Dear Neighbor,

At Wednesday's City Council meeting, I voted 'YES' on the proposal to create a new water/sewer tax to save the Municipal Employees' Annuity & Benefit Fund (MEABF) pension system. Voting for the tax secures the retirement of thousands of public servants, prevents the MEABF from going bankrupt, and puts the City of Chicago on the path to financial stability. The MEABF fund was on the path to insolvency in the next six years. And despite the wrongheaded rhetoric from some quarters promoting bankruptcy, allowing the fund to go bankrupt would not remove our obligation to pay the benefits. And in addition, despite efforts to change/tweak some elements of pension benefits in Springfield, the courts have repeatedly ruled that any change or reduction of benefit violates the Illinois Constitution. Further, if the fund was allowed to go insolvent, Chicago taxpayers would be required to pay benefits in a pay-as-you-go framework. This means that the City would have to budget an additional $1.1 billion each year to pay the annual benefits. Having to pay on an annual basis would sink the city. The decision to vote for the tax was the correct decision for both taxpayers and pensioners.

The impact of the tax is as follows for the 47th Ward: for single family dwellings the average monthly tax currently for water consumption is about $48. Once the tax is implemented, the $48/per month bill will rise to $52/month. The rate increases on a graduated basis over the next four years. So by 2020, the $48/month will rise $16/month for a total of $64/month. For multi-family dwellings the bill rises from $78/month to $84/month in 2017 and rises to $104/month by 2020. For commercial properties, the bill rises from $102/month today to $109/month in 2017 and then increases to $135/month by 2020. See the table below for full information on the rate and the phase-in.
The revenues generated by the water tax will be dedicated to funding the MEABF pension system. The increased revenue, $56 million in 2017 and up to $240 million in 2020, combined with existing funds pooled from the City's corporate and enterprise funds will ensure the City can begin contributing the actuarially required contribution in 2020. The revenue will be used as part of a ramp up to actuarial contributions. Starting in 2023, the City will need to begin to identify incremental increases to the tax or identify other revenue sources to keep up with the actuarially required contribution. That said, these incremental increases will be much more manageable --just as they would have been had the City been raising water and property taxes in an incremental fashion over the last two or three decades. In addition to this new tax, new city employees in the MEABF hired after January 1, 2017 will see the contribution to the fund from their paychecks rise from 8.5% to 11.5% of their earnings.

Because of this vote, two rating agencies see the City's financial outlook as more stable. A more stable financial outlook helps reduce the cost of borrowing, and will enable the City can refinance some longer term debt at lower rates. Refinancing and reducing the cost to borrow will free up money and allow for greater investments across the City. The road towards full stability is long and some years away - but I took this vote with that road in mind.

To see my appearance on Chicago Tonight discussing this tax, please click here.

Also at Wednesday's meeting, I introduced an ordinance with Ald. Joe Moreno (1) which amends the City of Chicago's affordable housing ordinance to include TIF reform. Currently, when a developer receives a major zoning change for residential use, 10% of the units with projects more than 10 units have to be set aside as affordable housing. Developers can either build the units on site or pay between $50k and $175k per unit into a fund to help subsidize rents or build affordable housing elsewhere. If the developer receives TIF assistance, the baseline percentage increases from 10% to 20%. The problem is: we still allow developers to buy-out if they receive city subsidies. This means, the developer can take a city incentive and in effect pay the city back with its own money to not build affordable units. I sat on the affordable housing task force (charged with updating the original ordinance) in 2014 and repeatedly brought this issue up. This loophole was not addressed in the updated ordinance - so Ald. Joe Moreno and I are partnering on this effort to close the loophole. I will keep you posted on this reform effort. To see coverage of this effort, click here.

At Wednesday's meeting, I passed a resolution with Ald. Carlos Ramirez-Rosa and the American Indian Center to co-designate the second Monday in October as Columbus and Indigenous Peoples Day. We also introduced an ordinance to amend the City code to ensure the code reflects the co-designation. I will keep you posted on this effort. To read more, please click here.

Sincerely,