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Emanuel's Water Tax Plan Clears First Hurdle With Finance Committee Approval

CHICAGO (CBS) -- A City Council committee has signed off on Mayor Rahm Emanuel's plan to raise water and sewer taxes to help shore up the city's largest employee pension fund.

After a three-hour meeting at City Hall, the Finance Committee voted 26-6 in favor of the mayor's plan to raise water and sewer taxes by nearly 30 percent over the next four years. The mayor's office has said the tax hike would add about $230 million a year in new revenue for the Municipal Employees Pension Fund, the largest of the four employee pension funds managed by the city.

The mayor's plan would raise the water and sewer tax for the average homeowner to $53 a year in 2017. The tax would jump to $115 in 2018, $180 by 2019, and $225 by 2020.

Business that use a lot of water will be hit hard. Laundromat owners said there is no good spin.

"It's a tax that's going to have to be passed on to our clients," said Paul Hansen, Illinois Coin Laundry Association.

Those clients, are the ones who can least afford it, such as, low-income African Americans and Hispanics, laundromat owners said.

"It's very difficult for me to comprehend because to me this is a tax on the poor," said Kurt Cargle, African American Laundry Association.

He also said it is a health issue, as "clean clothes are a necessity."

"Since they messed up now we got to pay for it," Cargle said. "I don't think so I don't appreciate it."

The city budget director isn't ruling out an exemption.

"We understand their concern," said Alex Holt, Budget Director. "We need to see what the facts are around the usage and what the impact would be on laundromats."

City officials confirm the tax won't shore up the pension fund for good. More money will be needed in the future.

"We don't budget 50 years out but what we have done," said Carol Brown, Cheif Financial Officer. "Just put this fund on a path to solvency."

The 26-6 vote virtually assures passage by the full City Council next week, and it did not come without some serious questions from aldermen.

Ald. Scott Waguespack (32nd), a frequent critic of the Emanuel administration, said what bothers him is while the revenue from the tax seems to shore up the city's largest employee pension fund for five years, there's a gap in year six.

Emanuel aides acknowledged more money will be needed in the future.

Waguespack said it was also upsetting aldermen did not receive the numbers behind the tax plan until less than a day before they were asked to vote on it.

"I think that's the concern here is that they're just trying to rush something through without taking a serious look at it, and this is a far too serious issue to wait until 3 o'clock the day before to hand out," he said.

Despite the overwhelming vote in favor of the plan, aldermen clearly were gritting their teeth in approving another tax increase for Chicago residents, a year after approving a record $588 million property tax hike to help fund police and fire pensions.

However, aldermen had not offered many other options for coming up with the funding needed to keep the municipal employees' pension fund solvent.

Emanuel has shot down many other possible tax hikes, including a graduated state income tax or a new commuter tax on suburban residents who work in Chicago; both of which would require approval of the Illinois General Assembly, where partisan gridlock has left lawmakers unable to agree on their own budget or pension reform. The mayor also shot down suggestions of another property tax hike or a sales tax increase.

"We have the highest sales tax in the United States of America. I don't think raising the sales tax higher than it is is the right way," he said last month when he introduced the plan. "In the end of the day, I went through taking property taxes off the table, taking neighborhood basic services off the table, not allowing Springfield to be the determiner."

The mayor said the water and sewer tax would be the fairest way to shore up the Municipal Employees Pension Fund.

Budget Director Alex Holt said the goal is to shore up the municipal employees' fund.

"The approach that we've really been focused on is to try to get these all four funds on a path to solvency, and what that means is a couple things. One, it means identifying additional sustainable revenues that are primarily focused on getting us through a five-year ramp-up period to get us to ARC [annual required contribution] funding," Holt told aldermen.

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