CHICAGO, Sept 8 (Reuters) - Chicago Mayor Rahm Emanuel’s proposal to tax water and sewer usage to save a city pension fund from insolvency passed a key city council committee on Thursday despite concerns that revenue will fall short.
The 26-6 vote by the finance committee sends the plan to the full city council, which meets Sept. 14.
The tax would raise an estimated $240 million a year once it is fully phased in over five years, helping Chicago gradually increase contributions to its municipal retirement system, which is projected to run out of cash within 10 years.
But some aldermen complained that even with adding the new tax money to existing revenue earmarked for Chicago’s biggest pension fund, the city would need another $300 million for its 2023 payment. Under the mayor’s plan, an actuarially required funding level would be reached in 2023, when the payment would spike to nearly $879 million from $577 million in 2022, according to city documents. The aim of the plan is to bring the retirement system’s funded level to 90 percent in 2057.
While Chicago has already authorized a phased-in $543 million property tax for its police and fire retirement systems and a telephone surcharge increase for its laborers’ pension fund, city officials acknowledged that more revenue will be required down the line.
“There will need to be increased payments and increased sources to make those payments,” said Chicago Budget Director Alexandra Holt.
Credit ratings for the nation’s third-largest city have tumbled into the low investment grade to junk levels due largely to an unfunded pension liability that stood at $33.8 billion at the end of fiscal 2015 for the four retirement systems.
Fitch Ratings last week revised the outlook on Chicago’s BBB-minus rating to stable from negative, based on the city’s plan to materially increase pension funding.
Reporting by Karen Pierog; Editing by Matthew Lewis