Updated 1:30 p.m.
Chicago’s City Council on Tuesday approved an $8.6 billion spending plan for 2018, which relies on a new way of borrowing money, and higher taxes and fees on everything from phone lines to concert tickets to Lyft and Uber rides.
Mayor Rahm Emanuel’s plans to close a projected $114 million annual budget gap have faced little resistance from the City Council this budget year. But some aldermen have raised concerns about his plan to bail out the financially struggling Chicago Public Schools, and to send city money to the Chicago Transit Authority.
Even though the budget passed with minimal political pain — 47 votes in favor and three votes against — one fiscal expert has warned that the city must start planning for a big spike in pension payments, which could mean higher taxes or deep cuts in a couple of years.
Here’s how the city’s new budget could affect you starting Jan. 1, 2018 — and beyond.
Taxes, fees, and surcharges
Emanuel wants to close the gap, in part, with nearly $65 million in new revenue. The budget will hit Chicago taxpayers — and visitors to the city — by imposing higher fees on Lyft and Uber rides, increasing a surcharge for phone lines, and hiking the tax on large entertainment venues.
The per-ride tax on ridesharing companies, currently at $0.40, will jump to $0.55 next year, and $0.60 in 2019. The monthly surcharge on all phone lines, which helps pay for 911 services, will jump to $5.00 per line starting next year, up from $3.90. And Emanuel also wants to restructure the city’s tax on tickets for live events so that bigger venues will now charge 9 percent, while venues that hold fewer than 1,500 people will now be exempt.
And the shadow of previous tax hikes still looms large over Chicagoans. Water and sewer taxes will continue to increase by $1.28 per 1,000 gallons next year. The city also continues to phase in previously-approved record-high property tax hikes this year, and another increase is expected from the school district.
The mayor’s budget expects to bring in $16 million from the new Lyft and Uber fees, which it will hand over to the Chicago Transit Authority for upgrades to bus and train lines.
It would also give $14 million to Chicago Public Schools to cover Safe Passage contracts and after-school programs.
Over the course of budget hearings in recent weeks, several aldermen took issue with giving this money to CPS and CTA with no strings attached. Both entities have the ability to levy taxes on their own. Having the city raise taxes on their behalf sets a dangerous precedent, they said, because the City Council has no say in how they spend it.
Two aldermen — Brendan Reilly (42nd Ward) and Scott Waguespack (32nd Ward) — tried to propose a change to those arrangements, but their suggestions never even got a debate.
“This is troubling to me given that time and effort was spent trying to get these things properly introduced,” Reilly said.
Ald. Leslie Hairston (5th Ward) said even if the measures were unlikely to pass, they should’ve been debated.
“These types of shenanigans that go on and how convenient it is to lose something that should be debated … is very suspect and I do believe politically motivated,” she said.
Ald. Ed Burke (14th Ward), the chair of the Finance Committee, responded by saying he was not aware of the ordinances, even though they were submitted to his committee by the clerk’s office last Thursday.
A good credit score makes borrowing money cheaper. In a city with infamously bad credit ratings, the mayor’s office is looking for ways to lower its borrowing costs, which could avoid new taxes on Chicagoans down the road.
Enter Chicago’s new “special purpose corporation,” a wonky financial vehicle that is legally separate from the city and has already gotten some good credit scores from ratings agencies.
The idea is a little like refinancing a mortgage at a bank that will give you a lower rate as long as you make monthly payments on autopay. In this case, the city is sending nearly all future sales tax revenue to the new corporation, which will then be able to borrow money at lower interest rates.
The city is hoping to borrow $3 billion next year through the corporation. The mayor’s office said the borrowing will cost about $45 million less than it would have through traditional bonds.