $40M is associated with the City’s Expanded Anti-Violence Initiative, which concentrates police in high crime neighborhoods.
“Do you think that is an efficient way of running the police department knowing that murders and up and crime is up, but we’re still paying $40M in overtime?” Beale asked. While she said she couldn’t comment on police strategies, she could say from a budget perspective, the city can buy more policing hours with overtime than straight time. $10M in police overtime provides about 150,000 hours of police time, while straight time nets 90,000 hours.
Ald. Nicholas Sposato (36), a former firefighter, and Ald. Chris Taliaferro (29), a former police officer, expressed skepticism about Mayor Emanuel’s proposal to move more than 300 cops off desk duty and on to the streets. Sposato equated the move to putting a housecat on the street, calling it, “the biggest bunch of crap I’ve ever seen.” Taliaferro called the proposed move, “smoke and mirrors.”
“I’ve seen that over the years, and many end up back inside. It’s not an actual number getting on the street,” Taliaferro said. “Unfortunately, it can be to the detriment of our community,” but said he would save his reservations for the budget hearing on police scheduled for October 6.
311 PRIVATIZATION – While many aldermen have fixated on $1M in savings estimated from outsourcing the City’s 311 system, replacing it would cost between $25 and $30 million dollars, Holt told aldermen Monday. That estimate prompted the City to look at whether outsourcing would be more cost-effective. The proposal came as a surprise to many aldermen, some of whom found out about it the night before the Mayor’s budget announcement. Comparisons to the maligned parking meter deal came soon after.
Ald. Scott Waguespack (32) made a point Monday to ask whether 311 outsourcing would fall under scrutiny of a privatization ordinance championed by Ald. Roderick Sawyer (6) and Mayor Emanuel, which has not yet been called up in committee. The ordinance would require the city to make a clear case for why a proposed privatization would benefit the city, provide sufficient time for public debate before moving forward and establish an accountability and transparency framework. Holt told him she expected 311 privatization would be subject to the ordinance, but framed the proposal as a jumping off point for reform, and not a done deal. There are 72 call center and management employees at 311 still in the budget as of January 1. “We might not be looking at full outsourcing,” Holt said. Limited outsourcing or no outsourcing at all are both possibilities. “We’re interested in finding out what the options might be.”
Aldermen from different caucuses voiced opposition to the possible outsourcing, including Brian Hopkins (2), Chris Taliaferro (29), Pat Dowell (3), Leslie Hairston(5), and Scott Waguespack (32).
RIDESHARING FEES – Rideshare companies like Uber and Lyft can start picking up passengers from O’Hare and Midway airports starting January 1 if Council passes the Mayor’s proposed changes, Holt says. But aldermen like Ald. Pat Dowell (3), said Council should work to “level the playing field” between cab and rideshare drivers before then, by subjecting rideshare drivers to some of the same fees, standards, and licensing requirements cab drivers currently have to follow. Ald. Susan Sadlowski Garza (10) told Holt, “When you open up the airport to them in January, this is going to be a disaster for taxi drivers.”
The mayor’s proposal gets rid of ground transportation tax that taxis currently pay, subjecting cab and rideshare drivers a .50 per ride charge instead. Of that proposed $0.50 surcharge, $0.10 would go towards the wheelchair accessible fund, and $0.40 would go towards the city’s corporate fund. The proposal would also charge rideshare a bigger pickup and drop-off fee at airports than cabs currently pay, and would reduce the medallion transfer tax, Holt says.
Ald. Anthony Beale (9), chair of the Transportation Committee, said medallions “are pretty much useless” at this point, and suggested Holt work with the Law Department on a new proposal to get more revenue and “truly level the playing field.” He has favored a $1 surcharge on all rides with Lyft and Uber.