Rahm’s First Budget Address

by Amanda Griffin-Johnson Yesterday, Chicago’s new mayor, Rahm Emanuel, released his first budget proposal. In his prepared budget address, he acknowledged that Chicago’s history of unbalanced budgets could not continue, and he recognized that “What we cannot do, however, is to protect the status quo by asking more of Chicago’s taxpayers. Raising taxes will drive more people...

by Amanda Griffin-Johnson

Yesterday, Chicago’s new mayor, Rahm Emanuel, released his first budget proposal. In his prepared budget address, he acknowledged that Chicago’s history of unbalanced budgets could not continue, and he recognized that “What we cannot do, however, is to protect the status quo by asking more of Chicago’s taxpayers. Raising taxes will drive more people and families from our city and discourage businesses from coming here – or those already here from staying.”

While it’s encouraging for a politician in Illinois to admit that reality, it did not stop the mayor from proposing a tax increase on non-constituents. Mayor Emanuel suggests increasing the city’s portion of the hotel tax from 3.5 percent to 4.5 percent to put the city “on par with Los Angeles and New York.” But the report overlooks the fact that the city isn’t the only government entity taxing hotel rooms in Chicago nor is the hotel tax the only discriminatory tax targeted at travelers. This increase would bring Chicago’s overall hotel tax to a staggering 16.4 percent. That’s like telling travelers: “Stay in Chicago for six nights, but pay for seven!”

The Global Business Travel Foundation’s 2011 report on travel taxes (car rental, hotel and meal taxes) in the top 50 U.S. destinations found that Chicago had the fifth highest discriminatory travel taxes on travelers behind Portland (Oregon), Boston, Minneapolis and New York City. When general sales taxes were also taken into account, Chicago jumped to the top of the list – imposing the highest total taxes on travelers.

The city’s portion of the hotel tax may be below LA and NYC, but the overall tax burden on travelers is not. But Business Week reports that the mayor’s office claims the hotel tax hike “will help increase revenue that supports tourism, not deters it.” It seems as if the plan is to make the city less attractive to travelers in order to get money to use to make the city more attractive to travelers. This way, the city can take credit for tourists while raising taxes that are mostly paid for by people the politicians are not accountable to.

Overall, the mayor’s proposed budget totaled $6.3 billion, a 2.1 percent increase over last year. But the city’s operating fund (the corporate fund), which the mayor has the most control over, was decreased by 5.4 percent to $3.1 billion. The mayor proposes closing the estimated $635 million budget deficit with $417.4 million of spending cuts and reforms and $238 million of increased revenue, investments and financing (with $20 million going into the city’s rainy day fund).

Unfortunately, Emanuel’s budget proposal did not clearly lay out all the details of how he would get to those spending cuts and efficiency savings. While the city posted hundreds of pages of budget documents, it would be helpful for taxpayers if the city included an excel version of the underlying budget numbers. Then residents could easily and quickly review all the proposed changes or see the effect of their own budget suggestions. Below are some of the budget recommendations that the mayor highlighted.

Savings from Spending Cuts/Efficiencies 

• $82 million – Closing 3 police stations, combine fire and police headquarters, consolidate CPD and fire bureaus and removing police vacancies
• $34 million – Reduce managers and get rid of vacant positions
• $33 million – Aggressive debt collection including $3 million from unpaid parking tickets and waters bills of city workers
• $20 million – Competitive bidding
• $20 million – Wellness program for city workers
• $12 million – TIF reform
• $9.3 million – Reduce fee waivers
• $7 million – Reduce library hours

Revenue Increases, Investments and Financing

• $50 million (savings) – Debt and bond refinancing
• $39 million – Estimated revenue growth
• $32.5 million – Pension reimbursement from CPS
• $28 million – Congestion parking premium
• $25 million – Business sponsorship/advertising on city property
• $14.8 million – City sticker fee increase for trucks and SUVs
• $14.6 million – Increase fines for various safety violations like DUI, illegal firearms and noise violations
• $14 million – Increase city’s portion of hotel tax to 4.5 percent
• $6.2 million – Increase valet and loading zone fees
• $147 million* – Increasing water fees by 25 percent this year (with 15 percent increases for the next three years)

*This infrastructure project is not part of the corporate budget.

You can access all the mayor’s budget documents at ChicagoBudget.org including:

• 2012 budget recommendations (634 pages)
• Overview of the budget recommendations (204 pages)
• 2012 Draft Action plan (168 pages)
• Mayor Emanuel’s prepared remarks (10 pages)
• Budget press release (8 pages)