CHICAGO (Reuters) - Chicago would raise a monthly emergency service surcharge on phone lines to free up $50 million in operating funds to increase its payments to two city pension funds under a proposed ordinance introduced on Wednesday.
Mayor Rahm Emanuel and 36 city council members backed the ordinance, which would increase the current surcharge, generating an additional estimated $12 million this year and $40 million next year. The measure would allow Chicago to avoid a hike in property taxes, which are largely used to fund the city’s four retirement systems.
“This revenue will support (the Office of Emergency Management and Communications) and fund a vital emergency service for residents, while allowing the corporate fund to end its subsidy of the 911 center and instead make the additional $50 million payment required for the first year under the reform plan for the Municipal Employees and Laborers pension funds,” a statement from the mayor’s office said.
The Illinois Legislature earlier this year approved the higher surcharge, as well as reforms requiring the city and workers to increase pension contributions to the two retirement funds. The law, which also ties cost-of-living adjustments for pensions to inflation while skipping the adjustments in certain years, lets Chicago decide how to raise money for the increased pension payments.
Emanuel’s office has warned that the municipal and laborers’ systems face insolvency within nine to 17 years unless changes are made. The funding shortfall is $8.4 billion for the municipal system and $1 billion for the laborers system, according to city documents.
Severe pension funding problems has led Moody’s Investors Service to cut Chicago’s credit rating four notches to Baa1 since July 2013.
Reporting by Karen Pierog; Editing by Eric Walsh