The Chicago Pension Fix That Neither Mayoral Candidate is Talking About

Chicago officials are leaving few stones unturned in their search for extra sources of revenue to help pay down the city’s pension debt.

But over the course of the city’s ongoing mayoral election, two words have been conspicuously absent from the mouths of the candidates: property taxes.

In fact, Mayor Rahm Emanuel has tapped nearly a half-dozen lesser sources of revenue – taxes on cigarettes, telephones, and parking, among others – in a bid to avoid having to raise property taxes.

The city’s mayoral candidates debated again on Thursday night, and it was again made clear that property taxes are more or less a non-starter for both sides.

From Bloomberg:

As the city’s credit rating slides toward junk status, the most direct remedy to dodge the threat of insolvency — raising property taxes — is barely mentioned by the two men vying to run Chicago in the next four years.

In the race for mayor, to be decided in an April 7 run-off, Mayor Rahm Emanuel and his challenger, Jesus “Chuy” Garcia, are treating the option as political poison even though it may be inevitable.

[…]

Investors who have watched the city’s credit standing deteriorate say there’s no choice [but to raise property taxes] if Chicago is to corral the cost of pension liabilities — the annual payment will swell to $1.1 billion, from $480 million this year. Moody’s Investors Service cut its $8.3 billion of general obligations to Baa2 last month, two steps above junk, citing the retirement expenses. Chicago can’t reduce workers’ retirement benefits without state legislative approval.

“Limitations on benefit reforms will likely leave large tax increases as the only viable solution, a challenge given the city’s historical reluctance to tap its property tax base,” Matt Fabian, a partner at Concord, Massachusetts-based research firm Municipal Market Analytics, said in a March 16 report.

Emanuel, former chief of staff for President Barack Obama, floated a $250 million property-tax boost last year to pay for pension obligations. He dropped the plan in the face of City Council opposition, and is taking a different route this time.

The city’s unfunded pension liability totals over $25 billion, according to the City’s website.

Photo by bitsorf via Flickr CC License