Chicago mayor on property tax hike: 'We must solve our pension challenge'

FOX 32's Dane Placko contributed to this report.

CHICAGO (AP) — Mayor Rahm Emanuel pitched a massive property tax hike Tuesday as a "last resort" to correct Chicago's financial footing, suggesting the only alternative for the nation's third-largest city would include severe cuts to police and fire services, recycling programs, pothole repair and even rodent control.

Emanuel, who needs approval from state lawmakers and the governor for at least part of his sweeping plan, outlined a $543 million property tax over four years, a $45 million tax to modernize schools, and other new fees for residential garbage pickup, e-cigarettes and ride-sharing services. The property tax revenue would go toward paying police and firefighter pensions, with other fees aimed at closing a budget gap and improving overall financial health.

The Democrat, who won a second term after a tough campaign earlier this year, said Chicago's underfunded pensions were "a big dark cloud" standing in the way of further progress. Before delivering the news, he ticked off other cost-cutting reforms the city already had tried.

"Now it's time to finish the job," Emanuel said during the roughly 30-minute speech peppered by applause. "Raising city property taxes is a last resort. It is why we have never increased them in my last four years. But we must solve our pension challenge we inherited."

To soften the blow, he pitched an exemption for those whose homes are worth $250,000 or less. The exemption needs lawmakers to sign off, but not all state leaders have been receptive.

Leaders of the Democrat-controlled state House and Senate say they're on board and there's a hearing later this week. However, Gov. Bruce Rauner has been cool to the idea.

The first-term Republican governor, locked in a state budget battle with legislative Democrats, says raising taxes won't fix all problems and has pushed to freeze property taxes. Rauner spokeswoman Catherine Kelly declined comment Tuesday.

Chicago has the worst-funded pension system of any major U.S. city, a budget hole of at least $750 million and school system credit rating agencies have rated at "junk" status. The problems intensified over years because leaders didn't contribute enough to pension funds and continued questionable borrowing tactics.

Leading up to the budget speech, Emanuel, a former White House chief of staff, trumpeted his efforts, including testifying in Springfield and making cuts. He said spending levels for the $7.8 billion 2016 budget were the lowest since 2008.

He vowed to eliminate structural debt by 2019 — the year of the next mayoral election — and install air conditioning in all city schools. He also proposed privatizing Chicago's 311 service, which is used as an information and service request line, to save $1 million annually.

Emanuel called on aldermen to step up.

"I know this budget is tough and therefore I know it carries political risk. I get it," he said. "But there's a choice to be made. Make no mistake about it. Either we muster the political courage to deal with the mounting challenges we inherited or we repeat the same practices and allow the financial challenges to grow."

Among aldermen, who have largely been seen a rubber stamp for the mayor over the years, reviews were mixed.

Some said the property tax was inevitable, but others were angry about the collective increase, namely the proposed $9.50 per household monthly garbage fee.

"I don't know what the other options are," said Alderman Will Burns. "We've got to do what we have to do to save our city and that's the bottom line."

"Basically the chickens have come home to roost. And we cannot lie and we can't escape the reality," Burns added.

"It should be nothing new to my constituents. When I campaigned I said there would probably be a tax increase," said Alderman Daniel Solis of the 25th Ward.

Alderman Carlos Ramirez-Rosa questioned Emanuel's proposals, saying big corporations should pay more over everyday people.

"This is more of the same. It shows the mayor is going to continue to govern with the interests of his big campaign contributors, not in the interests of regular Chicagoans," he said.

"Not favorable. I didn't hear a lot of things taxpayers want to hear about fundamental changes to the way we operate the budget the way we operate the city," said Alderman Scott Waguespack of the 32nd Ward.

FOX 32 brought a copy of the mayor's 2016 city budget proposal to the streets outside City Hall.

"It sounds terrible. It sounds bad," said one man.

"I guess I'm okay with it because it seems like it's the only way things are gonna get solved," a woman added.

"Where's this money gonna go? There's gonna be another crisis in another two or three years. It's sensless," another man said.