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Updated City Revenue Proposals Cheat Sheet
[Ed Note: A version of this article appeared in Friday’s subscriber edition. This version has been updated to include new reporting.]
This year’s city budget deficit is unprecedented, at least $425 million, possibly approaching a billion dollars, depending on whether or not pension reform is passed and how much of the city's pension liabilities and debt the city decides to pay back each year.
Aldermen and interested observers have suggested dozens of new revenue solutions, but as of yet the mayor's team has been tight lipped which ones he is likely to adopt. With the Mayor's budget proposal scheduled for introduction tomorrow, Aldertrack has assembled a “cheat sheet” of the various taxes, fees, and efficiencies under discussion.
In addition to combing through all the media coverage, we reached out to aldermen and their staff, state legislators, City officials, and lobbyists to assemble the list. Excluding the property tax and other big ticket items like TIF reform, or some sort of city income tax, the ideas listed here total more than $2 billion.
On Friday and over the weekend a series of “smoke signals” emerged from the mayor’s office, making the following items most likely:
Property Tax: $450-$550M – As detailed in Thursday’s newsletter, this number might be misleading. It could be much bigger, or followed by a similar-sized hike next year. Leading aldermen and the mayor have said they plan to make a property tax increase “fair and progressive.”
Property Tax Exemptions – There is wide agreement that an increased exemption is politically necessary to pass a property tax increase of any size. Last week Mayor Rahm Emanuel floated a plan to exempt those that own homes worth less than $250,000, but it requires approval from Springfield, and Gov. Bruce Rauner made it clear he won't sign any tax changes without linking it to elimination of government employee collective bargaining.
Aldermen and city budget officials are now examining ways a tax rebate, managed entirely by city and Cook County government, could be passed through a city ordinance. Such a plan would require creating a new bureaucratic structure to manage it, however. Potential plans include:
Ald. Joe Moreno (1) has proposed a rebate plan that would rebate those with household incomes below $100,000.
The Progressive Caucus is releasing a proposed rebate plan this morningthat would give families earning up to 400% of the poverty level ($63,720 a year for a couple) about a $400 rebate for a $250,000 house based on an anticipated $500 million property tax increase. There would be no residential rebate for those with higher incomes. (Presser scheduled for 9:30 a.m. today)
Garbage Pickup Fee: $80M – Chicago is set to impose $9.50 garbage pickup fee per household. Senior citizens are supposed to get a 50% break. The weekend before the budget, word was that the fee would be $11-$12 a month, but Ald. Pat O’Connor (40) reportedly worked it down. Four years ago, Inspector General Joe Ferguson estimated a collection fee like this could bring in $125M, with an additional $18M if blue cart recycling fees were included. This fee could be folded into a property tax hike, to make it deductible from federal income taxes.
Rideshare Fees and Licensing: $141M – A plan last weekend would put a proposed rideshare tax between 30 cents to 50 cents for each trip–higher at surge-pricing times. Taxi fares would increase by 15% in the overall fare that goes to cab drivers, and a 50-cents-per-ride charge as the city applies the rideshare fee to cab drivers as well. In addition, rideshare drivers would now be able to pick up travelers at O’Hare and Midway airports. Finance Chairman Ed Burke (14) championed a $1 fee on Uber or Lyft rides, and with Ald. Anthony Beale (9), he suggested an additional fee during surge pricing, which is when rates for rideshares jump. The Progressive Caucus has suggested Uber and Lyft drivers should be required to have the same licensing as cab drivers and chauffeurs.
Congestion Fee: $145M – A tax aimed at reducing downtown traffic and pollution would require new city infrastructure, but could add up to a sizable new income stream. Last weekend, reports suggested Ald. Ed Burke was putting together a blue ribbon committee to look into how to implement it, possibly by charging a $10 fee on non-city cars entering the Central Business District that would be collected on city streets. Inspector General Joe Ferguson estimated in 2011 that a similar toll during morning and evening rush periods could raise $210 million, even after a 20% dip in traffic and a $300 million capital outlay for checkpoints equipped with cameras and electronic transmitters. Some money would also go to CDOT. Burke first brought the idea up in 2007, but was shot down by Mayor Richard M. Daley.
Efficiencies From the Mayor’s Office: $170M – Carole Brown, the City’s Chief Financial Officer, said at a City Club event the mayor’s budget will include $170 million in budget cuts, reforms and efficiencies. The Mayor’s press office has released a piecemeal list so far, things like auctioning off city surplus goods ($2M), changes to grid garbage collection ($7M), and healthcare savings from a deal with the Labor Management Cooperation Committee ($20M).
The following items have been been mentioned as “possibilities” in Aldertrack’s discussions with aldermen and leading lobbyists.
E-cigarette And Smokeless Tobacco Fees: $31M – Ald. Joe Moreno’s pitch to tax e-cigarette cartridges and containers would net the city approximately $1M in revenue. The bigger ticket item is a 20 to 30% tax on smokeless tobacco like chew or snuff. Moreno said he’d be willing to go as high as 70%. Mayor Emanuel, in one of few comments on aldermanic suggestions, told WLS-AM Radio there was a “building consensus” around a tax like this.
Cloud Tax: $12-70M – The City’s Finance Department doesn’t consider this a new tax, but an enforcement of two existing taxes already in the books. Most analysts agree the real revenue number is much higher, probably closer to $70M once a full assessment is completed. After pushback from the local tech community and businesses who rely on cloud data, enforcement of the tax was delayed until January and an exemption was issued for small companies. Greg Hinz reported this weekend that the tax will go to 5.25%, down from the earlier 9%, although streaming services, like Netflix, will still carry at 9% tax. There’s a court challenge to the ruling already in Cook County chancery court from the the nonprofit Liberty Justice Center, an arm of the Illinois Policy Institute.
Sugar-Sweetened Beverage Tax: $134M – Ald. George Cardenas (12), chairman of the Committee on Health and Environmental protection, held a hearing on a proposed penny per ounce tax on sugar sweetened drinks, including soda, some juices, Kool-Aid, and Gatorade. Cardenas says he is waiting for clarification from the Law Department before he calls it for a vote in committee, as there are two existing taxes on soda in the City.
Zero Waste Program: $29M – The Progressive Caucus wants to require buildings to break down recyclable materials by category so they can be reprocessed and sold to recycling companies at profit. The Caucus estimates it could raise $299 million over 10 years.
Stormwater Stress Tax: >$10M estimate – A tax on big box stores and other buildings whose large parking lots put an additional stress on city drainage systems is another Progressive Caucus plan. This tax could hit hospitals, schools, and nonprofits, too, but aldermen didn’t put a price tag on this suggestion or talk about possible exemptions.
Conservation Pricing for Bulk Utility Users: >$10M estimate – Another Progressive Caucus pitch would be for the City to charge bulk users of water, electricity, garbage collection, and stormwater drainage at higher rate. “Large entities like big box retailers, industry, and even universities and hospitals could potentially even subsidize lower rates for lower income Chicagoans,” the Caucus press materials say, but again, the proposal doesn’t include a price tag.
Fold Chicago Board of Elections Into Cook County Clerk: $13M – The Civic Federation has backed this idea, and the Progressive Caucus revived it in their recent budget suggestions. In a 2011 brief, Civic Fed said combining the two agencies would be more user-friendly, reduce voter confusion about where to stand and which machines to use on Election Day, reduce duplication, make it easier to find election results, and save money.
PILOT Program: no estimate – A PILOT (Payment In Lieu of Taxes) Program in Chicago, modeled after a similar one in Boston, would compel nonprofits exempt from property taxes to pay a voluntary fee to the City, and is supported by the Progressive Caucus. Some of that money would come from universities, and possibly from hospitals and churches. Since it’s a voluntary program and payments are generally negotiated between municipalities and nonprofits, it’s hard to predict how much money this could raise, or how long it could take to implement. Boston’s PILOT program brought in roughly $28M in FY 2015.
Investor Landlord Refuse Fee: no estimate – Another Progressive Caucus idea targets investor landlords, who rent out extra properties. Landlords renting out non-owner occupied single family homes and small apartment buildings would pay the cost of garbage collection. No estimates on revenue were provided.
Luxury Tax: no estimate – A tax non-essential, high-value purchases like fur coats, high-end jewelry and boats above a certain price point, plus services like pet grooming, travel services, plastic surgery, investment counseling and architects was also pitched by the Progressive Caucus. Ald. David Moore(17) has also suggested a tax on luxury real estate transactions, but neither the Caucus nor Moore suggested how much money the City could make from such taxes.
Increased Fee on O’Hare, Midway, Navy Pier Concessions: no estimate – Ald. David Moore, an accountant, proposed an increase on the percentage fee of gross sales from concessions at O’Hare International Airport, Midway Airport, and Navy Pier. Moore’s press spokesperson didn’t return requests for comment on how much they expect the fee to generate.
$2.50 Hotel Surcharge: no estimate – Given a record-setting 50 million visitors to Chicago in 2014, Ald. David Moore pitched a $2.50 surcharge per stay, not per night, on the city’s hotels. Moore’s press spokesperson didn’t return requests for comment on how much this would generate, only saying in a press release it would “generate millions.”
$25 Bike License: no estimate – Ald. Pat Dowell (3) first floated this idea in 2013 as an offset to a cable TV tax increase. Licensing would also require a 1 hour safety training course. A 2012 census suggested more than 19,000 people commute on bikes to work in the city, and that number has almost certainly gone up with the introduction and expansion of Divvy. But even if that census number doubled, licensing fees would generate less than $1M. At the time, Ron Burke, executive director of the Action Transportation Alliance, called bike licensing prohibitively complicated and costly to administer.
Vehicle Fuel Tax: no estimate – Chicago already has a $0.05 per gallon gasoline tax, which the Mayor says will generate less money every year because of increased fuel efficiency standards. A potential hike is also being floated at the state level to help pay for infrastructure projects. Chicagoans already pay the nation's highest collection of federal, state, and county fees and taxes at the pump.
City Income Tax: no estimate – Ald. Joe Moore (49) has proposed a graduated city income tax that applies to all wages earned in Chicago, including suburbanites who commute to work in the City. This would require authorization from Springfield, and could potentially tax the rich at a higher rate, but Moore did not give specifics on rates or income brackets.
Moving Truck Permit: no estimate – A permit to prevent booting and ticketing for moving and delivery trucks in the central business district and throughout the city was pitched this week by Ald. Brian Hopkins (2). Daily permits would range from $4- $20 daily, $20-$100 monthly and $200-$1,000 annually depending on whether the truck operates in the Central Business District or outside of it. Hopkins didn’t release an estimate of how much permitting would generate versus revenue from tickets and booting fees.
City Switch to Fiber Optic Network: no estimate – Ald. Hopkins also proposed the city build on existing emergency communication infrastructure and switch from private internet services to a faster, more reliable fiber optic network. He estimates the city could “easily” save $100M in the first two or three years after making the switch.
Ward-Controlled Video Gaming/Gambling: $20M – Gamblers heading to play video poker outside city limits might not have to travel so far, if a proposal from Ald. Raymond Lopez (15) gains some traction. His proposal would allow aldermen to approve licenses to bar/restaurants who want to install video gaming machines in a process similar to liquor licenses. Lopes estimates if everyone eligible opted in and were approved by their alderman, it would generate $16M a year, plus $4M in licensing fees. Lopez has already faced pushback from mayoral allies Ald. Ameya Pawar (47) and Ald. Pat O’Connor(40), who is concerned that video gaming might take away the draw of a land-based casino downtown.
Land-Based Casino: $450M – Mayor Emanuel has told aldermen in recent budget meetings that he plans to expend his political capital in Springfield on finally bringing a land-based casino to the City. Revenues would go toward funding police and fire pensions. Downtown business leaders have been for the casino, which they say would lead to more hotel stays, shopping and restaurant visitors. But it’s been a slog–Gov. Pat Quinn vetoed the mayor’s first try in 2012, saying he worried about city ownership and gambling industry influence on politicians. The Mayor might also get pushback from Chicago-area casinos who don’t want any more competition. Gov. Rauner has declared himself more open-minded than Gov. Quinn. Estimates about how much a Chicago casino would make vary based on different proposals floated in Springfield in May and June. According to state projections, a city-owned casino could generate at least $457 million a year, with more than $200 million of that to be paid to the state in taxes.
Food Cart Licensing: $2M – An ordinance to license and regulate mobile food carts has passed in the License Committee without vocal objection. Approved vendors who pass Health Department inspection will have to pay a $350 license fee. A representative from the Illinois Policy Institute suggested revenue from licensing for all existing vendors, who currently operate illegally, could generate $2M, and grow to $8M, depending on penetration. It’s up for a vote in the Sep 24th council meeting, and has vocal support from License Chair Emma Mitts (37).
Financial Transactions/Lasalle Street Tax: no estimate – A small tax on financial transactions like the selling and buying of stocks, bonds, and options has been floated by several aldermen, but would require Springfield approval. Chicago State Rep. Mary Flowers brought up a .01% tax in the General Assembly in 2013. Her bill would have imposed a levy on any commodities and stocks transactions made on the Chicago Stock Exchange, the Chicago Mercantile Exchange, the Chicago Board of Trade and the Chicago Board Options Exchange. In 2011, Inspector General Joe Ferguson said a penny-per-transaction tax could generate $38M for Chicago. William Barclay, an economist advising the CTU, said a $1-to-$2 tax could raise up to $12 billion a year for Illinois. The Sun-Times Editorial Board called that $12 billion figure a fairy tale, and said the mayor was opposed.
Corporate Income Tax: no estimate – Ald. Ameya Pawar (47), one of the driving forces behind the establishment of an independent financial office for City Council, has suggested easing the hit of a property tax increase by creating a corporate income tax for large businesses. He sees it as an alternative to a financial transactions tax, which he says would negatively affect pensions. The change would require Springfield approval. He says New York City has successfully implemented the tax without scaring big business away, but hasn’t suggested a rate or estimated revenue.
Temporary Amnesty for Outstanding Debt to City: $1M-$7M – Under an amnesty program proposed by Mayor Emanuel, any individual or business that owes the City money for parking tickets and other violations and taxes from before 2012 will be granted amnesty for the penalties and interest previous tickets or violations have accrued. Individuals will still pay the ticket or fine value, but will receive amnesty from the penalties and interests associated with failure to pay. Previous programs in 2002 and 2009 collected between $7 and $8 million, but the Office of Budget and Management put out a conservative $1M revenue estimate.
Restaurant Tax Increase: $25M – A possibility discussed by some lobbyists and aldermen, the city already has a quarter percent restaurant tax which brings in around $25M, the city could double it and call it a "progressive" tax, since most restaurant-goers have more discretionary income.
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