Chicago council passes Emanuel budget with property tax hike

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CHICAGO (AP) -- Chicago's City Council easily approved a budget plan Wednesday that includes a massive property tax hike and other fees to help close a shortfall and improve the city's underfunded pension system, votes many aldermen called the most difficult of their political careers.

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Mayor Rahm Emanuel proposed an incremental $543 million property tax increase for police and fire pensions, along with a separate $45 million property tax hike for school construction, a $9.50 monthly household garbage pickup charge and other fees. The former White House chief of staff said the measures were necessary to restore the city's financial health.

While much of the debate before Wednesday's 36-14 vote on the $7.8 billion budget was supportive, many aldermen said the consideration of it and connected revenue measures was a last resort.

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Chicago council passes Emanuel budget with property tax hike
Mayor Rahm Emanuel outlines his 2016 proposed budget before the City Council, Tuesday, Sept. 22, 2015, in Chicago. In his speech Emanuel called for a phased-in $543 million property tax increase, along with $45 million more for schools. He also called for other fees, including for garbage collection and ride-sharing services. (AP Photo/M. Spencer Green)
Mayor Rahm Emanuel, center, shakes hands in Council chambers before outlining his 2016 proposed budget to the City Council Tuesday, Sept. 22, 2015, in Chicago. In his speech Emanuel called for a phased-in $543 million property tax increase, along with $45 million more for schools. He also called for other fees, including for garbage collection and ride-sharing services. (AP Photo/M. Spencer Green)
Mayor Rahm Emanuel outlines his 2016 proposed budget before the City Council, Tuesday, Sept. 22, 2015, in Chicago. In his speech Emanuel called for a phased-in $543 million property tax increase, along with $45 million more for schools. He also called for other fees, including for garbage collection and ride-sharing services. (AP Photo/M. Spencer Green)
A copy of Mayor Rahm Emanuel's 2016 proposed budget is displayed on a table at city hall Tuesday, Sept. 22, 2015, in Chicago. In a speech before the City Council, Emanuel called for a phased-in $543 million property tax increase, along with $45 million more for schools. He also called for other fees, including for garbage collection and ride-sharing services. (AP Photo/M. Spencer Green)
In this Monday, Sept. 14, 2015 photo, James Young stands outside his home in the Auburn Gresham neighborhood of Chicago. After watching for years as their cityâs financial troubles piled up, Young and other Chicago homeowners will be told this week that itâs time for them to start paying the tab. Mayor Rahm Emanuel is expected to propose a large increase in property taxes on Tuesday, Sept. 22, 2015, to help eliminate billions of dollars in pension and other municipal debt and repair the school systemâs low credit rating.(AP Photo/M. Spencer Green)
FILE - In this July 1, 2015 file photo, Chicago Mayor Rahm Emanuel speaks at a news conference in Chicago. After watching for years as their cityâs financial troubles piled up, Chicago homeowners will be told this week that itâs time for them to start paying the tab. Mayor Emanuel is expected to propose a large increase in property taxes on Tuesday, Sept. 22, 2015, to help eliminate billions of dollars in pension and other municipal debt and repair the school systemâs low credit rating. (AP Photo/Christian K. Lee, File)
CHICAGO, IL - SEPTEMBER 21: A home is offered for sale in the Bucktown neighborhood on September 21, 2015 in Chicago, Illinois. Sales of previously owned homes fell more than expected nationwide in August following three months of gains. The slump has been attributed to lack of inventory and rising home prices. (Photo by Scott Olson/Getty Images)
CHICAGO, IL - SEPTEMBER 17: Traders in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) wait for the Federal Reserve's decision on interest rates on September 17, 2015 in Chicago, Illinois. Citing global economic concerns, the Fed chose to leave interest rates unchanged. The news was met with a round of boos in the pit. The Fed is still expected to raise rates later this year. (Photo by Scott Olson/Getty Images)
CHICAGO, IL - SEPTEMBER 17: A traders monitors activity in the Standard & Poor's 500 stock index options pit at the Chicago Board Options Exchange (CBOE) following news that the Federal Reserve, citing global economic concerns, chose to leave interest rates unchanged on September 17, 2015 in Chicago, Illinois. The Fed is still expected to raise rates later this year. (Photo by Scott Olson/Getty Images)
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"None of this is easy," said South Side Alderwoman Carrie Austin who voted in favor. "Absolutely none of it."

Chicago has the worst-funded pension system of any major American city, along with a school system that drowning in debt that credit rating agencies have rated at "junk" status. The problems have worsened over the years the city didn't contribute enough to pension funds and continued questionable borrowing tactics, some of which continued into Emanuel's tenure.

Emanuel, who won a second term this year after a tense campaign, said public finances hung over the city "like a dark cloud."

"Those finances were beginning to erode people's confidence in this city," he told aldermen before the votes.

He tried to make the property tax increase, which takes effect over four years, more palatable by pitching a relief plan targeted toward those whose homes are worth $250,000 or less. He said most of the burden of the increase would fall on the city's downtown business core.

Emanuel has pushed to double a homeowners' exemption from $7,000 to $14,000, or the amount cut from the home's assessed value before taxes are calculated. The idea is to ease or erase the tax hike's impact.

The proposal needs state legislative approval and Republican Gov. Bruce Rauner has been cool to the idea. Business groups and a renters' association have testified at the Capitol against the exemption, saying the property tax hike would get passed on to consumers. As a backup, Emanuel's office has also pitched a home rebate program similar to years past, which would give homeowners reimbursement checks.

Still, most aldermen said raising property taxes was painful.

Alderman Anthony Napolitano, who is a firefighter and northwest side alderman, said he'd rather have been in a burning basement than take up such a controversial idea. Others questioned if Emanuel's administration had made enough efforts to cut spending and if the monthly garbage fee - a first for city homeowners - was necessary.

SEE MORE: Fed keeps rates unchanged, sets up possible December hike

Alderman Jason Ervin, whose West Side ward includes impoverished areas, called it "regressive fee that burdens our poor residents the most" even with a cap until 2019. In a fiery speech, he said considering that none of the relief plans were a done deal, he couldn't vote in favor.

"I will not send my folks off the cliff," he said.

For the owner of a home worth $250,000, the annual property tax bill will be roughly $550 more. Over four years, a homeowner's property tax bill could equal 13 percent more.

Chicago saw property taxes rise in 2008, but the last major increase was in 1987.

Over the course of budget negotiations, Emanuel dropped a plan to privatize the city's 311 information and service line. The budget approach also impacts ride-sharing services, allowing companies such as Uber to make pickups at the city's airports. In return, those companies will pay more, including a 2 cent per ride charge expected to generate up to $2 million a year.

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