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Illinois could divert tax refunds of city debtors

By Hal Dardick and Ray Long, Chicago Tribune –

CHICAGO — Chicago Mayor Rahm Emanuel wants to intercept millions of dollars in state income tax refunds this spring from people across Illinois who owe City Hall money.

The plan, expected to be approved at Wednesday’s City Council meeting, puts Chicago at the forefront of a new kind of push by cash-strapped Illinois cities as they try to bring in every nickel and dime they can without raising taxes. Joliet and Springfield already have such plans in place and more towns likely will jump on board in the coming months.

The power to dip into tax refunds before they’re sent out comes from a little-noticed state law that took effect two months ago that allows cities and school districts to go to the state comptroller for help collecting what they’re owed.

In Chicago, the income-tax bite would hit individuals and businesses that received final notices for debt owed on parking tickets, red-light citations or administrative hearing fines that date back to 2005. The city figures to collect between $8 million and $20 million.

“I’m actually leveling the playing field so it doesn’t tilt in favor of those who cheat, and cheat other taxpayers,” Emanuel said Tuesday. “Our legitimate law-abiding citizens, law-abiding companies and commercial entities are bearing an unfair burden because they’re being responsible, and yet those that are being irresponsible and cheating are getting away with it. And we’re going to stop that.”

The amount of money collected by other towns and villages likely will pale in comparison to Chicago, something the only state lawmaker to vote against the law last year is quick to point out.

“I smelled a rat on this one, and I was not afraid to be the only ‘no’ vote,” said GOP Rep. Chris Nybo. “It’s obvious now, based on this bill, the ulterior motive here has been revenue. It’s always been about the money, and it’s always been a money grab… by the city from the suburbs.”

Nybo, now in a hotly contested Republican primary against Sen. Kirk Dillard, charged that giving Chicago the ability to collect income-tax refunds fits with Emanuel’s plans for a proliferation of new speed cameras as another way to rake in money from suburbanites who get tickets.

Sponsoring Rep. Jack Franks, a Democrat, called the measure a “common-sense type of bill” at a time when local governments are feeling a major cash crunch.

“It’s also a question of fundamental fairness,” Franks said. “You shouldn’t get a windfall from one government when you owe another government some money.”

Democratic Gov. Pat Quinn signed the law, backed by Republican Comptroller Judy Baar Topinka, in December. It allows cities, villages, towns and schools to forge agreements with the comptroller — who cuts the refund checks — to withhold tax refunds to cover unpaid debt.

Topinka spokesman Brad Hahn said Downstate Collinsville also has approved a tax refund agreement, and south suburban Burnham and Glenwood are close to doing the same.

Under the law, cities with enforcement agreements send lists of unpaid debtors to the comptroller, who would then send notices to the debtors. Those who owe then get 60 days to protest the diversion of refund money, which would trigger a hearing.

If 60 days goes by without a protest — or the hearing officer rules against the debtor — the city, village or school district is paid. The comptroller’s office also would collect a fee of up to $15 processing fee from each debtor.

The debt collection efforts are hardly the first launched by cities and villages, sometimes in cooperation with the state.

In Chicago, Emanuel last year began an aggressive effort to collect $1.8 million in overdue fines, fees and taxes from employees of the city and its sister agencies. He brought in more than half that amount within a couple of months. The mayor also collected more than $4.6 million owed by banks on vacant and foreclosed properties.

Former Mayor Richard Daley started all manner of debt-collection programs, from use of the Denver Boot for immobilizing vehicles with as few as two unpaid parking tickets to taking advantage of the ability to suspend state driver’s licenses for 10 unpaid tickets.

Years ago, Chicago also began using private collection agencies to recover unpaid debts, and cut off city business for companies with the most unpaid city bills.

With money tight during a down economy, the amount of revenue at stake is too large for towns to ignore.

“The city — meaning the taxpayers of the city — are owed hundreds of millions of dollars,” Emanuel said.

More than 100,000 of the state’s residents who get state refunds owe an estimated $80 million to the city, said Tina Consola, managing deputy director of the city Finance Department. But their refunds would not cover the full amount owed, she added.

The debt owed on parking and red-light tickets would only be deducted from income tax refunds if the debtors have been repeatedly notified and failed to pay the fines, Consola said. Administrative hearing fines come from violations of building, fire and sanitary codes, as well as city tickets for such infractions as false burglar alarms, she said.

One potential target of the effort is Cameron Topps, 34, who has racked up more than $21,000 in unpaid fines, according to city records. Topps said he owes the city mostly for parking tickets, but he just doesn’t have the money to pay.

“It’s not fair,” Topps said of the city tax plan, adding that he does expect a tax refund this year. “I’m trying to make ends meet, trying to pay bills and rent.”

Some aldermen who were concerned about budget cuts last November urged Emanuel to do more to collect past-due debt then pegged at more than $749 million. More than two-thirds of that was from parking and red-light tickets and fines levied as a result of administrative hearings, according to city data.

“There will be no more free rides,” budget officials declared in response, noting this year’s budget called for collecting $33 million in back debt, or twice as much as last year.

In Joliet, unpaid debt may not be that large, but the potential collections are nonetheless welcomed by the Joliet City Council, which last week approved its agreement with the state. “I thought it was too good to be true,” Mayor Tom Giarrante said.

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