* Mayor Rahm Emanuel has some pretty big pension problems on his hands, the result of years of not paying into the funds. So, he’s proposing a new and extended “ramp” to get the payments up to snuff over time. Gov. Pat Quinn vigorously opposed a shorter new ramp last spring, so Emanuel is trying again…
The measure would require a series of small city property tax increases starting in 2018 — three years into what would be Emanuel’s second term as mayor. It also would delay the need for big increases in city pension payments to 2022, three years into what would be Emanuel’s third term, if he decided to serve that long and was able to win re-election. […]
Emanuel needs to press for relief because of the timing of a state law approved while Richard M. Daley was mayor. It would require the city to put in nearly $600 million more in contributions to police and fire pensions starting in 2015. That additional amount is about one-fifth of the city’s day-to-day operating budget. […]
The state law that kicks in requires higher payments into the police and fire pension plans based on what actuaries say the city needs to pay to get up to 90 percent funding by 2040.
And his warning…
Combine City Hall’s pension costs with the huge amount of money needed to fund Chicago Public Schools pensions and the resulting property tax hikes means “there will be a mass exodus” from Chicago, Emanuel said.
“It will be the largest caravan since America settled the West,” the mayor said. Suburban property taxes historically are much higher than those in Chicago, however.
So are Downstate property taxes. Chicago has relatively low residential property taxes because commercial property is taxed at a higher rate.
- wordslinger - Thursday, Sep 26, 13 @ 10:30 am:
That’s a solution? Kick the can down the road until you’re out of office? We’ve seen this movie.
Perhaps Emanuel would like some assistance restructuring his TIF slush funds.
And, yes, I’m not sure where the exodus is going to be for lower property tax rates. It’s not Oak Park or Evanston, I’ll tell you that.
- A guy... - Thursday, Sep 26, 13 @ 10:32 am:
His crystal ball is as clear as day. Time to reckon or be wrecked. Time for everyone to get serious.
- William j Kelly - Thursday, Sep 26, 13 @ 10:33 am:
Let my people go… Better yet Rahm go!
- T.M. - Thursday, Sep 26, 13 @ 10:35 am:
I don’t get it. Why is this Springfield’s problem? The state isn’t the employer and doesn’t make (or skip, I should say) payments to Chicago police and fire pension funds. Why isn’t it up to Rahm and the city council to solve this problem?
- JC - Thursday, Sep 26, 13 @ 10:38 am:
Nowhere in Illinois to run to for tax relief…..no surrounding states either. I guess people who don’t want to pay for the services rendered in this state probably need to leave the country.
- GA Watcher - Thursday, Sep 26, 13 @ 10:39 am:
Chicago definitely has some very significant pension issues, but other local governments in the state do, too. Just wait until the State starts withholding revenues from local governments in a couple of years as allowed under the new hire pension reform bill passed a couple of years ago. Residents fleeing the City will just be moving from the fire to the frying pan.
- Rich Miller - Thursday, Sep 26, 13 @ 10:40 am:
===Why isn’t it up to Rahm and the city council to solve this problem? ===
You gotta learn to read…
===Emanuel needs to press for relief because of the timing of a state law===
- NW Illinois Dem - Thursday, Sep 26, 13 @ 10:41 am:
Another reflection of the failure of leadership in Springfield. Requiring downstate (or upstate) property taxpayers to fund an excessive amount of education funding is sending folks to border states for sure. Old story after countless blue-ribbon panels, but what’s the next move to increase the state’s share of school funding from the current 30%? Oops, sorry, this is supposed to be about the pension crisis. Wow - Illinois - time to get back on track.
- Anon - Thursday, Sep 26, 13 @ 10:44 am:
Commercial property taxes in Chicago are the highest in the nation on a square foot basis, due to the classification system that shifts residential burdens onto commercial and industrial. Industrial is now almost entirely gone from Chicago. With technology making it possible to locate office staff almost anywhere, commercial will surely be threatened if taxes raise much more. We could become a Detroit more easily than one might imagine. That would hurt the entire state. Whatever state pension reforms are ultimately enacted, they should apply also to all local funds, including those of Chicago. Do it once and do it right.
- 47th Ward - Thursday, Sep 26, 13 @ 10:47 am:
Chicago’s property taxes are going to go up, and by a lot I’m afraid. We’ve had it too good for too long.
As far as a mass exodus though, I think the Mayor is exaggerating. The mass exodus will be at City Hall because once those taxes go up, our tolerance for “business as usual” will disappear, along with most elected officials.
A 20% property tax increase is just the thing to make a lot of voters sit up and take notice. We’ve been asleep too long and let these people run Chicago’s finances into the toilet. The day of fiscal reckoning is upon us. There will be political consequences.
- Giddy up - Thursday, Sep 26, 13 @ 10:47 am:
“It will be the largest caravan since America settled the West,” the mayor said
I love a parade!
- OneMan - Thursday, Sep 26, 13 @ 10:47 am:
At some point, there is only so far you can kick…
Here is an idea, they get the casino but it all goes to the pension system along with a smaller ramp until is it good..
Also no one runs for office to fund pensions, don’t get to cut no ribbons or hold press conferences for that.
Finally how about using some TIFF money for that instead of a DePaul hoops arena.
- RonOglesby - Thursday, Sep 26, 13 @ 10:48 am:
@JC
“I guess people who don’t want to pay for the services rendered in this state probably need to leave the country.”
Actually, they dont have to leave the state. He is worried about people (tax payers) leaving the cities for the burbs for perceived safer environments, better schools, etc. Look a Detroit, it has some bad near suburbs but some thriving outer suburbs.
Finally… if you are willing to leave the state. You may leave “big”. My land in texas is almost 5 acres. Once the home is done my taxes there will equal what I pay here in illinois.
Rahm is kinda admitting that taxes can impact population. Not all people to be sure. But a big enough percentage to worry about it.
- Norseman - Thursday, Sep 26, 13 @ 10:50 am:
Time to invest in Chicago moving companies.
- ChicagoDem - Thursday, Sep 26, 13 @ 10:50 am:
Rambo wants to raise taxes on Chicagoans? Really?
- Small Town Liberal - Thursday, Sep 26, 13 @ 10:50 am:
- Another reflection of the failure of leadership in Springfield. -
Yeah, nothing to do with those Daleys you seem to worship.
- Anon III - Thursday, Sep 26, 13 @ 10:57 am:
“Detroit’s municipal pension fund made payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars and helping push it into bankruptcy, according to people who have reviewed the payments.” — NYT
http://dealbook.nytimes.com/2013/09/25/undisclosed-payments-cost-detroit-pension-plan-billions/?ref=todayspaper
Of course, that could never happen in Illinois, even Chicago. Every payment from every government pension fund is legit. Right?
- Rich Miller - Thursday, Sep 26, 13 @ 11:02 am:
If you think pension debt is what did in Detroit, you’ve never been to Detroit.
Seriously, get a clue.
- RNUG - Thursday, Sep 26, 13 @ 11:05 am:
word is dead on with his analysis.
Been there, done that, may still have the t-shirt somewhere.
I’m not familiar with the detail numbers of the Chicago pensions. Anybody know if the $600M gets Chicago to the more or less flat payment level, or is the State law front end loaded?
- James the Intolerant - Thursday, Sep 26, 13 @ 11:10 am:
A guy, he is not addressing the problem, he is attempting to put it off until 2018, 5 years from now.
- Don't Worry, Be Happy - Thursday, Sep 26, 13 @ 11:11 am:
Rahm is ignoring that there’s already an exodus taking place due to his failure to properly fund the schools:
http://www.chicagoreader.com/chicago/cps-alternatives-suburbs-magnet-selective-enrollment-lowincome/Content?oid=11046489
- Rusty618 - Thursday, Sep 26, 13 @ 11:12 am:
A 20% property tax increase would still have Chicago less than the rest of the state. I pay twice as much property tax for a house in southern Illinois than my brother does for a Lake Shore Drive condo.
- Gil Franco - Thursday, Sep 26, 13 @ 11:13 am:
It really doesn’t look good for Chicago and the state. The only real solution to this mess is amending the state constitution and modifying pensions for existing and future retirees. They should be livable but crammed down in the many instances where they are more than modest due to irresponsible actuarial planning, double dipping, past spiking etc. Otherwise, we face the downward spiral of disappearing government service including those necessary for decent quality of life and higher taxes. More and more people will leave and fewer will come. In the context of job change in our family, we have to think long and hard about staying here. The legacy costs in the city, state, and metro area are just too great. At this point, have some equity in my house but expect that to disappear with higher property taxes and few potential buyers. It’s a hard decision to make and may not be able to do it, but I know from a economic standpoint I would better off cutting my loses now.
- Anon III - Thursday, Sep 26, 13 @ 11:13 am:
Rich: Didn’t say pension debt did in Detroit. Cited news item that reports that Detroit Pension Boards were making unauthorized pension benefit payments for decades. Further, that the Funds were depleted and Detroit sold bonds to make contribution payments to Funds.
- Chris - Thursday, Sep 26, 13 @ 11:19 am:
“Rahm is ignoring that there’s already an exodus taking place due to his failure to properly fund the schools:”
Please. Do you *really* think that throwing more money at CPS would make the high schools better?
- Tom Joad - Thursday, Sep 26, 13 @ 11:23 am:
This ramp is what Edgar did in the early 90’s. Put meaningful pension funding off until you are out of office.
- Judgment Day - Thursday, Sep 26, 13 @ 11:27 am:
“Chicago’s property taxes are going to go up, and by a lot I’m afraid. We’ve had it too good for too long.”
For 2012 tax year (tax rate per $100 taxable value):
–Tax District– 2012 2011 Change (%)
City of Chicago 1.151 0.999 15.22%
Whatever happened to your property’s taxable value, your tax rate increased 15.22%. But it’s a little more complex than that, because the EAV (taxable value) for the City decreased. So, in reality, it’s just about a wash.
Here’s basically what happened.
1) City of Chicago EAV (taxable value) went down from $65,250,387,267 to $75,122,913,910, or a DECREASE of 13.14%
2) Tax rate for City of Chicago went up by 15.22%.
City of Chicago.
3) So, one (EAV) goes down, the other (Tax rate) goes up to compensate.
Link is: http://www.cookcountyclerk.com/tsd/DocumentLibrary/2012%20Tax%20Rate%20Report.pdf
Problem is, a 20% increase in property taxes (based upon 2012 EAV values for the City) is going to bring in approximately $
(1.151 x 1.20) x ($65,250,387,267/$100) = real estate taxes citywide.
(1.3812 x 652,503,872.67 = $901,238,348.94 total taxes (non TIF/Non SSA).
For 2012, this is how much City of Chicago actually got in real estate taxes (non TIF/non SSA): $ 751,031,957 (See page 14 of above link).
So, a 20% increase in tax rates would bring in an additional (approx.) $150,206,392
That’s assuming everything else stays equal to 2012 tax year values. If the City’s non-TIF/non SSA EAV increases, then the City gets more money. If not, you get less.
Question is: Is a 20% ongoing increase in the property tax rate going to fill the gap?
- olddog - Thursday, Sep 26, 13 @ 11:34 am:
@ Chris 11:19
=== Do you *really* think that throwing more money at CPS would make the high schools better? ===
Yep. You get what you pay for.
- Judgment Day - Thursday, Sep 26, 13 @ 11:42 am:
One last piece of information:
The total 2012 tax year real estate taxes collected (including all TIF and SSA amounts) was: $929,818,018 - $751,031,957 = $178,786,061 Amount of taxes collected yearly for TIF/SSA taxes only (based on 2012 Cook County Clerk tax extension data).
Fwiw.
$929,818,018 -
- Robert the Bruce - Thursday, Sep 26, 13 @ 11:53 am:
So Rahm needs $600 million? wordslinger’s suggestions re: the city’s TIF slush funds certainly look like a good start: $457 million last year http://www.cookcountyclerk.com/newsroom/newsfromclerk/Pages/2012TIFreport.aspx - some of that $457 million is legitimately in blighted districts, but an awful lot is still downtown corporate welfare.
Give Chicago a casino already - that might be another $100 million in annual revenue.
That gets us close to the $600 million.
But kicking the can down the road, as Mayor Daley and long-serving state legislators can attest, is so much easier!
- Don't Worry, Be Happy - Thursday, Sep 26, 13 @ 11:54 am:
Chris 11:19-
Do you *really* think closing schools and making kids cross gang lines to get to school; laying off teachers and increasing class sizes; reducing or eliminating art, music, language, and PE, would make the schools better?
- plutocrat03 - Thursday, Sep 26, 13 @ 11:54 am:
The Chicago schools are in the top third of performance since their per student expenditures are in the top third of the state?
- Lil Squeezy - Thursday, Sep 26, 13 @ 12:00 pm:
This same situation applies to plenty of downstate police and fire funds as well.
Everyone concentrates on the state systems, but the state plans are not the most significant pension problem in IL.
- Juvenal - Thursday, Sep 26, 13 @ 12:03 pm:
Some good nuggets from Amanda Vinicky:
Rep. Jil Tracy, R- Quincy, a member of the conference committee, says when House Republicans were briefed on the plan, “for a multitude of reasons they did not favor the framework that was laid out.” For some, it goes too far. For others — including Tracy — not far enough; she says it means about 20-percent of Illinois’ budget could still go toward pensions, and that is unrealistic.
As Republicans continue bringing up additional ideas, the “cost shift” favored by Chicago Democrats is making a comeback. This involves having schools, rather than the state, pay for the employers’ share of teachers’ retirement benefits. It’s opposed by Downstate Democrats and most Republicans. The conference committee’s chairman, Sen. Kwame Raoul, D-Chicago, says that idea’s never really been off the table.
@Gil:
I don’t think that solves the problem, unless you are going to also amend the Bill of Rights:
SECTION 16. EX POST FACTO LAWS AND IMPAIRING CONTRACTS
No ex post facto law, or law impairing the obligation of contracts or making an irrevocable grant of special privileges or immunities, shall be passed.
Even if you amended the Constitution to allow pensions to be diminished, the fund members would likely argue that any following diminishment was an ex post facto law.
The courts have generally taken a dim view of ex post facto laws, and constitutional amendments are not normally retro-active.
A proposed amendment would require 3/5 vote in each chamber, which will never happen. Even if it did, it would have to be approved by the voters, which is unlikely.
- PublicServant - Thursday, Sep 26, 13 @ 12:08 pm:
===The Chicago schools are in the top third of performance since their per student expenditures are in the top third of the state?===
That would be true only if all other variables (like income level, nutrition, family environment, neighborhood environment) were equal. Since they’re not, plutocrat03, that might explain the discrepancy that your simplistic calculus doesn’t allow for. But as a product of CPS, what do I know.
- Downstater - Thursday, Sep 26, 13 @ 12:16 pm:
= The mass exodus will be at City Hall because once those taxes go up, our tolerance for “business as usual” will disappear, along with most elected officials.=
Where have you been for the last 30 years?
- 47th Ward - Thursday, Sep 26, 13 @ 12:26 pm:
===Where have you been for the last 30 years?===
Right here in Chicago. My point was that, as long as taxes are manageable, voters don’t tend to complain about much. The only serious City Council efforts to oppose Mayor Daley had to do with attempts to raise property taxes, including a famous Council rebellion in 1995.
Aldermen know if they vote for a property tax hike, many of them will be thrown out of office. Yes, the CPS property levy goes up to the maximum every year under the tax cap bill, as do the parks and other non home-rule units in Chicago. The city’s corporate levy, by contrast, is up to the City Council. It has long been the third rail in these parts.
- From the 'Dale to HP - Thursday, Sep 26, 13 @ 12:29 pm:
Agree with @Don’t Worry, Be Happy, if Rahm can stop messing up the schools, he’ll have his pension problem fixed pretty quickly. Obviously CPS has been an issue for decades, but Rahm’s strategy and “leadership” at CPS is a total disaster, 1980s CPS like disaster. People are fleeing CPS right now, having dysfunctional leadership and taking an ax to public schools isn’t going to keep anyone around.
- Pete - Thursday, Sep 26, 13 @ 12:33 pm:
Maybe if the City started to treat property as a a valuable assest and not give it away with mixed income housing development, the taxes generated would reflect that. Not to mention TIFs are diverting funds from the pensions. Shut down the TIFs and I bet that $600M becomes a drop in the bucket.
- Rich Miller - Thursday, Sep 26, 13 @ 12:37 pm:
===Shut down the TIFs and I bet that $600M becomes a drop in the bucket.===
Nothing is ever that easy.
- RonOglesby - Thursday, Sep 26, 13 @ 12:46 pm:
@Don’t Worry, Be Happy
Crossing ganglines is something the city and school system can’t plan for. Gang lines can and do change. And often are only a block or two wide before ANOTHER gang line. saying the city should plan around gang lines is like saying build a house on a shifting pile of sand.
- Just Saying - Thursday, Sep 26, 13 @ 12:51 pm:
Home Owners in Chicago have never paid their fair share…it’s about time.
- From the 'Dale to HP - Thursday, Sep 26, 13 @ 1:03 pm:
@RonOglesby, unfortunately it’s the sad reality of urban policy and planning.
- Pete - Thursday, Sep 26, 13 @ 1:09 pm:
@Rich.
Well. With all the TIFs that the City of Chicago has in place, all the tax increase revenue will be diverted and locked up for capital improvements. The property tax rate can jump, but the dollars that reach the city coffers will be tied up locally.
When the City TIFs divert $2 Million dollars to fix up 25 residential homes, that’s backwards. Residents should maintain their own homes with their own money and pay for government services with thier paid taxes. If people can not do that, they should not own a home.
-Different argument, but fundamental basis for most of Chicago’s revenue problems. Chicago is selling world class services to everyone regardless of their ability to support those services. Some will argue that it’s a give an take, but when the takers take more than the givers can give, we have the current situation.
- Pete - Thursday, Sep 26, 13 @ 1:10 pm:
http://www.cityofchicago.org/content/dam/city/depts/dcd/tif/T_114_119thHalsted_10YR.pdf
page 12
- overcooked - Thursday, Sep 26, 13 @ 1:14 pm:
The property tax increase will still fall harder on commercial property, so that caravan will be more business interests moving out and leaving more Chicagoans unemployed.
- Frank - Thursday, Sep 26, 13 @ 1:21 pm:
Following up on Rich’s response to T.M.:
Yes, because the city’s pension functions are governed by statute, reform can only come from a change in state law. But, I think, the GA could pass a law that essentially passes control of the city pensions to city government. It kinda makes sense. The city hires the workers, negotiates their pay, levies the taxes, and is supposed to fund the pension. How ’bout the Mayor and alderman make the governing laws instead of the Guv and GA?
The same arguement behind the call for the “cost shift” on TRS that Rahm and other Chicagoans make can apply here, right?
- Joe Bidenopolous - Thursday, Sep 26, 13 @ 1:59 pm:
Coupla things:
Rusty618 - you mentioned your taxes are higher than the taxes on your brother’s LSD condo. Are you taxes higher than the taxes of all of the condos combined in your brother’s building? Think of it in terms of footprint. He may be paying less, but owners in general may be paying more for the same piece of land depending on how many units are in the building.
And Just Saying- Are those sour grapes because you live somewhere where your taxes are more, or do you have to pay commercial in the city on something? Because if it’s the former, why should we be punished?
Residents do have it good here - my taxes on a much smaller home (bigger lot though) downstate a dozen years ago were significantly more than my taxes today in Chicago. And the taxes also factored into our decision to live in the city vs. the burbs we considered.
Commercial pays a premium? Fine by me - they get to operate in a world-class city with all that it has to offer in terms of customers, talent, infrastructure, etc. Can’t find that many other places between the coasts.
- Genghis Khan - Thursday, Sep 26, 13 @ 2:05 pm:
Some of you are more “partisans” than economists.
Let’s say for instance property taxes for commercial property in Chicago were raised twenty percent. Who would take the “hit” on that?
If hordes of businesses started moving out of Chicago rents would drop in Chicago and landlords would take the hit rather than see empty space. Less construction possibly.
Availability and demand will drive the rents up or down and property taxes are just a part, an important part, of that equation. Property taxes have more of an effect on “profit” than they do on rents for the property owner.
I used to own an apartment building in Ravenswood. My rents were ultimately determined by what I could “get” and not by my property taxes. For a few years my rents went down a bit and taxes went up. In other years both went up and I even had a few years where my taxes decreased, a small amount, and rents went up.
It all depended on where the market was.
Now raising taxes for homeowners would likely drive down property values in most neighborhoods and make it more difficult for some folks to maintain their properties.
On the commercial tax front picture two identical office buildings in the same municipality and directly across the street from one another. One is in a high commercial tax county and the other is in a low tax county. Some towns do straddles two counties.
The value of the two buildings would likely differ, but the rents would likely be similar. The owner of the building in the higher taxed county would reduce his rent to reflect his competition and take less profit hence the lower property value.
Please tune in for more economics 101 from Professor Genghis in the future.
- wordslinger - Thursday, Sep 26, 13 @ 2:54 pm:
Gee Genghis, that was enlightening. Just chock-full of data.
As an economics professor, what do you think of the Emanuel plan overall? Does it seem economically sound?
- Rollo Tomasi - Thursday, Sep 26, 13 @ 3:09 pm:
Robert the Bruce - Thursday, Sep 26, 13 @ 11:53 am:
Give Chicago a casino already - that might be another $100 million in annual revenue.
$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$
Des Plaines is grossing almost 1 million a day over the last year. Chicago could do 5 times that! If you had one level that allowed smoking for those with that nasty habit Gary and Hammond would take a big hit. Rahm wants all the pension give backs BEFORE he gets a casino so he can spent that money the way he feels it should he spent.
- Fed up - Thursday, Sep 26, 13 @ 3:17 pm:
Rahm is playing on fear. TIF slush funds need to be used for schools and pensions, a casino & video poker at the airports would bring in huge revenue . The state legislator can shrink the Chicago city council which is bigger than New York’s. a change in the pension ramp would be a good idea. Maybe Chicago shouldn’t be spending $55 million on Maggie Daley Pk, or $60 million on a Chinatown library ( lots of city library’s built for less than a third of that). Eliminating waste won’t solve the problem but it will make the medicine easier to swallow.
- Genghis Khan - Thursday, Sep 26, 13 @ 3:46 pm:
Wordslinger,
I’m not an economics professor, but I do play one on TV.
Personally, I think taxes need to go up. I pay five figures in property taxes now on my SFH and I can afford the hit. The problem is that others can’t and it would likely have more of an impact in struggling neighborhoods than in my gentrified abode. Let’s say my property taxes jumped $2000 a year I would expect a “hit” on my real property value, but such is the price of fiscal solvency. In terms of mortgage affordability that would theoretically reduce my real property value maybe $25,000.
Can you dig it?
A huge problem in Chicago is aldermen having too much of a say over development and zoning issues. Here’s an example:
http://chicago.curbed.com/archives/2013/09/26/childrens-memorial-hospital-watch.php
A prime location for some high density and high property tax paying development and an alderman puts the brakes on the development.
This is one instance where Rahm should play Godzilla to Smith’s playing Barney from PBS for some of her constituents.
Chicago needs a casino also. Three actually. One at O’Hare, one near McCormick Place, and one at Midway.
Personally if I have to pay higher taxes or fees I prefer it in state income or property taxes as I can increase my federal write off and shift the burden to some of my fellow citizens in other states.
- reformer - Thursday, Sep 26, 13 @ 3:49 pm:
== Suburban property taxes historically are much higher than those in Chicago, however ==
My property tax rate in northwest Cook last year was 50% higher than the Chicago tax rate. If Chicago property owners start paying what suburban home owners have been paying for decades, why should that cause an exodus?
- Juvenal - Thursday, Sep 26, 13 @ 6:22 pm:
Dear Rahm:
Washington isn’t bailing us out, and we are not bailing you out. Enclosed, please find a calculator. Figure it
out.
With warmest personal regards,
I remain
Springfield
- low level - Friday, Sep 27, 13 @ 7:24 am:
Now Rahm is on that “fleeing the city” stuff? Gee…maybe when he’s out in that SUV he should stop by North Michigan Avenue on a Friday and/or Sat night. Tourists everyplace, mixing in with all the transplanted suburbanites moving back into the city. I still have to catch myself - its weird seeing people at times and places you never saw them before.
- low level - Friday, Sep 27, 13 @ 7:30 am:
As for the “TIF diversion”, please please stop reading that clown in the Reader, and see how TIFs work. Some of the subsidies given may be questionable but please learn what the increment is and how it is used. Tax Increment Financing.