Chicago Mayor Rahm Emanuel unveiled a plan on Wednesday that he called “an honest approach” to save the city’s biggest retirement system from insolvency with a water and sewer tax to be phased in over five years starting in 2017.
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To rebound to investment grade, Moody’s wants Chicago to reverse the trajectory of its pension problem. The city would use the additional revenue to replenish the city worker pension fund predicted to run out of money by 2025. That $4.43 average cost per month would go up each year.
To help save one of the city’s underfunded pension plan, Mayor Emanuel is proposing a water tax on city residents. Anders Lindall, a spokesman for the American Federation of State, County and Municipal Employees Council 31, said the plan is under review.
Another property tax hike?
The 7 percent water tax hike would cover the next five years. Chicago then needs the IL state legislature to approve a five-year phase-in of the city’s contribution to the pension system to boost the funded level to 90% by 2057 from the current 32.9%.
The deal also increases pension contributions by 3 percent for employees hired beginning next year, but they’ll also have their age of eligibility lowered from 67 to 65. That accord still needs state approval. “Everyone also agrees that city workers have faithfully paid their portion of the pension and they should not be vilified for receiving the pensions that will be their only source of retirement income”.
After four years, the proposal would amount to a 30 percent tax on water and sewer bills, or $2.51 for every 1,000 gallons of water used, the Emanuel administration said. “Probably not. Until you meaningfully reduce the rate of growth in benefits, this is going to be a material credit concern for many years to come”.
As the City increases contributions to the MEABF, the agreement provides real and sustainable changes to pension benefits to protect taxpayers and put the MEABF on a path to solvency.
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