* Greg Hinz writes about the costs of Chicago pension reform…
Some critics want to tap the city’s tax- increment financing system rather than raise property taxes $50 million each of the next five years, as Mr. Emanuel’s plan requires.
TIFs are a big, juicy target for those who want to protect homeowners. The city’s 153 TIF districts have a total of $1.7 billion in the bank and generate another $400 million-plus each year.
But roughly $1.5 billion of the $1.7 billion is already committed for projects such as an $800 million school construction plan announced a few years ago, a $15 million Chinatown library, an $18 million Albany Park library and a $12 million streetscape project for Devon Avenue, says Budget Director Alexandra Holt. She didn’t detail all $1.5 billion, but I have no reason to doubt her. With a couple of exceptions, the money is going to neighborhood projects, not downtown handouts.
Similarly, much of future years’ receipts are committed for things such as a $50 million el station at Cermak Road, a $9 million industrial project in Pilsen and debt payments. And total receipts are beginning to drop quickly, as TIF districts with a legal 23-year life begin to expire, like the huge $120 million-a-year Near South TIF.
Ironically, because of the tax hike for pensions, the TIF districts are expected to produce about $20 million in additional revenue, Ms. Holt says. The city will declare that money a surplus and apply its $4.6 million share to pensions, potentially softening the blow of the property tax increase.
* A recent Sun-Times editorial also looked at various options…
What about a Chicago casino, which also requires state approval? That’s worth pursuing but can’t be counted on for now. If lawmakers ever approve, casino revenue is years away and inherently unpredictable. At its peak, perhaps five to seven years into its life, revenue could reach $80 million to $120 million, city officials tell us. […]
The Chicago Teachers Union and others have pushed a financial transaction tax and eliminating tax-increment-financing districts, both of which sound good on paper but have more downsides than pluses.
State actions: Emanuel has advocated for expanding the narrow list of items subject to the sales tax to cover services (think dry cleaning and hair salons). If done right, this could generate more revenue overall while also lowering the tax rate. Quinn is opposed, but an expanded sales tax that matches the modern economy could benefit the entire state. It’s also what most states do. Lawmakers also could increase the share of state income tax revenue shared with municipalities, including Chicago. That was cut in 2011, costing Chicago more than $400 million. The downside, of course, is that the state needs the money.
* Meanwhile, the Chicago Tribune has editorialized strongly in favor of the city’s pension reform bill…
The Illinois General Assembly delivered a special package Tuesday to the Chicago City Council: a pension fix that probably requires aldermen to raise property taxes — less than a year before they stand for re-election.
Given the terrible finances of the city’s pension funds, Gov. Pat Quinn has no responsible choice other than to sign the bill, and the aldermen have little choice but to raise taxes.
So, to sum up, the Trib is in favor of higher property taxes to help solve the city’s historic pension underfunding problems, but totally against an income tax hike to help solve the state’s historic pension underfunding problems.
* And that leads us to this Eric Zorn post listing four reasons why a Chicago income tax should be considered…
But if the alternative is a significant decrease in city services leading to a deteriorating quality of civic life, a city income tax is among the least objectionable options for balancing the books.
* The city’s media ran stories last week about how Mayor Emanuel had completely ruled out the idea…
Mayor Rahm Emanuel on Wednesday ruled out creating a city income tax as a way to shore up the city’s municipal and laborers’ retirement funds while describing the $250 million property tax increase he wants to pay for the pension changes as “a measured way, a responsible way to address the question.”
* Glossed over in all of this is an important point noted in that above-linked Sun-Times editorial…
Emanuel is opposed to a city income tax, which must be approved by Springfield. [Emphasis added.]
* From the Illinois Constitution…
SECTION 6. POWERS OF HOME RULE UNITS
… A home rule unit shall have only the power that the General Assembly may provide by law (1) to punish by imprisonment for more than six months or (2) to license for revenue or impose taxes upon or measured by income or earnings or upon occupations.
* Paul Green has the last word…
Illinois governments at all levels are facing financial disasters and yet various “stakeholders” (I love that word) are bickering as if time were on their side. These stakeholders hope that somehow pension debt and overdue bill payment will be “hoped” away.
The specifics of these crises in Springfield and Chicago are economically complicated, politically toxic and do not lend themselves to a 30 second political commercial. However, the general parameters of the problem are not so complicated. Governments have promised more than they could deliver.
Incoming revenue does not meet expenditure needs, and to resolve these issues everyone in Illinois (Chicago included) has to lose something.
In short, this is a math exam, not an essay test.