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Alternatives to cuts

With Mayor Emanuel’s budget proposal expected to emphasize austerity with heavy cuts to city services, proposals to bolster revenues — and ensure that sacrifice is truly shared — are gaining traction.

“We’re afraid [the budget] is going to be heavy, heavy, heavy on cuts” including public safety and other city services, with the main impact “on working families and public sector workers,” said Amisha Patel of the Grassroots Collaborative, which is holding a “corporate welfare tour” Wednesday morning (see below).

The group’s initiative to return hundreds of millions of TIF funds to the city and other taxing bodies has the most momentum right now.  Seventeen aldermen cosponsored the Responsible Budget Ordinance – which would return 50 percent of surplus TIF dollars from all TIFs with balances over $5 million – and more have signed on since it was introduced last week.

Though the city hasn’t provided current figures, the measure could provide as much as $500 million to the city, schools, and other agencies, Patel said.  The bulk of the surplus is in 16 downtown TIFs, where subsidies have gone to highly profitable corporations, she said.

‘High-rent’ areas

Those are the “high-rent” areas where Emanuel said TIFs are inappropriate during his campaign.  His TIF reform panel, however, recommended criteria that would allow them to remain in place.  (It also recommended reviewing TIFs with the option of declaring a surplus.)

Emanuel has opposed using TIF surpluses, but he may be “coming around,” the Sun Times notes in an editorial backing the measure.

He should.  The reason he’s given – he’s against “one-time budget fixes” – doesn’t really apply.

It resonated with voters who’ve seen parking meter and Skyway privatization funds squandered.  But TIF accumulations are a different animal – taxpayer money sitting unused in a mayoral slush fund, to be handed out to politically favored developers and corporations.

Declaring a surplus would be sweeping the slate clean, a first step toward reform – and the TIFs will go on to accumulate new funds, taking in $500 million every year.

It’s a smart response to the recession, which is a big reason city revenues are down.  Freeing up the funds would also act as a stimulus to the city’s economy; heavy job cuts will add to the downward spiral of unemployment, foreclosures, disinvestment and destabilization.

Grassroots Collaborative will hold a press conference with supporters of the Responsible Budget Ordinance at City Hall on Wednesday morning (October 12, 9 a.m.) followed by a trolley tour of downtown corporations that have gotten TIF subsidies, including the Chicago Board of Trade, Miller Coors, the Willis Tower, and United Airlines.

Taxing traders

The campaign for a financial transaction tax got renewed impetus last week with a specific proposal from Stand Up Chicago and the Chicago Political Economy Group spelling out just how it would work here.

It would cover contracts sold on the Chicago Mercantile Exchange and Chicago Options Exchange, though the exchanges wouldn’t pay the fee.  Buyers and sellers would pay 25 cents per contract – a trivial amount on an average contract of $233,000, but with 12 million contracts a day, it would add up to $1.4 billion a year.

As we noted Friday, Bill Gates and, at one point, President Obama are among many prominent supporters of the concept; the New York Times just urged consideration of a national transaction fee.  In Chicago, 25 aldermen backed a related proposal last year.

Since Emanuel is a former CME board member, this could be his “Nixon goes to China” moment.  If not, it’s likely that support for the measure will grow, as discontent over corporate profiteering rises.

Commuters

Meanwhile there’s another huge pot of money that goes untouched.  As Inspector General Joe Ferguson noted in his report on budget options, there are 620,000 commuters earning a living in Chicago but paying their taxes elsewhere.  He estimates their earnings at $30 billion a year, based on the area median, but it’s likely much more, since they include many of the highest earners, economists say.

In a study done years ago, UIC economist Joseph Persky says he found that more than half of all earnings in the city went to suburban residents.  “I don’t see any reason that would have changed,” he said.

Indeed, the imbalance could well have increased – particularly because downtown development spurred by TIF seems to have benefited suburbanites far more than city residents, as the Chicago Reporter revealed earlier this year.

According to data supplied by the Reporter (thanks to Angela Caputo), residents of the collar counties held 23,824 more Loop jobs in 2008 than in 2002, while Chicago residents lost 21,057 Loop jobs in the same period.  (Suburban Cook residents lost about 1,900 Loop jobs.)

Nonresidents making a living in Chicago take advantage of all the city’s services and infrastructure; they just don’t pay for it.

One possibility for capturing a portion of that wealth is a commuter tax – an income tax on nonresidents working in the city.  Philadelphia and other cities have one, and New York City had one for two decades, before the state legislature abolished it in a bid for suburban votes.  (Mayor Michael Bloomburg has been pressing for its reinstatement.)

Ferguson estimates a 1 percent tax would generate at least $300 million; it could well be much more.  Several City Council members have spoken favorably of the idea, but politically it’s a tough climb, requiring approval from the state legislature.

Congestion pricing – a charge on vehicles entering the central district during business hours — would capture some of the revenue now being lost from out-of-towners, suggests Ron Baiman of CPEG.  The City Council could enact it.

The Center for Neighborhood Technology supports such a charge, said Maria Choca-Urban, the group’s director for transportation.   It would reduce congestion and auto emissions, she said – but revenue should be used to improve public transportation.  “If you’re going to put in place a deterrent to driving, you have to improve the alternatives,” she said.

With the CTA facing billions in unmet capital needs – and major portions of the city (notably the Far South Side) still unserved by rapid transit – there’s plenty of room for improvement, and those investments would mean badly-needed jobs.

[The Active Transportation Alliance points out that CTA service cuts and fare increases are expected in the forthcoming budget.  “Unfortunately, the threat of fare increases and service cuts have become an annual tradition in our region because our elected leaders have failed to adequately fund transit,” the group comments. “The consequences of service cuts and fare increases would be far-reaching, impacting our mobility, our economy, our quality of life, our environment and the congestion on our streets.”]

Ferguson envisions a complex collection system requiring electronic tolling sensors on every street leading downtown and transponders in every car.

London has a somewhat simpler system; commuters buy permits at shops, and a system of cameras identifies vehicles entering without paying.  Buses, cabs, and delivery vehicles are exempted, and residents of the central area can get a 90 percent discount on the charge.  In 2006, London’s congestion charge brought in nearly $400 million.

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Category: city budget, taxes, TIF, transportation

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One Response

  1. […] the majority of income earned in the city goes to people who pay taxes in the suburbs – an estimated 620,000 commuters earn $30 billion a year. Emanuel is phasing out the corporate head tax, a modest per-employee […]


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