Taxes

Chicago Property Taxes Hiked As School Budget Passed

There are so many new and increased fees, fines, and taxes being proposed and implemented around the Chicagoland area these days, it’s hard to keep track of all of them. But here’s one Chicago tax hike that’s just been approved that’s making local headlines. Juan Perez, Jr., reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s school board on Wednesday unanimously approved a budget that relies heavily on borrowed money and the hope of a nearly $500 million bailout from a stalemated Springfield, with the specter of disruptive cuts in January if that help fails to materialize.

The $5.7 billion spending plan contains another property tax hike — an estimated $19-a-year increase for the owner of a $250,000 home — as well as teacher and staff layoffs. The Chicago Board of Education also prepared to go to Wall Street to issue $1 billion in bonds and agreed to spend $475,000 so an accounting firm can monitor a cash flow problem so acute that Chicago Public Schools mulled skipping a massive teacher pension payment at the end of June…

(Editor’s note: Bold added for emphasis)

My old neighbors on the city’s Northwest Side, in their single family homes that are selling just south of the $350K-mark on average these days, probably aren’t too thrilled to hear about this latest tax hike.

Oh, but it gets “better.” Perez added:

To help patch over a budget gap the district said exceeds $1.1 billion, CPS raised its property taxes to the maximum amount allowed under state law. But CPS may not be done — [Chicago Public Schools chief Forrest] Claypool has floated the idea of restoring a property tax levy dedicated to teacher pensions that would generate an estimated $170 million

(Editor’s note: Bold added for emphasis)

Keep in mind this is just the school’s portion of the Chicago property owner’s tax bill we’re talking about here.

Once again, a couple of bucks here, a couple of bucks there, and all these new and increased fees, fines, and taxes from various levels of government will have Chicago taxpayers going bonkers soon enough.

And Illinois taxpayers- note that bit about:

The hope of a nearly $500 million bailout from a stalemated Springfield…

You too could be on the hook for this debacle.

Head on over to the Chicago Tribune website here to get the full story on this latest tax hike.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Illinois On Pace To Run $5 Billion Deficit

“Gaze upon the Illinois landscape today and things may seem OK. Schools opened last week, the roads are getting repaired, the state fair was held, the University of Illinois begins a new academic year tomorrow, the state government’s even paying its bills.

Enjoy this period of normality. It isn’t going to last much longer…”

-Tom Kacich, reporter/columnist at The News-Gazette (Champaign-Urbana), August 23, 2015

More bad news about Illinois’ fiscal health. Natasha Korecki reported on the Chicago Sun-Times website Monday:

Illinois is paying its bills – by court mandate — since Illinois lawmakers and Gov. Bruce Rauner were unable to reach a budget agreement. Rauner vetoed a Democrat-authored financial plan in June, saying it was out of balance by some $4 billion. The new fiscal year came and went July 1 without a new plan in place. Both sides say they’re willing to negotiate, but remain locked into their positions. Rauner wants a series of changes to benefit businesses and weaken unions in Illinois. Democrats oppose the proposals and say they shouldn’t be attached to a budget…

A recent analysis by Senate Democrats indicates that because of various contracts, decrees and court orders compelling spending, the state had already committed 90 percent of its revenues and was on pace to be $5 billion in the hole

(Editor’s note: Bold added for emphasis)

Kacich added from my old stomping grounds:

In May the Democrats who control the Legislature approved a budget that called for spending about $36.5 billion.

Republican Gov. Bruce Rauner vetoed it, calling it “unconstitutional” and “unbalanced.”

You want to see unbalanced?

Even without a constitutional budget in place, the state is still spending money, and eventually it could rise to a level of spending greater than the budget the Democrats sent him in May.

During a Senate hearing last week on an additional appropriation of $373 million for MAP grants for low-income college students — it passed and will go to the House for near-certain approval — Democratic legislators admitted the state is operating at a “spend rate” of 90 percent on a $38 billion budget

Anticipated revenue for the year, meanwhile, is the range of $32 billion, or $33 billion if the economy takes off.

Ugh…

(Editor’s note: Bold added for emphasis)

$36.5 billion was the proposed budget. It was vetoed. The state is currently operating at a 90 percent “spend rate” of a $38 billion budget. And anticipated revenue for the year is only $32-$33 billion.

Not good.

Kacich thinks a tax increase, “that may or may not be bigger than the one that was phased out on Jan. 1.,” is headed our way.

I think he’s right about that tax hike. And it’s something Illinoisans may want to take into account concerning their personal finances in the near future.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Kacich, Tom. “Tom Kacich: Enjoy the calm; the storm is on the way.” The News-Gazette. 23 Aug. 2015. (http://www.news-gazette.com/news/local/2015-08-23/tom-kacich-enjoy-calm-storm-way.html). 26 Aug. 2015.

Korecki, Natasha. “Comptroller: Illinois facing ‘severe cash shortage.’ Chicago Sun-Times. 24 Aug. 2015. (http://chicago.suntimes.com/news/7/71/903797/comptroller-illinois-facing-severe-cash-shortage). 26 Aug. 2015.

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Chicago: Prepare For Rising Electric Bills

When looking at Chicago-area properties to purchase in 2013, my girlfriend and I preferred the house we bought be “cheap” to heat and cool as we suspected utility bills would keep getting more expensive.

Luckily, the home we live in “fit the bill” (no pun intended), and just as we predicted, area utility companies keep raising rates.

This morning, I opened up my Sunday paper and spotted the following headline:

“Chicagoans’ electricity costs to rise”

Cythia Dizikes wrote in the Chicago Tribune:

Chicagoans will see a portion of their electricity bills rise in coming years because of new electric grid rules tied to the polar vortex, according to power auction results that were made public Friday.

The auction will increase part of the average ComEd residential customer’s electricity bill in 2018-19 by roughly $82 a year compared with what customers are paying now, and by about $100 a year compared with what they might pay in 2017-18, according to industry experts. The increases per month in the ComEd region are about two to three times greater than what some analysts had been predicting…

(Editor’s note: Bold added for emphasis)

Last year, ComEd also made local headlines for higher electric bills. I noted on May 7, 2014:

Local utility and energy delivery company Commonwealth Edison is a major provider of electricity to the Chicago and Northern Illinois region. Residents of these areas served by ComEd could see their electric bills jump in the weeks ahead. Steve Daniels reported on the Crain’s Chicago Business website earlier today:

Commonwealth Edison Co.’s residential rates will rise 20 percent beginning in June as a new charge for electricity reflects rising costs to secure supply during peak-demand periods from power plants.

ComEd’s new energy charge of 7.596 cents per kilowatt-hour, filed yesterday with the Illinois Commerce Commission, is 38 percent higher than the 5.52 cents its customers are paying now…

(Editor’s note: Bold added for emphasis)

Next up? Higher heating bills again, I’m guessing.

As I told my girlfriend at lunchtime today, it will be interesting to see how long Chicagoland residents put up with the new fee here, the tax hike there, the higher utility costs around the corner- and the rate at which they come.

The aggregate pain from all these rapid hits to pocketbooks on Main Street and down in the city can’t possibly elicit a pleasant response.

Stay tuned…

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Dizikes, Cynthia. “Chicago ComEd customers to be charged more for electricity in coming years.” Chicago Tribune. 22 Aug. 2015. (http://www.chicagotribune.com/business/breaking/ct-comed-charges-increase-met-20150821-story.html). 23 Aug. 2015.

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My Thoughts On Chicago’s Financial Crisis

I know I’ve been blogging a lot about Chicago/Cook County/Illinois lately. Which should come as no surprise to regular Survival And Prosperity readers considering I’ve talked about how I was born on the West Side, was raised around that area, and lived on the Northwest Side until I moved to the northwest suburbs two years ago.

Both the Chicagoland area and Illinois have been on my mind a lot recently. I fear we’re on the verge of some major upheaval stemming from decades of fiscal mismanagement by policymakers from both sides of the political aisle (some might think this blog only targets Democrats- over the years I’ve demonstrated everyone’s “fair game”). And by verge, I mean in the coming weeks. Focusing on Chicago today, what might kick it off (regular observers have witnessed the crisis growing for some time now)? I suspect the following. From the Chicago Tribune website back on July 31:

At a news conference this week, the mayor would not rule out a politically unpopular property tax hike, saying he’ll wait to show his hand until September, when he rolls out “a full budget with all parts in there.”

(Editor’s note: Bold added for emphasis)

A good portion of the coming pain is going to be felt by the Chicago taxpayer. What kind of “pain” am I talking about? That which I’ve been blogging about for a couple of years now- new/higher fees, fines, and taxes, coupled with reduced government services. Last night’s post about potential revenue generators Chicago Mayor Rahm Emanuel and the City Council are mulling over (hat tip Fran Spielman of the Chicago Sun-Times) should give Chicagoans a better picture of what’s headed their way (a property tax hike and garbage collection fee look likely). Concerning cutbacks in government services, I think that’s already begun. For example, the manpower shortage in the Chicago Police Department (hat tip Second City Cop) that’s existed for some years now. Down the road, I predict the average Chicago taxpayer will find it increasingly difficult to afford living in the city, let alone doing it safely as local government struggles to provide effective, efficient services to constituents.

Now, it’s bad enough Chicago/Cook County/Illinois are in real financial trouble. But then there’s the legitimate concern of a slowing economy/recession being right around the corner, never mind that coming financial crash I started blogging about back on Memorial Day Weekend 2007.

So what’s a Chicago taxpayer to do? This former Chicago resident picked up and left the city limits in 2013. Concerned about future tax and public safety liabilities, my girlfriend and I reluctantly departed our “suburb in the city” and moved into a house in a not-too-far away authentic suburb. Granted, we’ll still be on the hook for county and state problems, but it’s what makes sense for us in the short-term.

As much as I blast Chicago on Survival And Prosperity (“tough love”), I’m not convinced the city’s going to go “belly-up.” I think there’s a good chance it could be run by something similar to the Emergency Financial Control Board in New York City from 1975 until 1986 (talked about here back in April), but even a setback like that won’t be the end of the “City By The Lake,” just like it wasn’t for the “Big Apple.” I do predict city life is going to get real hairy once the “balloon goes up,” but I think that will be the case in a lot of urban areas nationwide.

That’s my two cents on Chicago’s financial crisis- for now. Chicago readers of this blog- what are you planning to do about the crisis? Or, what are you already doing? Maybe you don’t think a crisis exists? Please share your thoughts or experiences in the “Comments” section of this post, as I’d really like to talk more about this going forward.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

Source:

Dardick, Hal. “Emanuel needs $754M more to make ends meet.” Chicago Tribune. 31 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-chicago-budget-shortfall-met-0801-20150731-story.html). 21 Aug. 2015.

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Chicago Taxpayers To Be Hit With Property Tax Hike, Garbage Collection Fee?

Chicagoans- think all the recent talk of new/higher fees, fines, and taxes is garbage?

You’re right, in a way.

I just finished reading some material from Chicago Sun-Times City Hall reporter Fran Spielman over on that paper’s website.

Chicago taxpayers had better be prepared for their pocketbooks to take a hit in the coming months.

Spielman talked Sunday afternoon about the City’s need for $754 million in new revenue, and the options submitted by City Council to Mayor Rahm Emanuel to help “generate” it. That included:

• Property tax hike
• Garbage collection fee
• Ride-hailing companies (Uber) surcharge
• Congestion fee
• Bicycle license
• Gas tax hike
• Sales tax hike
• City income tax

Which ones stand a good chance of being put into play by City Hall? Spielman wrote:

Ald. Carrie Austin, outspoken chairman of the City Council’s Budget Committee, put Emanuel on the spot during the mayoral campaign when she called a post-election property tax hike inevitable. But she was right — especially now that a Circuit Court judge has overturned Emanuel’s plan to save two of four city employee pension funds.

The only question is, how much will property taxes be going up?

Emanuel has already offered to raise property taxes by $225 million for the Chicago Public Schools, provided teachers accept the equivalent of a 7 percent pay cut and the state reimburses CPS for “normal” pension costs…

(Editor’s note: Bold added for emphasis)

In a separate Sun-Times piece from last night, Spielman added:

Ald. Pat O’Connor (40th), Emanuel’s City Council floor leader, said it’s no longer an issue of whether Chicago will have a garbage-collection fee. The question is, how much?

“That’s where the real discussion will take place. It will be around the cost, rather than the enablement. We need to see the numbers that show how much we’ll save and how much it would generate,” he said…

(Editor’s note: Bold added for emphasis)

Property tax hike. Check. Garbage collection fee. Check.

Waiting to see what actually transpires. In the mean time, Chicago taxpayers might want to check out those Spielman articles to get a better idea of what might be in store for them shortly.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Spielman, Fran. “Property tax hike, garbage fee, congestion tax all on the table.” Chicago Sun-Times. 16 Aug. 2015. (http://chicago.suntimes.com/news/7/71/876236/chicago-budget-revenue-tax-ideas). 20 Aug. 2015.

Spielman, Fran. “Chicago homeowners likely to pay for garbage pickup soon.” Chicago Sun-Times. 19 Aug. 2015. (http://chicago.suntimes.com/news/7/71/891070/garbage-collection-fee-looks-likely-chicago-homeowners). 20 Aug. 2015.

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Exit Of Illinois Businesses Picking Up Steam?

Illinois companies are leaving the state for more business-friendly environments.

A tale I come across on a regular basis these days, despite all the sustained propaganda to the contrary.

Marissa Bailey reported on the CBS 2 (Chicago) website Monday regarding the situation of Chicago-based Hoist Liftruck, which just announced they’re departing for Indiana:

Gov. Rauner ran his campaign on what he could do to keep small businesses in Illinois. On Monday, he was begging small businesses to stay in the state.

CBS 2’s Marissa Bailey talked with a business owner who is leaving Illinois for a better deal.

Its 300 employees — most in a trade – work hard in a warehouse the size of two city blocks. But it’s the company’s home for only a few more months.

“I think if anyone looks at the numbers, they would make the same decision I did,” President and CEO Marty Flaska says.

He’s moving his company to East Chicago, Ind. early next year. Flaska says being a manufacturer in Illinois just got too hard. His biggest reasons involve the worker’s compensation system here, the cost of property taxes and lastly, he says, “the uncertainty about income tax in the state and where it may go.”

Flaska estimates that by moving he can save $6 million upfront and $2 million each additional year, thanks to property incentives, state grants and tax cuts in Indiana…

(Editor’s note: Bold added for emphasis)


“Chicago Business Bailing On Illinois”
CBS 2 Video

On the heels of that Hoist Liftruck announcement, Bob Adelmann added over at The New American magazine website:

On Thursday, Hoist Liftruck’s announcement that it was moving more than 500 manufacturing jobs to Indiana was just the latest in a long and almost fevered list of other companies seeking to escape Illinois’ outrageous workers compensation costs and high taxes.

On July 14 machine-maker DE-STA-CO said it was moving 100 jobs to Tennessee. The next day energy processor Bunge North America said it was shutting down its plant in Bradley, Illinois, and laying off 210 workers. The day after that General Mills pulled the plug on its manufacturing plant in West Chicago, terminating 500 workers.

A week later Mitsubishi Motors announced it was closing its production facilities that made its Outlander, ending 918 jobs there, even though there was the threat it would have to return some of the $9 million Illinois paid to get them to move there a few years ago.

Five days after that Mondelez (makers of Oreos and Chips Ahoy) said it was laying off 600 manufacturing jobs at its Chicago South Side facilities.

On August 12 Kraft Heinz, within weeks of their merger, announced its goal of saving $1.5 billion by the end of 2017. First to go were 700 jobs at Kraft’s Northfield facility. The very next day Motorola Mobility announced it was cutting its workforce in Chicago by 25 percent, eliminating another 500 jobs…

Adelmann also noted:

Chief Executive Magazine’s “2014 Best and Worst States for Business” report ranked Illinois 48th out of 50…

I dug up the most recent edition of that same report. The results of Chief Executive’s 11th annual survey have Illinois ranked again as the 48th “worst state for business” in 2015, following New York and absolute “worst state” California.

California, New York, and Illinois. What could those three possibly have in common that might account for such low marks?

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Bailey, Marissa. “For One Chicago Business, Illinois Became Too Inhospitable.” CBS 2. 17 Aug. 2015. (http://chicago.cbslocal.com/2015/08/17/for-one-chicago-business-illinois-became-too-inhospitable/). 18 Aug. 2015.

Adelmann, Bob. “Trickle of Companies Leaving Illinois Turning Into a Flood.” The New American. 14 Aug. 2015. (http://www.thenewamerican.com/economy/sectors/item/21405-trickle-of-companies-leaving-illinois-turning-into-a-flood). 18 Aug. 2015.

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Tuesday, August 18th, 2015 Business, Government, Income, Taxes No Comments

Chicago Public Schools Budget: Property Taxes Hiked To The Max

“Property tax hikes.” Something Chicagoans better get used to hearing in the coming years. Hal Dardick, Heather Gillers, and Juan Perez, Jr., reported on the Chicago Tribune website last night:

Chicago Public Schools unveiled a budget Monday meant to pressure Gov. Bruce Rauner and state lawmakers into providing nearly a half-billion dollars in pension relief, a gambit school officials warn will bring painful cuts if help doesn’t arrive by Jan. 1.

In addition to help from the state, the $5.7 billion operating budget relies on extensive borrowing, an influx of tens of millions in dollars in surpluses from special city taxing districts and an increase of the district’s property tax

To help patch over a budget gap the district said exceeds $1.1 billion, CPS will raise its property taxes to the maximum amount allowable — resulting in a $19 tax bill bump for the owner of a $250,000 home, the district said — while pushing $200 million in debt into the future…

(Editor’s note: Bold added for emphasis)

$19 here, a few bucks there, and pretty soon all these “bumps” start to add up, leading to mass frustration among Chicago taxpayers. And’s this particular increase isn’t a one-off either. From the Tribune piece:

And if Springfield does comes through — which is far from a sure thing — [Chicago schools chief Forrest] Claypool said the district would still need concessions from unions and larger tax hikes in years to come to keep up with the cost of ballooning pension payments…

(Editor’s note: Bold added for emphasis)

Like I said, “mass frustration.”

At what point does it all boil over?

Chicago taxpayers should probably read this article in its entirety to get a clearer picture of what looks to be in store for their pocketbooks in the near future and farther down the road. You can find the piece on the Tribune website here.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Chicago Requires $754 Million In New Revenue, Cuts To Balance Books

For a couple of years now, regular readers of Survival And Prosperity have witnessed me blog about higher fees/fines/taxes and reduced government services as Chicago’s financial reckoning day draws closer.

I fear the pace of all this is about to pick up.

Hal Dardick reported on the Chicago Tribune website late Friday afternoon:

Mayor Rahm Emanuel must come up with at least $754 million in new revenue and budget cuts to balance the city’s books, according to preliminary 2016 budget estimates the administration released Friday.

A little less than half — $328 million — would cover increased payments to the police and fire pension funds that Emanuel and aldermen did not account for in this year’s budget. That number could be even higher if the mayor doesn’t get the pension relief he’s seeking from Springfield.

In addition, City Hall must figure out how to close a projected $426 million hole in next year’s budget, an annual financial analysis showed. The shortfall comes as Emanuel has been borrowing at high interest rates to keep the city afloat.

Unlike previous years, Emanuel is not taking a property tax increase off the table. At a news conference this week, the mayor would not rule out a politically unpopular property tax hike, saying he’ll wait to show his hand until September, when he rolls out “a full budget with all parts in there.”

(Editor’s note: Bold added for emphasis)

Chicago property owners are probably hoping for an endless summer- considering what could be in store for them next month.

A significant property tax hike in and of itself might not be enough to make Chicagoans think about moving out of the city. However, sustained pressure on household finances from all applicable fees, fines, and taxes could do it, particularly if government services (public safety comes to mind here) steadily erode.

You can read the entire piece on the Tribune website here (registration required).

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Crain’s Chicago Business: Pension Reform Ruling Could Cost Taxpayers Extra $200 Million A Year Through End Of Decade

In my Sunday post about Chicago’s pension reform legislation being ruled unconstitutional, I blogged:

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

How many hundreds of millions are we talking about here?

Greg Hinz wrote in his blog on the Crain’s Chicago Business website Monday:

The court decision throwing out a deal to refinance two Chicago pension funds appears to be among the most costly in the city’s history, in some ways ranking right up there with the Great Chicago Fire.

Exact figures are not available and vary some depending on who’s doing the estimating. But based on statements by city officials and documents filed by the pension funds themselves, it’s likely that the decision by Cook County Circuit Court Judge Rita Novak will cost city taxpayers around $200 million a year through the end of the decade—and will keep rising for decades thereafter.

“You’d have to go back to either the Depression or the Great Fire to find a comparable situation in which the city faced either greater challenges or more painful decisions,” Civic Federation President Laurence Msall said. “It’s clearly going to result in increased taxes and reduced services.”

(Editor’s note: Bold added for emphasis)

Remember, that additional $200 million hit to Chicago taxpayers would come on top of addressing fire and police pensions. And bailing out the Chicago Public Schools, which had its credit rating reduced to junk status today by Fitch Ratings. In May, I noted Moody’s downgraded the Chicago Board of Education (the primary debt issuers of CPS) three notches to junk.

You can read Hinz’s entire blog post on the Crain’s Chicago Business website here. If I were still a Chicago resident, I’d probably find it disturbing. But at least I’d be clued in as to what could be coming down the line.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Judge Rules Chicago’s Pension Reform Legislation Unconstitutional

Here’s the latest on Chicago’s public pension crisis. Hal Dardick and Rick Pearson reported on the Chicago Tribune website last night:

Mayor Rahm Emanuel’s administration said it will appeal a Cook County judge’s decision Friday that ruled unconstitutional a state law reducing municipal worker pension benefits in exchange for a city guarantee to fix their underfunded retirement systems.

The 35-page ruling by Judge Rita Novak, slapping down the city’s arguments point by point, could have wide-ranging effects if upheld by the Illinois Supreme Court. Her decision appeared to also discredit efforts at the state and Cook County levels to try to curb pension benefits to rein in growing costs that threaten funding for government services.

The issue of underfunded pensions, and how to restore their financial health, is crucial for the city and its taxpayers. The city workers and laborers funds at issue in Friday’s ruling are more than $8 billion short of what’s needed to meet obligations — and are at risk of going broke within 13 years — after many years of low investment returns fueled by recession and inadequate funding.

Without reducing benefits paid to retired workers, or requiring current workers to pay more, taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation

(Editor’s note: Bold added for emphasis)

Chicagoans- let that last line from Dardick and Pearson sink in real good:

“Taxpayers could eventually be on the hook for hundreds of millions of dollars more in annual payments to those city funds — before the even worse-funded police and fire retirement accounts are factored into the taxing equation…”

And the City’s response to the ruling? Mayor Emanuel’s Press Office countered Friday:

Statement of City of Chicago Corporation Counsel Stephen Patton on SB1922

“While we are disappointed by the trial court’s ruling, we have always recognized that this matter will ultimately be resolved by the Illinois Supreme Court. We now look forward to having our arguments heard there. We continue to strongly believe that the City’s pension reform legislation, unlike the State legislation held unconstitutional this past spring, does not diminish or impair pension benefits, but rather preserves and protects them. This law not only rescues the municipal and laborer pension funds from certain insolvency, but ensures that, over time, they will be fully funded and the 61,000 affected City workers and retirees will receive the pensions they were promised.”

As to the City of Chicago’s credit rating possibly getting whacked after the decision? Timothy W. Martin reported on The Wall Street Journal website Friday afternoon:

Moody’s said Friday’s ruling had no effect on Chicago’s bond grade. But rival Standard & Poor’s Ratings Services, which currently has an investment-grade rating for the city, said that “regardless of the ultimate outcome” of Mr. Emanuel’s pension law, it “will likely lower” its Chicago rating in the next six months, unless city leaders chart out a solution to address its pension problems.

(Editor’s note: Bold added for emphasis)

Like I’ve been saying for a couple years now, that proverbial brick wall keeps approaching for Chicago.

Since City Hall can’t get its affairs in order, Chicagoans might want to look at straightening out theirs if they intend to stick around for the long haul.

Sources:

Dardick, Hal and Pearson, Rick. “Judge finds city’s changes to pension funds unconstitutional.” Chicago Tribune. 24 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-chicago-pension-ruling-met-20150724-story.html). 25 July 2015.

Martin, Timothy W. “Chicago’s Pension Overhaul Plan Tossed Out by Judge.” The Wall Street Journal. 24 July 2015. (http://www.wsj.com/articles/judge-rules-2014-law-to-reduce-chicago-pension-shortfall-unconstitutional-1437754525). 25 July 2015.

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Downtown Chicago Diners Could See 11.25 Percent Sales Tax In 2016

Back on July 16, I noted the total sales tax rate in Chicago and the rest of Cook County looks to rise to 10.25 percent again in the coming year, making it one of the highest rates in the nation.

But diners of certain downtown Chicago eateries could be hit by an even higher sales tax rate. Pointing out an additional sales tax (“McPier tax”) downtown that tacks on an additional 1 percent to food/beverage bills, Lauren Choolijian reported on the WBEZ 91.5 website yesterday:

For restaurant patrons that dine south of Diversey Parkway, north of the Stevenson Expressway, east of Ashland Avenue and west of Lake Michigan, the Cook County proposal means an 11.25 percent sales tax will be added to their tab in 2016. The McPier tax affects all food and beverage purchases prepared for “immediate consumption,” and that includes soft drinks and alcoholic beverages…

(Editor’s note: Bold added for emphasis)

Actual and proposed fee, fine, and tax increases are making the headlines quite often these days in the Chicago area. If my suspicions prove correct (these hikes are just the first of many due to steadily eroding financial conditions), Chicagoland residents, workers, and prospective visitors will increasingly seek alternatives (for example, dining out closer to home as it concerns the above), local government revenue collection will plummet, and public services will continue to be scaled back.

Anyway, check out Choolijian’s piece on the WBEZ site here for the full details of the 11.25 percent sales tax hit.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Wednesday, July 22nd, 2015 Fiscal Policy, Government, Taxes, Tourism No Comments

Crain’s Chicago Business: City’s Rising Fees, Fines, And Taxes Look To Continue

Chicago readers of Survival And Prosperity might want to read two articles that recently appeared on the Crain’s Chicago Business website concerning rising fees, fines, and taxes in the city. In a piece entitled “Chicago’s expanding appetite for new taxes,” Thomas A. Corfman wrote Saturday:

While Mayor Rahm Emanuel has held the line on property taxes, revenue from other local taxes has climbed nearly 20 percent since he took office.

A strengthening economy explains much of the surge. But Emanuel has fueled the growth by raising taxes on things such as cable TV and parking…

Keep in mind that “line on property taxes” may soon be breached. Significantly. Corfman added:

While property tax revenue has fluctuated slightly since 2011 after accounting for new construction, that’s likely to end soon. The badly undercapitalized police and firefighter pension funds are supposed to receive a state-mandated $550 million payment next year. Property taxes will likely account for the bulk of the increase, says Ald. Roderick Sawyer of the South Side’s 6th Ward

(Editor’s note: Bold added for emphasis)

This comes on the heels of another Corfman article entitled, “How much could Chicago pension payments jack up your property bill? Try 30%”. He wrote on July 4:

Even as Mayor Rahm Emanuel warns about a property tax hike of up to $250 million for the cash-strapped Chicago Public Schools, another big wave of increases likely is coming to rescue the pensions of police officers and firefighters.

A massive payment due to those retirement plans next year could drive up Chicago property taxes by more than 30 percent, according to a Crain’s analysis. And if the current logjam in Springfield continues, it could be a lot worse

(Editor’s note: Bold added for emphasis)

As I wouldn’t steal Crain’s thunder, you can read Corfman’s July 18 article here and his July 4 piece here.

And as always, my intention is not to scare Chicago residents/businesses by blogging about such material. Rather, as a former Chicagoan this is something I feel my former neighbors should be made aware of, especially if they plan on staying in the “Windy City.”

Got to figure out some way to keep ahead of those rising fees, fines, and taxes and eroding public services.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Gold Taxation Issues

I have a feeling that a number of Survival And Prosperity readers either own gold or might be thinking about acquiring the precious metal in the future.

Tonight, I happened to come across an article on MarketWatch.com entitled “The tax implications of owning gold.” Bill Bischoff wrote yesterday:

In this environment, the idea of investing some taxable money in gold and other precious metal assets could be appealing. But read this to make sure you understand the tax angles…

It’s an insightful read. For example, I thought the sale of physical gold (both bullion and collectible) was subject to the maximum federal income tax rate of 28 percent- at a minimum. However, Bischoff explained:

Here’s how the 28% maximum rate deal works. If you are in the 28%, 33%, 35%, or 39.6% federal income tax bracket, net long-term gains from collectibles, including precious metal assets, are taxed at 28%. However, higher-income folks may also owe the dreaded 3.8% net investment income tax. If so, the maximum effective federal rate on long-term gains from precious metals can be 43.4% (39.6% + 3.8%).

If you are in the 10%, 15%, or 25% bracket, your net long-term gains from collectibles, including precious metal assets, are taxed at your regular rate of 10%, 15%, or 25%. In these brackets, you don’t have to worry about owing the 3.8% net investment income tax…

Interesting. You can read the entire piece over on the MarketWatch website here.

Just remember to consult a competent tax professional regarding such matters rather than relying on something you read on the Internet.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

(Editor’s note: I am not responsible for any personal liability, loss, or risk incurred as a consequence of the use and application, either directly or indirectly, of any information presented herein)

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Size Of Cook County Sales Tax Hike Necessary?

No surprise here. Hal Dardick reported on the Chicago Tribune website yesterday:

Cook County Board President Toni Preckwinkle persuaded just enough commissioners to approve a 1-percentage-point sales tax increase Wednesday — the culmination of a major political about-face, but a move she said was needed to bail out the county worker pension system.

Following weeks of one-on-one lobbying sessions by Preckwinkle, nine of the 17 commissioners voted to raise the county share of the sales tax to 1.75 percent. Add up the state, city and public transit portions, and the total sales tax rate in Chicago once again will hit 10.25 percent — one of the highest rates in the nation

Preckwinkle first rose to power in 2010 on a campaign pledge of repealing what remained of an identical sales tax increase under predecessor Todd Stroger…

(Editor’s note: Bold added for emphasis)

Opponents of the sales tax hike claim the County didn’t perform enough belt-tightening before approving the measure. County Commissioner Bridget Gainer (10th District) penned on the Tribune website on July 1:

Don’t get me wrong, the county has a serious budget and pension cost gap, predicted to be $479 million. The proposed 1 percentage point increase in the sales tax would raise some $474 million annually.

But $130 million of the deficit goes away with pension reform. An additional $50 million in savings has already been identified by the budget staff. Yet another $50 million is in reach if we are finally willing to consolidate our redundant taxing bodies and duplicative services…

(Editor’s note: Bold added for emphasis)

Back on December 5, 2013, I pointed out Illinois has the most units of local government of any state in the country at 6,963 local governments (U.S. Census Bureau).

It’s been reported Cook County is home to 1,300 of these taxing agencies alone.

The sales tax hike goes into effect starting January 1, 2016.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Dardick, Hal. “Cook County Board votes to raise sales tax.” Chicago Tribune. 15 July 2015. (http://www.chicagotribune.com/news/local/politics/ct-cook-county-sales-tax-increase-met-0716-20150715-story.html#page=1). 16 July 2015.

Gainer, Bridget. “Commentary: Cook County Commissioner Bridget Gainer: I won’t vote for a sales tax hike.” Chicago Tribune. 1 July 2015. (http://www.chicagotribune.com/news/opinion/commentary/ct-cook-county-tax-preckwinkle-gainer-perspec-0702-jm-20150701-story.html). 16 July 2015.

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Chicago Board Of Education Could Borrow More Than $1 Billion With $600 Million-Plus Pension Payment Due Next Week

I fear Chicago’s celebratory mood post-Stanley Cup could be fast disappearing as the city’s financial reckoning day rapidly approaches. Juan Perez, Jr., reported on the Chicago Tribune website tonight:

The Chicago Board of Education on Wednesday approved plans to borrow more than $1 billion in an effort to manage an immediate cash crunch and get through the coming budget year.

The borrowing is on top of an existing line of credit of up to $500 million. The initial $200 million in borrowing authorized Wednesday could help the district cover its bills through the end of June, but the district would be short of cash to cover payments shortly after that, according to documents obtained by the Tribune.

A separate line of credit of up to $935 million would take the district through the coming budget year. The loans will be secured with the promise of future property tax revenue.

The board’s unanimous 5-0 vote in favor additional borrowing came one day after the Illinois House fell 18 votes short of approving a three-week extension on a $600 million-plus pension payment due next week

(Editor’s note: Bold added for emphasis)

Democrats have a supermajority in both chambers of the Illinois General Assembly, and “Machine”-controlled Chicago still couldn’t get that pension payment deadline extended.

Oh well. Long-time Survival And Prosperity readers shouldn’t be the least bit surprised about the latest bad news concerning Chicago’s public schools. I blogged way back on September 13, 2012:

By now, many of you have probably heard about the teachers strike going on in Chicago. Day 4 and counting. While many Chicago public school teachers are probably worth every red cent of the $71,017 median salary they command- and more- when all things are considered, considering the precarious financial situation of the Chicago Public Schools, a larger crisis looks to be right around the corner.

Looks like we’re almost there.

Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Perez, Juan. “Chicago school board approves more than $1 billion in new borrowing.” Chicago Tribune. 24 June 2015. (http://www.chicagotribune.com/news/local/breaking/ct-school-board-meets-met-0625-20150624-story.html). 24 June 2015.

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Christopher E. Hill, Editor
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