It's a sad tale cities and smaller municipalities are facing across the U.S. - plummeting tax revenues, due to the economy!
Consumers spend less money. Visitor counts take a tumble. Very predictable sources of city revenue - here in Chicago, our steep Real Estate Transfer Tax, for example - are not meeting projections by a large margin, due to the sluggish Real Estate Market continuing here.
The result? Big budget gaps, for municipalities, like Chicago, that are mandated by law to maintain a balanced budget ( I realized, to you Federal Government types - the words "Balanced Budget" are an oxymoron, a complete fantasy - but, locally, it is the law in most city and state annual operating budgets).
So what to do?
Increase taxes, of course!
But how to do so creatively, without the local population getting up in arms, complaining too loudly, or voicing their opinion with their wallets - buying less stuff!
Over a year ago, the Cook County Board (Cook County IL is the county which includes the City of Chicago) increased the General Sales Tax to a staggering 10.25% in Chicago and some of the Chicago Suburbs. How did local consumers react? They shopped more out-of-county. Or in the neighboring states of Indiana or Wisconsin. Or increased Internet purchases of bigger-ticket items, from non-sales-tax, out-of-state companies.
The County Board - they are getting the message, and just might pass a partial repeal of the tax increase next month!
Here in Chicago, Chief Financial Officer Gene Saffold, as reported by Hal Dardick in today's Chicago Tribune, sees a half-billion-dollar budget deficit for the city in 2010, and a total $6.2 Billion Chicago City Budget. Why? Lower collected taxes and rising wages of city workers are to blame, he contends. These line items make up 80% of Chicago Municipal Spending!
Will Chicago Taxes be raised to make up the shortfall? And what will the people say? What will they do?
On New Years Day, 2009, Chicago privatized its Parking Meter System, doubling meter fees and more heavily enforcing fines for violators across the city. A sweetheart, quickly-passed, 75-Year Parking Meter Lease to an outside, yet "connected" company brought in over $300 Million to city coffers. But that increase has been roundly criticized for its implementation problems, and the lack of debate before its passage.
But tapping the $300 Million Meter Money - or, as Chicago Mayor Richard Daley calls it, the city's "Rainy Day Fund," will barely make a dent in the budget gap!
Chicago has laid of dozens of city workers, and asked City Labor Unions to force their members to take unpaid days off to save the city money. More cuts are likely next year. The largest portion of increased spending in 2010 will come from $117 Million in higher wages, benefits, and payments to worker pensions.
One observer, Laurence Msall, Director of the Civic Federation here in Chicago, understands the problem created by increasing labor costs, but sees few new potential revenue sources for the city . . . or things left to tax.
The City of Chicago even has a special tax on Bottled Water - but, in today's economy, even taxes from this revenue source are taking a hit! In addition to the dwindling Chicago Real Estate Transfer Tax and Sales Tax Revenues, City Hotel and Car Rental Tax Revenue has been impacted, as business people are becoming a bit more frugal planning their visits here.
So . . . will that "Last Resort" - increasing Chicago Property Taxes - be tapped?
Likely so! But expect Chicago Aldermen to turn their heads and hide when they are approached on that one!
Please see our post today via BlogChicagoHomes.com.
DEAN & DEAN'S TEAM CHICAGO
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