Mayor Rahm Emanuel and the City’s union partners announced an agreement in principle to put the Municipal Employees’ Annuity and Benefit Fund (MEABF) on a path to solvency. If approved by City Council, this final agreement, just as the three pension agreements before it, represents a shared solution for securing the retirements of employees and retirees, while protecting Chicago taxpayers from solely bearing the full burden of growing pension costs in the future. To stabilize the MEABF, the City will propose a tax on water-sewer usage that will be assessed on Chicago businesses’ and residents’ unified utility bill. Starting in 2017, residents and businesses will pay a rate of $0.59 per 1,000 gallons based on their water and sewer usage. The tax will be phased in over five years, ending with a tax rate of $2.51 per 1,000 gallons of water and sewer usage in 2020. The average household uses approximately 7,500 gallons of water a month, meaning the average household will pay approximately $4.43 more per month in 2017. The Administration will seek City Council approval of the tax on water-sewer usage.

The plan increases contributions by three percent for new hires and lowers the age of eligibility for full benefits from 67 to 65 for any new employee hired on or after January 1, 2017. Further, the plan provides employees hired after January 1, 2011, the opportunity to accept a lower eligibility age of 65 for full benefits in exchange for increasing their payroll contributions by three percent. Under this agreement, the revenue from this tax, in addition to existing MEABF funding and the proportionate share from enterprise funds, will pay the City’s pension contributions beginning with the 2017 contribution. The City will begin making contributions on an actuarially-basis by 2022, and MEABF will achieve a 90 percent funded ratio by 2057. The City will seek approval from Springfield for increased contributions. Without action, the MEABF will become insolvent in 2025.