All my Chicago friends…wake up and pay attention…Hold onto to your wallets!

tax rocket I am not an actuary and I don’t play one on TV! But the recent 28% utility tax hike in Chicago and the reporting of that tax increase in the Chicago SunTimes has me a bit mathematically bewildered. (read here)

“The plan is to start with a 7 percent tax, double it in year two, impose a 21 percent tax in year three and end at 28 percent in years four and five. The average Chicago household currently pays $686.04 a year for water and sewer services that use 7,500 gallons of water. City Hall maintains that the new tax can be enacted by the City Council in September under the city’s sweeping home-rule power and does not require state legislative approval. It is expected to cost the average homeowner $4.43 more month or $53.16 a year in 2017. In the fourth year, the added tax burden will be $225.96 a year.”

Clearly the SunTimes calculation are from setting the tax increase from the baseline of $686. But this is the calculation for the tax added just for the PENSION FUNDS. What about the normal increases designed to keep up with the depreciating condition of the water and sewer system??? Surely that current average cost will increase from $686…it has to if you want the system to stay solvent.The reported yearly cost average in 2011 was $450/household…a 52% increase in just 5 years.

Everyone knows, or at least they should know, that in the year 2021 if you hold to the rate of increase since 2011, the average yearly cost will be $1042/household. Now add the $225 dollars mentioned above you get $1267.

Now watch this:

  • year 1:             $686 x 7% increase = $734
  • year 2:           $734 x 14% increase = $836
  • year 3:           $836 x 21% increase = $1012
  • year 4&5:   $1012 x 28% increase = $1295

If you all think that in 2021 your average yearly water and sewer bill is only going to be $878/household ($686 plus the 28% proposed increase)…You all are in for a big surprise!

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