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Policy


Chicago’s 21st Century Solutions

The Non-Resident Employee Fee 

 

 

 

“The following is a public policy analysis was originally created in 2015 to increase funding for expanding city services. “

The City of Chicago was built on the needs of transportation.  From the fur traders to the steam engines and the industrial revolution, it is a hub of movement.  The mobility and growth of Chicago has and will continue to be built on modes of transportation. This transportation is a viable income for the city and all who utilize the city.  It is provided through Chicago’s “Right of Way”. A Right of Way is the “privilege to pass over the land of another, whereby the holder of the easement acquires only a reasonable and usual enjoyment of the property, and the owner of the land retains the benefits and privileges of ownership consistent with the easement” (Farlex). The City of Chicago creates a business hub for all to prosper through the unspoken right of way benefitted by all in the city, resident or non-resident.   The right of way is maintained by City services including road repair, emergency services, sanitation, health services and more. As these service costs increase the City’s budget must expand to cover these costs.   Non-resident employees must invest where they are vested, Chicago. A Non-Resident Employee Fee can increase Chicagoan employment, decrease budgetary focus in City departments and create new jobs. This policy analysis paper is to provide a comprehensive and organized argument justifying the recommendation for Chicago to implement a new fee.

The recommendation will be supported with data on Chicago’s employment inequity and increased budgetary expansion for “right of way” expenses.  This analysis is an original presentation with several comparisons to tax implementation in world-wide cities.

Employment

According to the 2013 US Census Bureau American Community Survey over 1, 837,957 people were employed throughout Chicago (Easy Facts 1). That still creates a fluctuating unemployment rate, currently at 5.6% (IDES).  This Chicagoan employment is drastically blocked by the 618,559 cars and public transportation riders that commute into Chicago everyday for employment purposes (AFF, S0802). These jobs are deflected from Chicagoans by carrying suburban and outlying county residents into the city for jobs.   As of the 2011 census, Chicago resident employment in the city decreased by 40,000 jobs (Hinz, 9/17/14). That’s 40,000 more residents that the City supports through services, that cannot add directly back to the Chicago economy. These cars transport employment that does not create a stronger residential economic opportunity that Chicagoans need.

Throughout America, cities are creating taxes, levies, duties and fees to recapture their “right of way” investment.  The Philadelphia Mayor’s Task Force on Tax Policy projected 70,000 more jobs added to their economy (Appendix 2009). This is partially due to investing the revenue of their Wage Tax to attract and build more business.  In Omaha a Wheel Tax was implemented to acquire fees for all who drove into their jobs in the city. Cities cannot continue to invest and maintain roads and services without committing to investment from free riders within the city.  

Work Equity for the Chicago Economy

As Chicago’s deficit reaches nearly a billion dollars, partially to maintain non-resident accessibility and safety while in the city, Chicagoan job losses increase.  The Grassroots Collaborative, a labor-community coalition in Chicago, found that from 2002-2011 the 52,000 jobs gained in downtown Chicago only created 1 out of 4 hires for Chicagoans (Tellez, 10/8/13). Beyond the lack of Chicagoan hires, minorities were not being hired.  The Grassroots Collaborative study, “Downtown Prosperity, Neighborhood Neglect: Chicago’s Black and Latino Workers Left Behind”, found 800 downtown positions were lost by residents of Englewood while residents of Naperville were hired for 800 downtown jobs (Tellez, 10/8/13).  The median job loss for Latino zip codes was 381 downtown jobs during this same period (Tellez, 10/8/13).

The Non-resident Employee Fee would be directly implemented by employers upon their non-Chicagoan employees. Employers would be influenced to decrease their own administrative costs by hiring more Chicagoans than “outsiders”.  The Mayor of Philadelphia also created a Task Force on Income equality that researched and created a policy to make sure that minorities were well represented in job growth.  The Non-Resident Employee Fee will do the same.

Budget Drain

In 2015 these non-resident employees were and will be part of an ever expanding emergency services, transportation and infrastructure budget.  The 620,000+ non-Chicagoan employees that commute into work are serviced by the City in numerous manners: police for accidents and transportation guides, safety patrols and street help.  Fire for emergency problems on and off the road; never forget that some downtown buildings are considered little cities as up to 10,000 people may work in one building that may need evacuation.

According to the Chicago 2015 Budget Overview (available online at Cityofchicago.org) the Department of Police will cost $1,447,421,767 and Fire Department will cost $596,880,489.  We are almost $2 billion in operating costs for over half a million non-Chicagoan employees that never make a direct deposit into these two budgets. The Department of Transportation who pave streets, maintain street lights and markings, signs, etc will cost approximately $315,072,571.  The Department of Streets and Sanitation will clean-up $44,127,651 worth of trash to make Chicago a clean and inviting place to work.

The Office of Emergency Management and Communication who make the decisions on street closures, storm awareness and preparation and much more will cost $202,004,901. These are just a few of the departments that work 24 hours a day everyday to make Chicago a safe place to work.  These services and departments are a part of the $1 billion deficit in Chicago. Desperately needed direct revenue to supplement these costs can be extracted from the Non-Resident Employee Fee. The Fee would be structured for a deduction of 40% of revenue to directly fund each of the above departments for their work in providing services.

Non-Resident Employee Fee Structure

The Non-Resident Employee Fee would revitalize the economy based on a sound structure, many elements already being in place in City departments.  There is a flat fee of $200 per year for each non-Chicago resident employed in Chicago. This fee would be implemented for each job a person may have in Chicago.  The fee would also be implemented for any part-time jobs. Part-time jobs are considered working 20 or more hours per week for an equivalent of 26 weeks per year. Exemptions to the fee would be limited to: full and part-time students, earnings at poverty level (revised yearly per US guides) or less including bonuses and other work related compensation, all US veterans and civil service employees.

Poverty Table for Chicago Residents (Source provided by IllinoisLegalAid.com)

Household 1 2 3 4 5 6 7 8 9 10
Income 11,670 15,370 19,790 23,850 27,910 31,970 36,030 40,090 44,150 48,210

There will not be any exemptions or refunds for change of living status, employment change to outside of Chicago city limits or a return to school after fee is paid.  There will be no exemptions for contract, seasonal or temporary workers. The City must recover costs so a person who may live 1,000 feet outside of the city limits to a person living 100 miles outside of the city limits will pay for their use of the right of way opportunity brought to them by the City of Chicago.

The Clerk would directly contact City of Chicago business owners of the Non-Resident Employee Fee compliance.  The Clerk’s Office will contact employers quarterly starting January 1st of each year.  For example, January 1st, April 1st, July 1st and October 1st of each year.  In each quarter the Clerk will request a list of employees from businesses and their addresses. The Chicago City Clerk’s office will be required to run a comparison search through the State of Illinois Employment Security and/or the Department of Motor Vehicles (same to be used for outside state line employment) databases for home addresses and employment addresses. This search is already utilized for City Sticker compliance reducing economic efforts to obtain non-resident information.  The double verification through the Clerk and State of Illinois and employer and employee is to protect those employees who may have moved or changed household size and income within the time of verification. The Clerk’s office will send the employer a list of employees who must pay the fee. The said employees have 30 days to remit the fee either by mail or on the Clerk’s website. If the fee is not paid by employee then employer must pay the fee. The Clerk will then send each business a quarterly request regarding new hire information.

The form sent to employees through employer will include a waiver section attached with proof for student status (high school students must submit their credit hour enrollment and college students must follow the guidelines of part-time as 9 credit hours and full-time as 15 or more credit hours), wage statement for poverty status or veteran status.

A Policy that Gives Back

According to a mixture of data a $200 yearly fee would bring the city between $100 and $200 million dollars per year.  A stipulation would be that a total of 40% of the fee must be directed back to the departments of the City that must use resources for these non-resident employees.

This 40% would be equally divided between OEMC, fire, police, sanitation, streets and transportation.  Special events and other departments would not receive the fee due to their event revenue financing from tourism.   The policy fees would also supplement many minority areas where data substantiates a lack of Chicago hiring. Minority ward community centers would be given 20% of the funding to implement and successfully expand employment search programs. These services would be implemented in established community centers as a supplemental program.  The Chicago City Clerk’s office would be given their fees for the research and employee activities to directly re-invest in their accounts. The Clerk’s office will have to create an itemized report for any and all activities related to the searches, stamps, paper, employee work, etc that is related.

In order to make this fee a success, all City of Chicago departments that help to implement the fee should be repaid by the fee.  The Clerk’s office can only hire 2-4 people for the temporarily busy season from January 1st to March 31st to implement the fee communications and monitor the fee extractions.  The fee is not to cost anything extra to the government. The remaining monies from the Non-Resident Employee Fee would be directed to the City of Chicago General Revenue Fund for other city services.  

Several US and international cities implement fees for employment and congestion.  These fees come in various forms such as Philadelphia’s Wage Tax, the Omaha Wheel Tax, Detroit’s non-resident income tax and the London Congestion tax.  Many of these taxes go through several changes in their policy lifetime.

Constitutional Commitment

Protests against a “commuter tax” have risen throughout the Chicago land area many times.  Since 1960, a tax has been discussed without being implemented. But a new day has arrived.  Omaha, Detroit, Philadelphia, New York and Cleveland have implemented a “commuter tax” which we call the Non-Resident Employee Fee.  The fee is not to harm business in Chicago rather it is to create business. The City of Chicago budget cannot continue to expand and create a safely serviced population without money.  Money is what is behind those that serve our city. According to the Illinois Supreme Court “To survive scrutiny under the uniformity clause, a nonproperty tax classification must (1) be based on a real and substantial difference between the people taxed and those not taxed, and (2) bear some reasonable relationship to the object of the legislation or to public policy. “(Docket No. 93836, Arangold Corp. v. Zehnder (Il. S. Ct.) The Free Rider Investment Fee is distinctly based on a substantive difference-residence.  Our residences can be argued to be the formation of our socio-cultural morals, norms and lifestyles. Zip codes create different people with differing contributions to their respective residency. Non-Chicagoans due to their substantive difference of residency do not apply their economic contribution to the city in an effective manner that can contribute to what they take from the city. A residency requirement has been upheld as a means to inclusion in clubs, sports and the like. The residency rule substantiates the Non-Resident Employee Fee.

Secondly, the reasonable relationship to the public policy is mandated by the employee’s use of the public goods and services through a “right of way”.  These non-Chicagoan employees use the streets, traffic controls, environment, infrastructure, emergency services and more in order for them to continue their employment.  Their employment would not be available if not for the services of the city. A “ghost town” without safety, order and a workable environment would not have employees.

Riding into the Future

The Non-Resident Employee Fee would benefit Chicago residents by supporting city services.  The residents of Chicago, whose own employment needs are ignored or bypassed by these non-Chicagoans, have a reasonable request to ask for contributions to the city that inhabits the employment.  The Non-Resident Employee Fee would be relatively low cost to the City by compelling employers through a City ordinance, that they must take responsibility for their employees and their hiring choices. The low costs are associated with the already established practices and abilities within a structured governance system.

The Chicago Clerk’s Office already has the office, relationship, computer equipment and printing equipment needed for fee extraction.  The State of Illinois already monitors employment so no new data, equipment or office needs. The Fee may subject either office to hire 1 to 2 new people.  Their average salaries being $45,000 a year. That is a minor deduction from the $100-200 million provided by the fee. It’s always a good start to create jobs.   Toll ways can cost anywhere between $1 million to $25 million dependent on the location (Move Illinois). A type of “commuter toll” would still limit revenue as many non-resident employees can find side streets to arrive in the city or by taking public transportation (Weimar, 2009).  Besides these elements, the maintenance on the toll would be a larger deduction from the profit (Weimer, 2009).  Tolls don’t produce revenues or reduce congestion.  City cameras have been a new device in fighting congestion.  In London, cameras are used to stop all traffic flow on certain streets at certain times of each day.  This is a great idea until one realizes, Chicago residents become a victim to this as well.  One out of every four Chicago residents do not want any type of ticket cameras (Madhani, 4/5/2015).  Cameras became a major issue during the 2015 elections.

The Non-Resident Employee Fee makes Chicagoans and their needs first.  It brings much needed revenue back into a system that has continuously protected and maintained the right of way that employers and employees have taken for granted.

Acknowledgements

Alderman George Cardenas would like to thank Kermit Wies from the Chicago Metropolitan Planning Agency and the staff and researchers from CMAP.  He would like to extend a thank you to the Chicago City Clerk’s Office for supplementing research. His dearest thank you to all the researchers from the US Census to the Grassroots Collaborative.  Your dedication and hard work supported the creation of this 21st Century initiative.

Lead author and researcher: Mac-Z Zurawski, M.A.

Adjunct Lecturer, Department of Criminal Justice, Political Science and Philosophy

Chicago State University

12th ward Legislative Assistant: Samie Martinez

Resources

Arangold Corp. Versus Zehnder.  No. 1-01-1371. Illinois Supreme Court. 2002. Retrieved from: http://caselaw.findlaw.com/il-court-of-appeals/1153023.html.

“City of Chicago 2015 Budget Overview: Program and budget summaries by department”. Cityofchicago.org/budget. 1 March 2015.

“Current Employment Statistics”. Illinois Department of Employment Security. http://www.ides.illinois.gov/LMI/Pages/CES.aspx.   Web. 29 February 2015.

“Current federal poverty levels”. Illinois Legal Aid. 12 April 2015.  http://www.illinoislegalaid.org/index.cfm?fuseaction=directory.showPovertyLevels

Daniel, Joseph I and Khalid Bekka. “The Environmental Impact of Highway Congestion Pricing”. Journal of Urban Economics. 47.2 (2000): 180-215.

Fortino, Ellyn. “Report: Downtown Chicago Job Growth Excludes Most City Residents”. Progressillinois.com.  8 October 2013.

Hinz, Greg. “Commuter tax for the burbs? Fuhgeddaboudit”. Crains.com. 17 September 2014.

Levy, Jonathan I, Jonathan J Buonocore and Katherine von Stackelberg. “Harvard: Evaluation of the public health impacts of traffic congestion: a health risk assessment”. Environmental Health.  2010,. http://ibtta.org/sites/default/files/The%20Public%20Health%20Costs%20of%20Traffic%20Congestion.pdf.

Madhani, Aamer. “Red-light cameras create red hot furor in Chicago”. Usatoday.com. 5 April 2015. http://www.usatoday.com/story/news/2015/04/05/red-light-cameras-political-furor-chicago-ohio-florida/70746154/.

“Mayor’s Task Force on Tax policy and Economic Competitiveness in Philadelphia”. October 2009. http://www.phila.gov/taxPolicy/PDFs/Thinking_Beyond_Today_Oct_2009.pdf.

“Means of  transportation to work by selected characteristics”. 2013 American Community Survey 1-Year estimates.  UScensusbureau.com.  29 February 2015.

“Move Illinois: The Illinois Tollway Driving the Future: Capital Program Overview”. www.illinoistollway.com. http://www.illinoistollway.com/move-illinois.  6 April 2015.

“Right of way”. The free dictionary by Farlex. http://legal-dictionary.thefreedictionary.com/right+of+way. 3 April 2015.

Sinoski. Kelly. “No way around congestion tax on new vehicles for Metro Vancouver residents”. Vancouversun.com. 20 March 2015.

Tellez, Eric.  Downtown Prosperity, Neighborhood Neglect: Chicago’s Black and Latino U.S. “Transporataion, Chicago”. Table S0802.  Census Bureau, 2007-2011 American Community Survey.

Workers Left Behind”. Grassroots Collaborative. 8 October 2013.

Weimar, David. Cost-Benefit Analysis and Public Policy.  Wiley-Blackwell Press. 22 April 2009. http://onlinelibrary.wiley.com/book/10.1002/9781444307177.

“Wheel Tax Frequently Asked Questions”. City of Omaha Finance page. 29 February 2015. http://www.cityofomaha.org/finance/revenue/13.

“Where Workers Work: 2015”.  Illinois Department of Employment Security.  1 March 2015.

http://www.phila.gov/Revenue/businesses/taxes/Pages/WageTax.aspx.

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