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Will Chicago’s JackPOT save the city from its pension debt?

Will Chicago’s JackPOT save the city from its pension debt?

Right before leaving the office in May, Chicago Mayor Rahm Emanuel has decided to score on his election campaign promises. One of them, which he also described as a “flashing yellow light of uncertainty” is the $28 billion pension bill that came due.

“We got into this challenge because elected officials and labor leaders made promises, without telling the full truth about what they would cost,” said Emanuel on Wednesday while addressing the City Council with the proposed solutions.  Before putting the burden on taxpayers again, here are the four solutions proposed by the mayor – let’s dive into each of them.

1. Constitutional Amendment

Within the Amendment, Mayor Emanuel proposes to reform the benefit system in order to ensure long-term security for workers and protect taxpayers, while also adjusting cost-of-living expenses to correspond with the economy in Chicago.

2. Fund Stabilization Bonds

Emanuel is introducing the new legislation, aimed basically to refinance the city’s pension debt at a lower rate, similar as you would do with mortgage or any other loan. According to the mayor’s proposed ordinance, it wouldn’t create any new tax burden on taxpayers. On the contrary, it’s projected to decrease the already existing tax debt by $6-$7 billion in total.

While the two above proposals are significant, the next two have been the talk of the town this week, since implementing them would affect the lives of all Chicago residents and visitors alike. 

3. Legalization of recreational marijuana

Through the legalization of recreational marijuana Emanuel hopes to score more tax dollars into the city budget that would ultimately help to cover the pension plan debt.

Notably, the announcement comes just in time before the governor-elect J.B. Pritzker, Emanuel’s fellow Dem, steps into the office. During his election campaign, he pointed several times that he would legalize marijuana “right away.” According to the study released by New Frontier Data earlier this year, if all states would legalize recreational marijuana right now, it would generate a total of $131.8 billion in federal tax revenue before 2025. Additionally, the report points out that there would be almost a million new jobs created. If we treat sales of cannabis at the same numbers tobacco industry is currently being treated statewide, it is expected that there will be additional $126 million in revenue coming into the state budget annually. However, as the mayor also pointed, “recreational marijuana has social costs that must be considered.”

4. City-owned casino

As the fourth solution proposed as an alternative to another residents’ tax burden, Mayor Emanuel also suggests to consider building a casino within the city’s limits. The casino will be owned by the City of Chicago, and a portion of its revenue would be aimed at financing the city’s pension debt.

Notably, according to the House Amendment 3 to Senate Bill 7, the whole gambling landscape of the state could be changed. Additionally to the city-owned casino, the bill would also allow slot machines at O’Hare and Midway airports. Plus, gambling would be also allowed at the horse race tracks statewide, including Arlington Park and Hawthorne Racecourse.

According to the Commission on Government Forecasting and Accountability, by establishing additional casinos statewide, including the one owned by the City of Chicago, there will be an increase of a projected $1 billion in additional tax revenue, and that is additionally to the revenue coming from the slots that would be also permitted at different sites across the city (including both airports), as well as statewide. According to Emanuel, the city administration is currently looking at all the impact city-owned casino would bring to job creation, local economic development, tourism, tax revenue, and city services. As part of this initiative, Emanuel consolidated his efforts with the Representative Bob Rita, who’s leading the new legislation efforts in the House of Representatives.

Among potential sites for the city-owned casino Chicago officials eye the Port District on the city’s South Side, right off the Bishop Ford Expressway. According to Ald. Anthony Beale (9th) who represents a Far South Side ward located near the Port District, every month Chicago loses around $40 million in revenue to nearby Hammond, IN, which has a casino. In fact, just recently, Indiana moved one more casino closer to the Chicago border.

“They’re doubling down on the fact that we’re allowing all of this money to leave our state,” Beale said.

Emanuel supports the proposed site, emphasizing that this way we’d be “capturing everything that leaves for Hammond and keep it in Chicago.”

The mayor plans to finalize the legalization of recreational marijuana, as well as building of the city-owned casino before he leaves the office in May.