121 Report – CRMA – August 2015

A BUDGET STALEMATE BRINGS TAXES
…AND MORE TAXES

As the state continues to operate without a budget, Illinois residents and business owners are starting to feel the very real effects of the stalemate.

 

Every week, it seems as if some important constituency will have their funding cut or that bills will not be paid.  Whether it’s federal pass-through funding to help the poor and elderly maintain access to groceries and prepared meals, employee salaries or child care subsidies for low-income families, everything has been in jeopardy at some point.  And while the General Assembly has been in session every week since May 31st (the date by which session was originally scheduled to end) very few bills have passed, including the City of Chicago’s and Cook County’s pension reform bills.

 The financial position of both local jurisdictions has had, and will continue to have, consequences for taxpayers.  While the pension reform bills will help ease some of their burden, both units of government have deficits that exceed the reach of their legislative initiatives.  Cook County Board President Toni Preckwinkle used the legislature’s inaction on her pension bill as an opportunity to pass a sales tax increase. This increase will give the city of Chicago the highest sales tax in the country starting January 1, 2016.  After the tax increase was pushed through within two weeks of the measure being introduced, It was later revealed that President Preckwinkle plans to use over $100 million of that cash infusion to raise the salaries of county employees by as much as 6% in some cases.  This bombshell has left the local and national businesses near the border of the county feeling increasingly unwelcome.  Further salting the wound, it is questionable that the additional revenue could be used for pensions at all.  There is a school of thought that the General Assembly would have to approve the additional revenue for the pension payment which President Preckwinkle’s office has not totally denied.  It is very possible that all of the revenue could be used for purposes other than making pension payments.  This is why the Cook County Board could have, and should have, waited before taking the vote.  There are more questions than answers right now and the uncertainty will have a negative impact business and sales tax revenue.

 

While the retail and restaurant community prepares for that tax to go into effect, we are not out of the weeds yet.  Mayor Rahm Emanuel’s budget address is set to be delivered in mid-September.  If you believe the media reports, that address is likely to include a property tax increase.  A recent lower court decision rejected the city’s attempt to decrease a current pension benefit in exchange for lower-cost, city-funded employee retirement plans.  The city will appeal this decision, but considering that the Illinois Supreme Court just overturned the state’s similar pension reform bill, there is not much hope that the city will prevail.  Add to that current proposed budget from the Chicago Public Schools that cuts spending by $200 million, relies on over $400 million in state aid (that may never come) and lays off over 400 teachers.  If the school system fails to receive the money it is budgeting for from the state, its new chief, Forrest Claypool,  has not yet said what he would do to balance the budget (cue the higher property taxes).

 

While so much discussion regarding the possibility of higher property taxes centers on Chicago’s homeowners, we should note that the business community pays a larger and disproportionate share of property taxes.  It’s probably no surprise to members that the Cook County property tax system is structured differently from every other county in the state.  Rates are assessed at 10% of market value for residential and 25% for commercial.  Therefore, commercial properties carry more of the property tax burden.   Instead of addressing this system that no doubt has a negative impact on commercial development in the county, the discussion always seems to turn to increasing taxes.

 

 There’s no time like the present budget disaster at the state, county and city levels to change the way we think about who we tax, how we tax and why. Cook County would do well to reevaluate its property tax system that keeps residential rates artificially low and commercial rates higher than surrounding counties.  If we want to help the local economy, increased development and job growth is the way to go.  We should change the conversation from increasing property taxes to building the tax base.  There are many ways to stimulate the economy, get people working and grow revenue to local units of government.  Our broken property tax system should be fixed before taxpayers are again asked for more money.

 

CITY COUNCIL ORDINANCES AND RESOLUTIONS

INTRODUCTIONS

Sponsor:  Alderman Proco Joe Moreno (1st Ward)
Committee on Health and Environmental Protection
This proposal would amend the recently enacted plastic t-shirt bag ban by prohibiting retailers from offering compostable bags to customers.  The city of Chicago does not have any commercial composing facilities, and since these bags cannot be recycled, they would all end up in the landfill.  It is not clear how many retailers are actually offering such bags since the cost of doing so is often prohibitive.
 

 

CRMA will continue to push for the ordinance to be amended to replace a ban with a fee on all single-use bags.  The latter option preserves customer choice while employing a proven method for actually changing consumer behavior.  If a customer doesn’t want to pay for bags, then the customer will start bringing their own bags.  The use of plastic bags has decreased dramatically with this model and customers in Washington DC and other cities along the west coast that have gone to a bag fee model have developed the habit of bringing their own bags.
 
Sponsor:  Alderman George Cardenas (12th Ward)
Committee on Health and Environmental Protection
For the past several years legislation has been proposed in the General Assembly to tax sugar-sweetened beverages.  The initiative, led by members of the medical and various health-related non-profit communities, was an attempt to address obesity in communities of color and the chronic illnesses that are tied to it.  The HEAL Act, as it’s known in Springfield, has received hearings in both the House and Senate but has failed to garner enough votes for passage.  We have seen this trend before.  When the advocates fail to get their bill passed in the state legislature, they bring their fight to the city.  But sometimes a bad bill is just a bad bill no matter where it travels.  This fight should stay in the state legislature where it belongs.

 
Interestingly enough, the city of Chicago is the only city in the state that has had an additional tax on soft drinks for over 20 years.  This 3% tax is paid by the consumer to the retailer who then remits the tax to the city.  Yet, the tax has not helped shrink waistlines nor has it reduced the incidence of chronic illness among children or adults in black and Latino communities.  Maintaining a healthy weight is much more complicated than taxing individual products.  It requires a commitment to changing a person’s lifestyle:  what a person eats, drinks, how often they eat, portion size and regular physical activity all play an active role in keeping a person’s weight under control.

 

There is no silver bullet to weight loss.  This tax would just shift sales of the product across the border.  Meanwhile, like the current soft drink tax, it won’t make a dent in tackling obesity and it will hurt grocers near the border of the city.  Members should note that Ald. Cardenas was also the author of Chicago’s current bottled water tax and co-sponsor of the plastic t-shirt bag ban.

 

Sponsors:  Aldermen Tom Tunney (44th Ward) and Michele Smith (43rd Ward)
Committee on License and Consumer Protection
This proposal would establish a pilot program to extend sidewalk cafes into a protected area of the street.  Sidewalk cafes are an important additional revenue source for Chicago restaurants. In some of the most congested areas of the city, it is difficult to establish a sufficient area for outside eating due to narrow sidewalks.  Therefore, Aldermen Tunney and Smith are seeking to have a pilot program for the 2016 sidewalk café season where restaurants could extend the outside seating without unduly interfering with pedestrian or vehicular traffic and parking.

 

The idea would be a great addition to neighborhood retail and hospitality centers by allowing restaurants to expand their square footage and giving residents an opportunity to spend more time outside in the short Chicago summers.  It also will give restaurant employees more opportunities to earn more money due to the additional patrons.  The pilot program is a win for employers, their employees and commercial corridors.  We support it.

 

Sponsors:  Mayor Rahm Emanuel, Aldermen Daniel Solis (25th Ward), James Cappleman (46th Ward) and others
Committee on Zoning, Landmarks and Building Standards
As the city’s transportation authority has spent millions of dollars in recent years modernizing many of the “el” stations, it has become important to turn these areas into bustling retail and residential meccas.  To that end, Mayor Emanuel introduced this proposal to loosen some of the parking requirements and increase incentives for providing affordable units and mixed-use development near these transportation hubs.

TanyaTricheContact Information

Tanya Triche
Vice President & General Counsel

312/726-4600