As he prepares to spend the political capital needed to pass a $500 million property tax increase and a first-ever garbage collection fee, the last thing Mayor Rahm Emanuel wants to hear is that its not enough.
But thats precisely what financial analysts have been saying.
Those massive increases coupled with a tax on smokeless tobacco products, a $1-a-ride fee on Uber and other ride-hailing services and a possible, penny-an-ounce tax on sugary soft drinks will not produce nearly enough revenue to solve Chicagos $30 billion pension crisis or rid the city of the junk bond rating that has saddled taxpayers with tens of millions in penalties and borrowing costs.
Before being sworn in to a second term that is likely to be his last as Chicagos mayor, Emanuel talked about governing as if he has run his last election. In other words, with the freedom to do whats right, instead of what is politically expedient.
On Wednesday, the mayor reiterated that second-term mantra and sloughed off claims that he needs to raise taxes even higher and cut city employees and programs more deeply.
I know this comes as a shock to you, [but] I have yet to present my budget. They were actually commenting on your budgetnot my budget, the mayor told a Chicago Sun-Times reporter who broke the story about Emanuels plan to raise property taxes by $500 million for police and fire pensions and school construction and impose a garbage collection fee to raise $100 million more.
In two weeks, I will be presenting my budget. And people can evaluate the entirety . . . I have two weeks left. Were not done. Even as I was on my way here, we were working through some health care savings that are going to result in an additional $20 million savings . . . So what I would say to you is, their comments are about something that I have yet to present. When I do, then they can comment.
Emanuel noted that Chicago bonds have been trading up a point or two since the Sun-Times headline hit the web and the streets.
The financial markets continue to see whats happening in Chicago [as] encouraging. As recently as today, Bloomberg News wrote about that, he said.
If you kick the can down the road and you dont confront challenges, that has a real financial consequence. Facing up to those challenges means you are going to spend your political capital to do whats right not whats politically convenient. And thats going to put the city on the right course.
Whether or not Chicago sheds its costly junk bond rating, Emanuel said the massive collection of tax increases included in his 2016 budget will accomplish three things during the course of his second term.
Were going to meet our responsibilities to policemen and firemen and secure their retirement in a way that also secures the citys finances and do it in a fair way. We will eliminate once and for all . . . the structural deficit that we inherited of $654 million. [And] we will rid the budget of all the sleight-of-hand and gimmicks that were built up over years to hide the real cost of operating the budget, he said.
From selling parking meters to one-time revenue sources to raiding the rainy-day fund to eliminating scoop-and-toss [borrowing]. So, actually the budget will reflect what it costs to run the city. Thats what were going to get done. And were also going to do it in a cooperative way. If an alderman has an idea, I want to hear about it. If youre from organized labor and you have ideas about savings, hes all ears.
During a panel discussion on city finances sponsored by the City Club of Chicago, Civic Federation President Laurence Msall argued that a $500 million increase that would be Chicagos largest in modern history is not going to be enough because weve dug the hole so deeply.
Msall criticized the mayor for assuming that the Chicago Public Schools will get $480 million in pension help from a dysfunctional Illinois General Assembly that doesnt want to help. He further argued that Emanuel has not been nearly as aggressive as he needs to be in cutting costs.
Matt Fabian, a partner at Municipal Market Analytics, said he would have preferred to see four straight years of $300 million property tax increases than one giant hike.
The political cost of a $500 million raise probably makes this the only revenue raise at least the only significant one that well see in the near-term. And thats just not enough. So, either it means much deeper spending cuts or a return to gimmicks, particularly if the economy softens, he said.
The citys cost of borrowing wont see a material [drop] until it loses the non-investment grade rating. And its not going to lose that rating until it makes much more progress than this.
Ald. Pat OConnor (40th), the mayors City Council floor leader, has the unenviable task of lining up the 26 votes needed to pass, what will undoubtedly be the largest collection of tax increases Chicagoans and their aldermen have ever seen.
OConnor acknowledged that Chicago is likely to be saddled with the junk bond rating for quite some time.
Its a noble goal. But I dont think anybody believes one budget season is going to change that, OConnor said Wednesday.
Our goal is to get a balanced budget, get our pension payments made and get rid of the bad financial practices. Were not talking about out-years. Were talking about this year. We need to make the moves that begin to address the bond [rating] issue. But thats not going to get solved this year. Lets just make the moves that get the immediate goals accomplished.