Chicago property owners to receive massive tax increase

In Chicago, 1 out of every 3 dollars in taxes collected goes into one of the five pension systems for city employees.  The city is desperate to stave off insolvency in all of those plans, given the $111 billion in unfunded liabilities.

Rather than cut the fat out of the city budget, aldermen have decided to hit Chicago property owners with a 13% average tax increase over the next four years, with the tax bill this year being the largest.  The increase is expected to pull in $588 million – most of which will go into the pension plans. 

But Moody's is saying this will only delay the inevitable.  Chicago's unfunded pension liabilities are expected to grow for another ten years despite the massive tax increase.

Chicago Sun-Times:

Lost in the fine print when that tax hike was approved is that the city is phasing in the increase over four years, although by far the biggest hit comes this year.

The city increased its property tax levy by $318 million this year for police and fire pensions. That will jump up by another $109 million next year, $53 million the year after that and $63 more in the final year. By then it will have reached a total of $543 million more per year.

The full $45 million tax increase for school construction takes effect on this year’s bills.

One way of looking at that is that Chicago will collect more than $1.9 billion more in property taxes over the next four years — $1.768 billion for pensions and $180 million for school construction — than it would have before the tax increases.

That’s how it’s usually parsed in political campaigns by candidates who didn’t have to take responsibility for the tough vote.

As you probably figured if you are a city resident, that extra $1.9 billion still doesn’t get you out of the woods on property tax increases either, mainly because of the city’s massive unfunded pension liability.

Still under consideration by the Illinois General Assembly is authorization for a separate $175 million annual property tax levy for Chicago teachers’ pensions that would also require City Council approval. It would also have to get past Gov. Bruce Rauner, who has said Chicago should be freezing its property taxes.

Plus, we still don’t know how the city is going to fund its shortfall in the municipal employees pension fund, currently the subject of union negotiations.

But don't fret, Chicagoans.  Help is on the way.  What Mayor Emanuel takes away with one hand, he gives with the other:

With the tax bills on the way, Chicago aldermen are in a hurry to craft a property tax rebate plan that will ease the burden on some homeowners.

A spokesman for Emanuel said the city will start briefing aldermen Tuesday on possible approaches for a rebate —including how much money to give back and how to pay for it.

The Civic Federation’s Laurence Msall is questioning how the city can afford to finance a rebate at this time, and I have the same concern. But political expediency will probably win out.

The Illinois constitution makes it illegal to cut pension benefits, as Governor Rauner discoveredf when the Illinois Supreme Court nixed his pension reform plan that included a small cut in benefits and a greater contribution  by workers.  So the powerful municipal unions will continue to see many retirees with six-figure pensions and the funds themselves becoming insolvent.

They ought to change the motto of the city to "Chicago: The City That Works...Badly."

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