Property taxes would increase and retirement benefits for some city workers would be cut under a proposal put forward by Chicago Mayor Rahm Emanuel to start alleviating the huge pension debt he inherited.
Under the plan, both taxpayers and city workers would pay more. The owner of a $250,000 home would pay $50 more a year starting in 2016, and after five years the homeowner would be paying and extra $250 a year.
At the same time, city workers would pay 2.5 percent more toward their retirement, increasing their contributions by 0.5 percent a year for five years. They now pay 8.5 percent of their salary each year for pensions and would eventually pay 11 percent.
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In addition, annual 3 percent compounded cost-of-living pension increases would be tied to inflation and would be skipped in certain years.
The plan is designed to cut about half of City Hall's $19.5 billion pension debt over 40 years. The massive shortfall came about largely because the state formula governing city contributions did not require it to pay in enough money to keep the pledges made to employees.
A coalition of public labor unions, We Are One Chicago, condemned the plan as unfair to workers.
"The city's proposal is an unconstitutional approach that makes onerous cuts to the pension benefits of nearly 50,000 active and retired public servants," the group said in a statement.
Emanuel's office released a summary of the proposal saying, "The plan strikes the right balance of reform and revenue and serves as an honest framework in which everybody gives something, so that no one has to give everything."
Moody's Investors Service last month cut Chicago's credit rating one notch to Baa1 on the basis that its pension liability is a threat to the city's fiscal solvency. The agency had already slashed Chicago's rating three notches in July.
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