CHICAGO - Chicago Mayor Rahm Emanuel vowed not to raise property, sales, or gasoline taxes to help erase $297 million of red ink in the 2015 budget he will unveil later this month.
"In my fourth budget, we will hold the line on property, sales and gas taxes and put money back in the rainy-day fund and continue to look at the system as a whole to find efficiencies and reforms," Emanuel said during a public appearance Oct. 2.
He noted his past three budgets were balanced without property, sales, or gasoline tax hikes and included small deposits into the city's reserves, reversing former Mayor Richard Daley's policy of dipping into reserves to help manage through deficits during the recession.
Emanuel did not rule out any other tax or fine and fee increases in the election-year budget. His past budgets have relied on those maneuvers to close spending gaps.
Over the summer, finance officials announced a preliminary deficit of $297 million in what will end up a roughly $7 billion budget. The city also said it would not address how to cover a looming spike of $550 million in police and fire pension fund contributions next year.
The payment is due in 2016 but the city had previously called 2015 its day of reckoning because a property tax levy request to cover 2016 expenses must be made by the end of 2015.
The mayor is banking on reaching an agreement with union officials and winning state legislative approval to overhaul the two funds and phase in the spike required under a prior state mandate to move to actuarially-based contribution levels.
Lawmakers approved a reform package earlier this year to stabilize the city's other two pension funds, for municipal workers and laborers. The plan originally relied on a $50 million property tax hike in 2015 but lawmakers approved Emanuel's request to raise the city's emergency communications surcharge. That frees up a similar amount from the general fund that now goes toward emergency services and eliminates the need for a property tax increase next year.
The reform package, however, relies on annual $50 million increases in payments over five years.
The deficit estimate is down from a $339 million shortfall the city faced heading into the 2014 budget year.
The city has reduced some long term cost pressures by renegotiating new contracts, including healthcare deals, introducing managed competition for some city services, and transitioning to grid-based garbage collection. At the same time, the city has raised various fines, fees, and taxes to generate more cash.
Despite structural budget improvements, Chicago's credit ratings have been battered by its $19 billion of unfunded pension obligations.
Moody's Investors Service rates Chicago general obligation bonds Baa1. Fitch Ratings rates Chicago's $8 billion of GOs A-minus and Standard & Poor's rates them A-plus. All three assign a negative outlook.
