Emanuel wants to boost taxes on hotel rooms, downtown parking
BY FRAN SPIELMAN City Hall Reporterfirstname.lastname@example.org October 11, 2011 3:10PM
Mayor Rahm Emanuel has promised to erase the deficit without a general tax increase on sales or property or by cutting police officers or using one-time revenues. | John H. White~Sun-Times
Updated: November 16, 2011 1:24PM
Mayor Rahm Emanuel will raise taxes on hotel rooms and downtown parking — along with fees on city stickers for SUV’s — to chip away at Chicago’s $635.7 million shortfall, aldermen were told Tuesday.
Emanuel has promised to erase the deficit without a general tax increase on sales or property or by cutting police officers or using one-time revenues.
But, he has opened the door to raising a host of more specialized taxes and fees, while turning off the free water spigot for hospitals, universities and other non-profits.
On Tuesday, the mayor’s budget team spelled out the specifics — sort of.
During a series of closed-door briefings, aldermen were told that the mayor plans to raise the city’s tax on Chicago hotel rooms from 3.5 percent to 4.5 percent, a 28.5 percent increase.
In all, the mayor plans to raise taxes, fines and fees by $78 million.
The parking tax would be imposed, only on the “upper tier’” of parkers and only on weekdays.
Water and sewer fees imposed for the first time on hospitals, universities and other non-profits would raise $20 million to $30 million, with a discounted rate for hospitals serving low-income neighborhoods.
The budget also includes $417 million in cost-cutting, $88 million generated by refinancing debt and $39 million in ‘modest’ revenue growth.
The $14 million hotel tax increase would raise the tax on the average Chicago hotel room by $1.78 a night at a time when hotel occupancy is up 2.7 percent and the average room rate is down 2.4 percent.
It would raise the overall hotel tax in the city from 15.4 percent to 16.4 percent. The biggest chunk — 6.17 percent — is imposed by the state. The McPier Authority gets 2.5 percent. The Illinois Sports Facilities Authority adds 2.14 percent.
The mayor also plans to raise vehicle impoundment fees for an array of criminal offenses, city stickers fees for SUV’s and the tax slapped onto the already sky-high cost of parking at downtown garages.
Emanuel’s budget team billed the unspecified parking tax increase as a “congestion fee” designed to encourage motorists driving into the city’s Central Business District to take public transportation instead.
Hefty increases are also planned for valet parking and commercial loading zones, sources said.
Despite initial statements to the contrary, Emanuel also plans to declare a $60 million surplus in the city’s tax-increment-financing (TIF) districts. The city’s share of that money would be $12.5 million, with much of the money going to the Chicago Public Schools.
Former Mayor Richard M. Daley did the same thing to a greater degree to balance his final budget.
As expected, the mayor plans to risk a City Council rebellion by switching from a ward-by-ward to a grid system for garbage collection. That would set the stage for a managed competition between city employees and private contractors similar to the contest currently under way for recycling.
The mayor has pegged the annual savings from a grid system at $60 million. But, the 2012 budget anticipates a $20 million savings, apparently because it will take time to implement.
Many aldermen remain dead-set against a grid system for fear it will deprive them of their ability to respond to special requests for services.
Marc Gordon, president of the Illinois Hotel and Lodging Association, could not be reached for comment on the proposed hotel tax increase.
Ald. Bob Fioretti (2nd) called it a mistake that would encounter “serious opposition” at a time when Chicago is fighting to boost its share of tourism.
“When people get their hotel bills, they wonder what’s this number? Especially in the downtown and Navy Pier area, it’s already too high. It’s a mistake to go even higher,” Fioretti said.
Ald. Pat O’Connor (40th), the mayor’s City Council floor leader, called the one percentage point increase in the city’s hotel tax “very modest” and “not something that will prevent someone from staying in a hotel in Chicago.
“They didn’t see it as a deal-breaker for tourists,” O’Connor said, noting that the mayor’s staff has done a “broad comparison” of the tax rates in other major cities.
Sources said Emanuel is prepared to argue that the presence of the G8 and NATO summits next May along with several other major conventions and conferences planned for 2012 would result in a five percent to seven percent increase in visitors to Chicago, in spite of the hotel tax increase.
More than 2,000 new hotel rooms are either planned or under construction in a downtown area that already has a robust inventory of 34,000 hotel rooms.
The occupancy rate through July was 68.8 percent, up from 66.6 percent the year before, according to Smith Travel Research, a Tennessee-based consulting firm.
If the City Council goes along with the increase, it would be the first since 2004, when the hotel tax was raised from 3 percent to 3.5 percent.