Water rate hike splits aldermen
by CYRYL JAKUBOWSKI
Northwest Side aldermen discussed Mayor Rahm Emanuel’s 29.5 percent tax hike on water and sewer bills that was passed by the City Council on Sept. 14 to help stabilize the municipal employees pension fund that will be unfunded by 2025.
The council voted 40-10 to approve the tax hike in order to prevent bankruptcy of the Municipal Employees’ Annuity and Benefit Fund, according to Emanuel’s office. The aldermen who voted against the increase are Leslie Hairston (5th), Susan Sadlowski Garza (10th), Patrick Daley Thompson (11th), Toni Foulkes (16th), David Moore (17th), Chris Taliaferro (29th), Scott Waguespack (32nd), Gilbert Villegas (36th), Anthony Napolitano (41st) and John Arena (45th).
The are aldermen who voted for the tax increase are Ariel Reboyras (30th), Milly Santiago (31st), Deb Mell (33rd), Carlos Ramirez-Rosa (35th), Emma Mitts (37th), Nicholas Sposato (38th), Margaret Laurino (39th), Patrick O’Connor (40th), Ameya Pawar (47th) and Debra Silverstein (50th).
"With today’s action by City Council, all four of Chicago’s pension funds are now off the road to bankruptcy and on the path to solvency," Emanuel said in a statement. "Not only are we shoring up the city’s finances, we’re ensuring that thousands of workers are able to retire with dignity and security."
The city will implement a tax next year on water-sewer usage that will be assessed on Chicago businesses’ and residents’ unified utility bill. Residents have seen their water rates double, along with a $9.50-a-month garbage collection fee that that has been attached to that bill during Emanuel’s term.
Starting in 2017, residents and businesses will pay a rate of cents per 1,000 gallons used. The tax will be phased in over 5 years, ending with a rate of $2.51 per 1,000 gallons in 2020 and 2021, according to the mayor’s office.
The average home owner will pay $53.16 more next year, $115.20 more in 2019, $180.96 more in 2019 and $225.96 more in 2020 and 2021, according to aldermen. The city expects to raise $56.4 million in the first year and $240.1 million in 2020.
"We have a huge obligation that we needed to address, and I voted in favor of the property tax and the garbage collection fees to pay for the police and fire pensions," Arena said. "My biggest concern with this in particular was that it’s a very regressive revenue approach.
"My concern is that the fees will not do enough to cover the pension obligations in the long run," Arena said. "We are asking the people who can least afford it to shoulder the burden."
Arena said that he was concerned that by 2023 the employee pensions would still be left with a $300 million shortfall, even after the tax was fully phased in.
"It’s not uncommon for aldermen to say that we need to get Springfield to help out with the problem," Arena said. Arena said that the General Assembly would still be required to approve certain concessions.
With the funding source codified, the city will seek approval from the General Assembly for increased employer contributions and employee contribution reforms in the municipal employees’ fund.
The legislature will be asked to approve a plan to increase contributions by 3 percent for new hires and to lower the age of eligibility for full benefits from 67 to 65 for any employee hired on or after Jan. 1, 2017, according to Emanuel.
The legislation also will include an opportunity for employees hired after Jan. 1, 2011, to accept a lower eligibility age of 65 for full benefits in exchange for increasing their payroll contributions by 3 percentage points to 11.5 percent.
Arena said that the numbers that were presented by the city were confusing because people who install water meters will be able to save money on their bills.
"That’s the key point in all of this," Arena said. "I asked how they would account for people installing water meters and they gave me vague answers.
"The demand will definitely go up for the meters because people can save some money and they will do that for sure. The aldermen will tout the benefits of the meters and they will come off as some kind of heroes."
Arena said that about 7,400 people in the 45th Ward do not have water meters. He said that even if 25 percent of those homes get the meters, the city would lose some of that water tax revenue.
"The truth is that we need to find more revenue, and kicking the can down the road or committing the sins of the fathers won’t solve anything," Arena said. He said that the council’s Progressive Caucus has floated around the idea to have a luxury tax and move toward a more progressive tax system.
"Everyone says that people will pay a political price for this vote, but that rarely happens," Arena said. "Some on the council have voted for every bad idea over and over again. Some of the people who deserve to pay the price have been sitting on the council for generations. I’m honest with my constituents and I don’t shy away from telling them that there is only ‘bad’ and ‘worse’ when it comes to some solutions."
Sposato said that the city already factored in people getting new meters.
"I was never a guy who had a problem with this tax," Sposato said. "I voted for the property tax increase and the other increases because everybody said that something had to be done and we had to act.
"Nobody likes to raises taxes, but you can get a water meter or you can shower less or water your grass once a week instead of twice and you can save money," Sposato said. "It’s based on consumption. People are telling me that they will leave the city now, but the suburbs have higher water taxes, so it’s still much cheaper here in the city."
"People have a right to be upset, and I’m sure they will be and send me some nasty e-mails, but I have been encouraging people to put in a water meter for a long time," Sposato said. "We don’t know what the future will hold, and right now we need to get out of the pension mess that was created by the other administrations."
Laurino said in a statement that the aldermen needed to "do the right thing."
"We take an import step forward with this tax," Laurino said. "The police officers and firefighters pensions were covered last year by the property tax. The laborers pensions were covered by the telephone tax increase. The tax on water and sewer services will cover municipal workers pensions."
"With all of these initiatives, residents will be paying their fair share, and we will have addressed issues that have been sidestepped for more than 10 years," Laurino said.
Chicago’s water and sewer rates will continue to compare favorably to those of other major cities in the Great Lakes region and nationally, according the mayor’s office.
Assuming that Chicago’s suburbs do not raise water rates over the next 5 years, the city’s water rate in 2021 will still be lower than 104 of 126 suburb’s customers’ residential rates.
As part of the water-sewer tax, seniors who receive the senior sewer exemption will continue to receive the exemption and that exemption also will apply to the tax. The senior sewer exemption reduces eligible seniors’ total water and sewer bill by 50 percent by removing sewer charges. Seniors receiving the exemption also will see a 50 percent reduction in the tax on water-sewer usage as the tax will only be charged to the water portion of the bill.
