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Chicago businesses brace for potential doubling of property taxes

CHICAGO (Reuters) – Chicago Mayor Rahm Emanuel has disclosed that his record property tax hike plan entails significant cuts for nearly 300,000 homeowners, leaving Chicago businesses predicting they will face hikes of up to 50 percent.

The second-term mayor last week proposed a $544 million property tax increase, the city’s biggest ever, to help fix one of the worst-funded city pension systems in America and vowed “struggling” homeowners, whose residences are worth $250,000 or less, would not see an increase.

But details from the mayor’s office on Wednesday showed Emanuel’s definition of “struggling” extends far beyond Chicago’s famed bungalow belt to include nearly 290,000 homes. For the first time, the mayor’s office is saying those homeowners actually would profit from his dramatic city-wide tax increase plan.

A new analysis Emanuel’s administration circulated among city aldermen predicted that homeowners living in properties valued at $250,000 or less would experience “little or no increase” from the tax hike and that “most” would see their taxes drop.

The owner of such a home would see their tax bill drop by $140, or 3 percent, with the tax cut rising as home values drop. By contrast, the owner of a $500,000 home would see a $195 increase, or 22 percent increase, in property taxes under the mayor’s plan, his office’s analysis showed.

Word that so many city homeowners stand to escape the reach of the mayor’s property-tax hike and some will even get cuts has angered business groups.

They argue they are being asked to shoulder a disproportionate share of the new tax. Several took their concerns to state lawmakers during a hearing last week.

One of those business leaders, the head of the trade group representing 23,000 merchants statewide, said some commercial properties in the city’s Loop business district could see a 50-percent hike in property taxes because of reassessments and the impact of the mayor’s tax push.

“I don’t think it’s ever good when you shelter someone from the true cost of government,” said Robert Karr, president and CEO of the Illinois Retail Merchants Association. “With this, they’re shifting the cost to a smaller population who’s paying an unfair burden.”

Emanuel’s office, which has said one in four dollars of the tax hike would come from the city’s central business district, did not contest the 50-percent figure. But a mayoral aide insisted Emanuel’s plan is his best effort to fairly distribute the cost of the tax increase.

“Mayor Emanuel believes that the necessary property tax increase for our police and fire pension funds should be borne by those who can best afford it and should not hurt middle- and lower-income families and seniors,” Emanuel spokeswoman Molly Poppe told Reuters.

Emanuel’s strategy has the makings of a political two-fer because he gets the political benefit of proposing a tax cut, even if it winds up a casualty of a bitter budget standoff at the state capitol. Either way, the mayor gets the money he needs to help resuscitate his city’s police and fire pension funds.

Emanuel’s tax-relief component depends on a change in state law authorizing a possible doubling of Chicago’s existing $7,000 property-tax exemption available to all owner-occupied homes.

But that now appears in doubt because Republican Governor Bruce Rauner has voiced his distaste for increasing the property-tax exemption without it being tied to changes in collective-bargaining rules and other business-friendly changes the governor is seeking at the state level.

Combined, Chicago’s police and fire pension funds had a deficit of $12.1 billion as of December, city records show. The fire pension system is only 23 percent funded, while police pensions is 26 percent funded. (Editing by Cynthia Osterman)

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