5-Sep-16 – The “tax tsunami” that is hitting Chicago property owners and renters is not only about the rising real estate taxes and new utility tax on water, sewer, and garbage collection. It really is about the massive, newly approved $5.4 billion Chicago Board of Education budget that relies on a trio of new real estate tax hikes that will come like waves of a tsunami.

So look out, Chicago is about to be consumed by the coming waves.

For more than two decades Chicago Public Schools plans to boost its regular property tax levy to the maximum amount allowed by law. CPS also will collect on a capital improvement property tax enacted last year to finance borrowing for infrastructure projects.

However, the biggest chunk of cash will come from a new property tax boost expected to generate $250 million to help cover CPS’s massive teacher pension obligations.

Experts say the total property tax increase will cost the owner of a $250,000 home an extra $245 per year. For the North Side, where many homes are valued at more than $500,000, that translates into an annual tax increase of nearly $500.

On August 24, the school board appointed by Mayor Rahm Emanuel also voted unanimously to authorize taking out a $1.5 billion credit line to help CPS to pay its bills this year. It also approved up to $945 million in borrowing for unspecified Chicago Board of Education construction projects.

(Right) Mayor Emanuel reads to children in this 2013 photo by Brooke Collins.

The $338 million capital budget includes spending $27 million to install air conditioners at 61 CPS-operated and charter schools. Another $57 million is earmarked for internet upgrades and other technology projects, including new security cameras and metal detectors.

Chicago homeowners’ tax bills already have risen an average of 12.8 percent this year. However, the 2015 tax hikes that were due on August 1 ranged from 25 to 50 percent or more in the Gold Coast, River North, Lincoln Park, Old Town, and “hot” neighborhoods such as Bucktown, Logan Square, and Wicker Park.

Mayor Emanuel says the city needs to raise $588 million in new revenue to pay for pensions of teachers, police, and firefighters.

The Chicago property tax wallop comes at a time when Illinois already is posting the highest median property tax rate in the nation, not to mention the highest sales tax rate in America.

And don’t forget the new utility tax coming next year

As if the real estate tax bite for schools were not enough, property owners already are burdened with a new $239 million utility tax on water and sewer bills, starting with a seven percent tax in 2017.

The proposed utility tax would jump to 14 percent in 2018 and rise to 21 percent in 2019. It would top out at 28 percent in 2020-2021. However, Chicago’s 66,000 senior citizens who live in single-family homes would be exempt from the new tax.

These dramatic tax increases are coming so fast and furious that they would make Chicago Outfit loan sharks blush. Why, it’s almost as if we have all been enrolled in the New Tax of the Month Club. (Left) Jake “Greasy Thumb” Guzik (1886-1956), financial and legal advisor for the Chicago Outfit.

Mayor Emanuel is lobbying Chicago aldermen for passage of the new water-sewer surcharge, which can be enacted by the City Council in mid-September under the city’s sweeping home rule power. It does not require approval from the Illinois Legislature or voters.

With an annual use of 7,500 gallons of water, the average Chicago household currently pays $686 a year for water and sewer services. The new utility tax is expected to cost the average homeowner $4.43 more a month, or $53.16 a year in 2017. In the fourth and fifth years, the added tax burden is expected to grow to about $226 a year.

Earlier this spring Mayor Emanuel also launched the city’s new “garbage fees” program. Single-family homeowners now pay a new garbage fee of $19 every other month, or a total of $114 a year. Small rental property owners also pay $19 every other month for each unit in their buildings.

So, the garbage fee for the owner of a four-unit building is $76 every other month, or $9.50 per dwelling unit. The four-flat owner is billed a total of $456 per year for garbage. Garbage fees now are included in the city’s first unified utility bill, which reflects two months of water, sewer, and garbage charges.

If the new seven percent utility tax is enacted, the owner of a four-flat will pay an additional $23 every other month in 2017 or $137 more for the year. In 2018, the annual utility tax would jump to $294 based on the 14 percent surcharge. In 2019, at the 21 percent tax rate, the annual utility tax bill would rise to $412. In 2020 and 2021, at the 28 percent tax rate, the annual utility tax increase tops off at $549.

All these tax increases assume the rate of inflation stays the same and there are no more budget surprises to spring on bewildered and battered Chicagoans. Starting on June 1, annual water rates can be adjusted upwards, based on the previous year’s rate of inflation. However, any such annual increase in the water rate is capped at 105 percent of the previous year’s rate. Of course, with the tsunami rolling over us you can always just get a few buckets and haul your own water just like they do in other third world societies, and bypass the city’s purse snatchers.