However, the plan for the fiscal year that begins on Jan. 1 still faces uncertainties in the Illinois Legislature and supreme court that could impair the mayor’s plan to address the city’s $20 billion unfunded pension liability.
The proposal was for $543 million property tax increase phased in over four years, as well as fee increases and spending cuts in an attempt to fix the city’s financial crisis linked largely to pensions.
Emanuel offered a choice prior to the vote to either slash vital public safety and other services or the proposed property tax increase, which would be Chicago’s largest increase.
Chicago was already dropped to “junk” status by Moody’s Investors Service earlier this year and faces further downgrades as the city’s finances continues into uncertainty.
Both Moody’s and Fitch Ratings said the use of higher property taxes to pay pensions is a positive step for the city. But the credit rating agencies noted parts of the mayor’s pension strategy are dependent on actions by the Illinois Legislature and the state supreme court, which will take up the constitutionality of a 2014 city pension reform law next month.
Property taxes will be boosted between now and 2018 to cover state-mandated contribution increases to police and firefighter pensions. But the tax increase will fall short if Illinois’ governor does not enact a state law that would spread out annual contributions. The mayor is also pushing the state legislature for a bill to shield residential properties valued at $250,000 or less from the tax hike, although the city could consider a rebate program if that measure is not enacted.
The spending plan, which includes a $3.63 billion operating budget for fiscal 2016, creates Chicago’s first-ever garbage collection fee and generates new revenue from taxis and ride-sharing businesses. It also reduces the city’s dependence on so-called scoop and toss bond restructurings to $125 million from $225 million this fiscal year.
The budget includes an additional $45 million property tax increase to pay for Chicago Public Schools’ capital projects.
Sherwin L. Sucaldito, REALTOR®, GREEN, ABR, CRPM
The Institute of Luxury Home Marketing
Green REsource Council, GREEN
Accredited Buyer’s Representative , ABR
Certified Residential Property Manager, CRPM