October 19, 2015
IN THIS ISSUE:
CRMA Testifies Against Unfair Distribution of Proposed
Property Tax Increase
The Chicago City Council held its annual public hearing on the budget this week and CRMA was there to weigh in on Mayor Rahm Emanuel’s proposal to shift a portion of the proposed property tax increase to the employer community. The ordinance proposes to increase the property tax levy over a four year period with the largest part of the increase to coincide with the 2015 property tax bills. While it is clear that the city needs a significant amount of revenue to meet its pressing pension obligations, the employer community is concerned that all taxpayers will not be asked to pay their share of the increase. Instead, the Mayor is asking the General Assembly to increase the homestead exemption which would essentially exempt homeowners with properties valued at $250,000 or less from the increase leaving employers to pick up the tab. Chicago’s neighborhood employers are stretched thin and are disheartened to learn that they will be asked to pay their share and the share of others.
CRMA is asking the Mayor and the City Council to reconsider a policy that favors some homeowners over others as well as renters and local business owners.
You can read our testimony here.
You can also view the actual budget for the city here.
Cook County Kicks Off Budget Season With Modest Mix of Cuts
and New Revenue
With the sales tax increase set to go into effect on January 1, 2016, Cook County kicked off its budget season last week by issuing its preliminary budget for public review. IRMA took part in a meeting with the employer community prior to the release of the budget where the County’s Budget Officer detailed plans for cutting expenses and seeking new revenue.
Since the County took care of the most significant part of its new revenue outside of the budget process by passing the 1% sales tax increase in July, this budget seeks smaller revenue enhancers along with some structural cuts. The sales tax increase will mostly fund a significant pension payment, although there has been some question about whether the County has the authority to use sales tax revenues for this purpose. The County Board has signed an intergovernmental agreement with the pension board to allow for payment from this revenue source. The County believes that such an agreement is all that is necessary to not run afoul of Illinois law. I would note though, that the County’s pension bill, which is still languishing in the General Assembly, would allow the County to increase the amount for its maximum pension payment, and it would also allow for pension payments to be funded by other sources such as the sales tax. Unless there are structural changes to how the pensions are funded, the county expects that it will continue to have problems keeping up with the rate of growth of the debt obligation. For its part, the sales tax increase is expected to generate an additional $308 million in its first year.
The $4.5 billion budget will mostly be financed by revenues from the health and hospital system, the sales tax and property taxes. The majority of revenue will be spent on expenses related to the health and hospital system, public safety (which includes the county jail) and other fixed costs. As the hospital system works its way back to profitability, the county has used less of its tax resources over time to fund it, resulting in savings in the budget. The county also plans to eliminate vacancies in other areas and has negotiated some health benefits savings with its unions. It will also demolish three buildings at the county jail as it continues to permanently reduce population and it will consolidate or eliminate programs that have either been ineffective (the Sheriff’s Day Reporting Unit) or are no longer needed in large quantities (mortgage foreclosure program). Additional revenues will come from an expanded amusement tax which will add a tax to such things as in-home cable TV services and other recreational activities. The county also expects to discontinue the practice of diverting revenue from the motor fuel tax to the circuit court system. Instead, it will use the money to fund three infrastructure projects for new or improved roads and bridges which it hopes will increase economic development.
President Preckwinkle is also proposing an e-cigarette tax which would be applied similarly to the tax in effect in North Carolina. She also plans to increase cigarette and gas tax enforcement. Unlike Chicago, the county is not proposing an additional tax on closed-unit delivery systems for e-cigarettes. The county expects that this new tax will bring in $1.5 million.
After holding four public hearings on the budget over the next couple of weeks, some amendments will be made to the budget before its expected passage prior to the Thanksgiving holiday. IRMA will weigh in on this process along the way and encourages your feedback during these discussions.
Cook County Commissioner Steele Pushes for Hearing on
Starting Wage for Large Employers
After introducing an ordinance to create a Cook County-specific starting wage for businesses with at least 750 employees in the county, Commissioner Robert Steele is set to have a public hearing on the matter on Tuesday, October 20th. The Commissioner and co-sponsors Commissioner Luis Arroyo and Commissioner Joan Murphy are being encouraged to move forward with the quick hearing by IIRON. IIRON is a local group that organizes people around various issues including the “living” wage, the right to unionize, environmental issues and economic concerns focused on large corporations. This group has not been a part of starting wage discussions in Springfield, nor were they involved in the Chicago negotiations. There has been no attempt by the sponsors of this ordinance to have a conversation with the employer community regarding its concerns which is a significant departure from how wage issues have been addressed in other jurisdictions. IRMA is of the firm belief that the authority to set wages is the sole purview of the General Assembly, and locally-set starting wages are in conflict with the provisions of the Illinois Constitution. Moreover, the early results of Chicago’s implementation of the higher starting wage has shown that employees have had their hours cut and others have lost their jobs. The unintended consequences of this policy are being felt all over the city. Nevertheless, Commissioner Steele has called the issue for a vote, although he can re-call that request at any time. If this issue were to pass, Cook County would be the first home rule county in the state to not only pass a starting wage ordinance, but one that would only apply to certain employers.
CITY COUNCIL ORDINANCES AND RESOLUTIONS
Sponsor: Mayor Rahm Emanuel
Committee on Finance
The 2016 Budget Proposal includes a number of new taxes and fees. Of particular interest to the retail community are the following proposals:
Personal Property Lease Transaction Tax and Amusement Tax
This item changes the lease tax to include non-possessory computer leases where a customer accesses the provider’s computer from a mobile device. If customers are accessing the computer to input, modify or retrieve data, then the transaction will be taxed at 9% of the lease/rental price. If the access is to input, modify or retrieve data that is supplied by the customer, then the transaction is taxed at the lower rate of 5.25% of the lease/rental price.
Small, new businesses will be exempt from having to collect or pay this tax. Businesses qualified for the exemption are defined as licensed businesses (licensed in any jurisdiction) during the most recent year prior to the taxing year, which have under $25 million in sales and have been in operation for less than 60 months. Businesses will be combined into one unitary business group depending upon how they are formed and how revenue/management is shared.
A separate, but related item seeks to add amusements delivered electronically to mobile devices to the amusement tax. If passed, video and audio streaming, and on-line games would be subject to the tax.
Liquid Nicotine Product Tax
This item will tax closed-unit e-cigarettes as well as all product intended for vaping that contains nicotine. The tax on closed-unit devices is $1.25/unit and the tax on the liquid is $0.25/milliliter. This proposal is the only proposal in the country seeking to tax closed-unit devices. All other jurisdictions that are taxing or proposing to tax e-cigarettes are taxing the consumable product only. Chicago’s version would unnecessarily distort the market for e-cigarettes, creating winners and losers in an otherwise open, competitive market. Vape pens (largely sold by vape shops) would be the winners and e-cigarettes (largely sold by grocers and convenience stores) would be the losers. We have asked the city to reconsider its position and tax this product similarly to how it is being taxed elsewhere in the country which has already been approved by vape shops, grocers and convenience stores alike. Taxing the product similarly to North Carolina and Cook County’s recent proposal would give the city the revenue it seeks while discouraging use without diverting the sale of the product to other jurisdictions.
CRMA is opposed to this item as written.
Overweight Truck permit fees will increase annually according to CPI-U.
Building Permit fees regarding plan review related to the construction of new buildings, renovations and/or repair of existing buildings are increasing anywhere from 25% on the low end to 100%.
Sponsor: Mayor Rahm Emanuel
Committee on Budget and Government Operations
The 2016 Budget Management Ordinance which generally focuses on matters not directly related to revenue but can contain fee increases has a number of items of interest to the retail community:
Driveway Permit Fees
Businesses seeking these permits will pay different amounts for appropriate street signage depending on their location. Businesses inside the Central Business District (CBD) will pay $500 for sign installations related to the permit along with any other fees directly related to the sign installation. Businesses outside of the CBD will pay $110. The annual maintenance fee will be equal to the amount of the sign installation fee.
Debt Relief Program
The city is establishing a debt relief program for taxpayers for debts incurred during the period ending December 31, 2011. Taxpayers must apply for the relief.
Sale of Tobacco
The prohibition on the sale of tobacco within 100 ft. of a school, child care facility or place of education/recreation of minors was changed to reflect how the property is measured for the prohibition on the sale of flavored tobacco. It will be measure from property line to property line.
Tobacco License Revocation and Fines
A license shall be revoked for 3 or more violations within a 24-month period of the following: failure to pay the cigarette tax, mutilated stamps, interference with inspections/recordkeeping, purchase of tobacco products from unlicensed wholesalers, violations of the 100 ft./500 ft. rules regarding the sale of tobacco products/flavored cigarettes, sale to minors, sale outside of original packaging, failure to post warning to minors, interference with ID cards of inspection officials. Fines have also increased for these violations over 100% in most cases.
Committee on Aviation
This resolution calls for the Department of Aviation, the airlines and airport concessionaires to form a public/private partnership to help combat terrorism and fund additional police presence at the airports. All related parties are being asked to offer their input on the idea.
Vice President & General Counsel