The uncertainty is a real problem
Beyond the bleak outlook, the most disconcerting aspect of the budget stalemate has been the uncertainty it breeds in businesses, explains Illinois Association of Realtors senior lobbyist Brian Bernardoni.
“Businesses don’t like uncertainty,” Bernardoni says. “And our budget problems are filled with uncertainty.”
Branch, a long-time Chicagoan, shares the sentiment. He says that the instability state employees and businesses now face is spilling over into the housing industry.
“There have not been any salary increases for faculty and administration at the state’s universities, or anywhere else,” he says. “That uncertainty stains the housing market. People do not want to invest in a home when they’re not sure whether they’ll be receiving a paycheck next month. Without home investment, community investment will remain absent.”
The city of Chicago employs more than 32,000 people. The state employs more than 800,000.
Mayor Rahm Emanuel’s administration has made efforts to supplement revenue shortfalls, but the efforts, as well as the underlying uncertainty, have shifted a bulk of the burden onto homeowners (and also renters and businesses).
“This deep into our budget crisis, the issues are big, and it has the mayor playing around with taxes,” Bernardoni says, remarking on the recently passed tax hike to water and sewer services, which will increase rates by 30 percent over the next five years. “The administration is trying to make up for not only the pension problems, but other shortfalls as well. It’s the old Chicago phrase, ‘everybody pays.’”
Aldermen Robert Maldonado of the 26th Ward and Patrick Daley Thomspon of the 11th have publically complained about the recent increase. Maldonado, who did eventually vote in favor of the new sewer and garbage tax rates, claimed his constituents are being “taxed to death.” And Thompson flat out called the added tax “unreasonable.” The 40-10 vote illustrates that most, at least in the context of the city’s current situation, disagree. And according to the National Association of Real Estate Brokers’ current president, Ron Cooper, raising taxes is the only way for Chicago and Illinois to fill fiscal gaps.
“This isn’t rocket science. You’ve got to increase your tax base,” he says. “Our states and counties and cities will continue to have residential problems until we increase their revenue base. And the way to do that is through taxpayers paying taxes on homeownership. It’s a graded tax.”
It’s a line of thinking that Mayor Emanuel has embraced.
Property is going to cost more
“Nobody likes to raise taxes, but everybody likes to make sure they have a secure retirement,” the mayor said, thanking the 40 aldermen who helped pass the sewer and water tax increases.
The added revenue from higher sewer and garbage taxes alone will not balance Chicago’s books. When fully implemented, utility bills for Chicago households will average a monthly increase of $19, accounting for an estimated annual contribution of $240 million to the Municipal Employees’ Annuity and Benefit fund, or MEABF.
Critics of the increase have pointed out that to bring the MEABF to normal levels – even with the widened revenue streams – the fund will need a $300 million infusion in 2023, according to a DNAInfo report that Budget Director Alexandra Holt confirmed. The MEABF is only one of the pension funds that needs balancing – which is why Emanuel last year announced a four-year plan to raise property taxes by a record $543 million.
How will that affect Chicagoans?
Figures from Cook County Clerk David Orr’s office put the average property tax increase over last year’s rate per household at 13 percent, according to a report from The Chicago Tribune. So for a property worth $225,000, homeowners can expect to pay $413 more this year. The mayor has installed a property tax rebate scheme to offset some of the burden, but the relief maxes out at $200. It’s even less for families earning over $50,000, for whom the rebate will be closer to $75.
“Property taxes have a different impact on different people,” Bernardoni explains. “Some homeowners can afford the increase, and to them that’s just the cost of living in Chicago. But others can’t, and it becomes a burden. And as it relates to businesses, this increase is huge from an economic development standpoint.”
Orr’s office also confirmed higher forthcoming property taxes for Chicago’s north and northwest suburbs. In the coming year, area households can expect property taxes to increase by $110. Wheeling and Elgin will feel the largest and second-largest increases in property taxes, at 11.3 percent and 11 percent year over year, respectively.