While Chicago’s fiscal situation is severe, it’s hardly unprecedented. In the recent past, cities in its weight class have been in worse straits; they’ve survived, rescued their bond ratings, and rebuilt their finances. New York’s near-bankruptcy is the most famous case for obvious reasons, but it’s also an old example.
But you don’t have to go back that far to find a big city on the skids. Miami’s bonds hit noninvestment levels in 1996, and the state moved to take over the city’s finances.
And they did something that should sound familiar to Chicagoans: They hiked garbage fees.
“They were charging less than half of what it was actually costing. It was being subsidized by the general fund, much less than neighboring communities,” says Howard Frank, a professor at Florida International University, who wrote a book on the city’s fiscal crisis. “It was draining the general fund.”
Miami already had garbage fees at the time: $160 a year, equivalent to about $243 today. The state’s oversight board pushed for the fees to double, but the city fought it for two years. Eventually the state board won over the scandal-plagued local government, getting garbage, “fire rescue,” and property tax hikes that, by 2003, rose by $181 ($234 today), all of it meant to plug deficit holes.
Now Mayor Emanuel is proposing something similar for the city of Chicago. The Tribune recently reported that the mayor is considering proposing a $9.50-per-month pickup fee “at single-family homes, duplexes, and four-flats.” Aldermen are wary of the specifics, but they should find comfort in the fact that Chicago would not be alone among major cities in proposing some sort of garbage pickup fees.
Across the country, it’s pretty common for big cities to serve up garbage fees that cover some or all of the costs of services. Los Angeles raised its fees several times—more than doubling over four years—to increase the size of its police force.
But the more basic case for such fees is this: efficiency and transparency. That’s the advice Robert Inman—a professor at the Wharton School at the University of Pennsylvania who consulted on tax policy with the city of Philadelphia as it passed through its years of fiscal crisis in the early 1990s—gave to Chicago:
Cities should be attuned to how they pay for the services they provide, Inman noted. User fees are the best option for services that can be easily priced per use—usually services considered “excludable” (i.e., services that are not rendered if an individual does not pay
for them). For services that are difficult to price per use—usually those deemed “nonexcludable” (such as public safety, roads, and courts)—general, broadbased taxes are needed.
A price-per-use fee could lead to less use, which is why New York’s Citizens Budget Committee actually favors variable garbage fees: “In other cities and in New York City’s commercial sector, garbage producers pay fees based on the volume of trash removed. Such charges discourage garbage creation and encourage reuse and recycling. Pay-as-you-throw fees would save the City an estimated $57 million annually.”
That’s actually on the table, Lauren Chooljian recently reported—a fee based on per-cart usage rather than per-household usage. If such a fee is inevitable, Chicagoans should start thinking about how to turn it to their advantage.