Mayor Rahm Emanuel’s bad-news budget easily approved

28 Oct 2015 | Author: | No comments yet »

Chicago Tax Increase Spurs Bond Rally as Pension Debts Lingers.

CHICAGO (CBS) — The City Council has approved the largest property tax hike in modern Chicago history, with the vast majority of the new revenue going to shore up police and fire pension funds.

Welcome to Clout Street: Morning Spin, our weekday feature to catch you up with what’s going on in government and politics from Chicago to Springfield.Mayor Rahm Emanuel is expected to easily win approval Wednesday of a budget brimming with tax and fee increases that all told will cost Chicagoans $755 million more a year. By a 36-14 vote, aldermen signed off on a $7.8 billion budget plan for 2016, after only a few minor changes to Mayor Rahm Emanuel’s original proposal. The budget includes a new monthly garbage collection fee, which Emanuel agreed to cap at $9.50 per household until after the 2019 election, to appease aldermen who feared the fees could go up before they come up for reelection.

The push has driven a rebound in the price of Chicago’s bonds, which tumbled after Moody’s Investors Service in May pulled the city’s investment-grade rating because of escalating retirement costs. Aldermen could find themselves going back to patch a hole in the budget next year if pension relief doesn’t materialize from Springfield, and dealing with other pension woes down the road if a court case doesn’t go the city’s way. It marks one of the strongest efforts yet to deal with financial pressure that built over the past decade as Chicago shortchanged employees’ pensions by billions, even though it may do little to cut the obligation that was left behind. “No one should think that as a result of passing this property-tax increase and this budget that the city has accomplished stabilization of the pension funds or its overall finances,” said Laurence Msall, president of the Civic Federation in Chicago, who supports the tax increase, calling it a positive, needed step. “That is going to have to be worked on and evaluated every year going forward.” Chicago has contributed $7 billion less than actuaries recommended over the last decade, which by last year left the public-safety, municipal and laborers funds with about 35.5 percent of what they need for retirement checks that will be due in the coming decades, city documents show.

During the past month, Emanuel has pitched his $7.8 billion spending plan as the responsible thing to do, a move that will “finally confront our fiscal challenges.” But it’s also not like he had much of a choice. As the annual payments rise, the squeeze that has been put on the budget triggered a series of downgrades this year that have left Chicago with a lower rating than any big city except Detroit. Police and firefighters were so fed up with the city not funding their pensions that they got lawmakers in Springfield to pass a bill in 2010 requiring the city to start making much larger contributions by 2016. Chatter from council members indicates it will pass, and the mayor himself expressed confidence during an interview Tuesday night on WTTW Ch. 11’s “Chicago Tonight.” WTTW’s Paris Schutz then pressed the mayor on if he needed the budget to pass with “a resounding majority to send a message or is it going to be a slim majority?” “Look, that’s not the way I look at it, and there will be a vote,” Emanuel responded in dodging the question. “I’m working for every vote, because I think it’s important that we stand together for the future.

With that bill coming due and the Illinois Supreme Court walling off attempts to cut benefits, Emanuel dropped the “reform” part of his “reform and revenue” plan and called for a record $543 million property tax increase. In addition to the pension issue, the city’s repeated failure to eliminate its deficit and end risky and expensive short-term borrowing practices drove Wall Street rating agencies to drop Chicago’s creditworthiness to a junk status that has significantly increased the city’s cost of borrowing.

They also will vote on Emanuel’s budget rules, including an increase in the fine for cars that get booted from $60 to $100, an increase in fines for not removing snow and a proposal for an amnesty program to allow people to pay parking and traffic violations this fall without penalties. Emanuel has been counting on a law that would cut the city’s 2015 contribution to the public-safety pensions to $619 million from current law’s $840 million.

The budget also opens the door for ride-sharing services like Uber and Lyft to begin picking up customers at the city’s airports, Navy Pier, and McCormick Place, over the objections of the taxi industry, which has long complained it faces more strict regulation than ride-share competitors. Such is the deep-rooted, top-down nature at City Hall, where the mayor proposes the budget in the face of little opposition, and the council ultimately votes for it. Taxi drivers also would get a long-sought fare increase, and some of the money raised by the ride-sharing fees would be used to help cab drivers pay for their chauffeur licenses.

Emanuel’s budget includes 10 tax, fee and fine increases ranging from the property tax hikes and a new trash collection fee to new cloud taxes on streaming services and fare and fee hikes on taxi and ride-sharing companies. The revenue package also includes higher fees for business owners who fail to clear snow and ice from the sidewalks outside their buildings, increased fines for drivers who don’t have insurance, and higher booting fees.

Star Wars creator George Lucas’ proposed lakefront Museum of Narrative Arts also will come before the council for zoning approval that would clear the final major city hurdle for the 300,000-square-foot building to go up south of Soldier Field. Fitch Ratings called Emanuel’s budget a “positive credit development.” A portion of Chicago’s general-obligation bonds due in 2035 traded for an average of 98 cents on the dollar Tuesday to yield 5.2 percent.

A lawsuit by Friends of the Parks to try to stop the museum from being built on the shore of Lake Michigan is still in court. *The Hastert hearing: Former U.S. House Speaker Dennis Hastert will walk into federal court this morning, 10 months after a crucial interview with federal agents that led to charges against him. Hastert is scheduled to plead guilty to an indictment that alleges he was making cash withdrawals as part of an agreement to pay $3.5 million to a longtime acquaintance, identified only as Individual A, to cover up wrongdoing from years ago. Hastert, who has remained free on his own recognizance since pleading not guilty in June, faces one count each of evading currency-reporting requirements and making a false statement to the FBI. He stood in front of a disease-infested tree that was half torn down as he told the assembled cameras the city would pick up the pace on its tree trimming backlog.

Before the news conference, the mayor’s press aides led the TV cameras to a crew removing graffiti nearby and then down an alley to watch workers spread rat poison and then across the street to shoot footage of a streetlight being replaced. “We’re delivering better services, more cost-effective,” said Emanuel, who pledged that more efficient garbage pickup and street sweeping would lead to more workers on rat patrol and tree trimming. Joe Moore, 49th, acknowledged the city “can’t afford those big-ticket items and big projects” at this time. “I think people understand that’s the case and understand that we don’t have any choice,” he said.

He also will be asked if everything the government alleged in the factual basis is true. *Emanuel and “Chiraq”: The mayor also was asked on “Chicago Tonight” whether he’ll see Spike Lee’s “Chiraq” movie. Emanuel, who seemed surprised by the question, was non-commital. *Obama Bulls delay: The president’s appearance at the United Center meant heightened security at the Bulls home-opening game, and some fans who paid to see their team take on LeBron James and the Cavaliers were still trying to get in approaching halftime. Obama was interviewed during the second quarter on TNT and acknowledged the Eastern Conference’s inferiority to the NBA’s Western Conference. “(I’m) glad my Bulls are in the East,” he said. *Debate drink list: When Republican presidential hopefuls meet tonight for their third debate, some D.C. reporters not covering the talkfest may be bellying up to the bar at the National Press Club for a debate-watch party and $6 drink specials named after the candidates. The legislation has been approved by the General Assembly, but the Democrats who control the legislature have not sent it to Rauner for fear he’ll veto it amid the stalemate. Major bond rating agencies in recent years have noted the financial predicament of those funds during repeated downgrades of the city’s credit rating.

Moore, the Far North Side alderman, said “it could very possibly be the case” that further tax increases will be needed in the future, given the pension situation. “I don’t think we’re out of the woods yet,” he said.

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