By Karen Pierog and Renita D. Young

By Karen Pierog and Renita D. Young


CHICAGO (Reuters) - The Chicago City Council on Wednesday approved Mayor Rahm Emanuel's fiscal 2017 budget which calls for a tax on plastic bags and the first phase of hiring more than 900 police officers.


The council voted 48-0 for the budget which begins on Jan. 1.


Emanuel last month unveiled his $9.8 billion all-funds spending plan, which includes $3.7 billion for operations. The budget relies on $82.3 million in revenue growth, savings from efficiencies, and a few one-time measures - but no big tax hike.


"To think that we're on the verge today of passing a budget with almost unanimity is remarkable," Alderman Ed Burke said just before the vote.

Emanuel last year pushed through a $543 million phased-in property tax increase for police and firefighter retirement systems. The city enacted a new tax on water and sewer usage in September to rescue its largest pension fund for municipal workers from insolvency. The council previously increased a telephone surcharge for laborers' pensions.

Credit ratings for the nation's third-largest city have been deteriorating due largely to an unfunded pension liability that stood at $33.8 billion at the end of fiscal 2015 for Chicago's four retirement systems.

The new budget includes a 7-cent fee on store bags and parking rate hikes. It also accommodates the initial phase of the mayor's two-year plan to add 970 police positions to address the city's sharp spike in violence.

"This is the first year in recent memory that we've made investments in public safety with the addition of 1,000 police officers," said Alderman Jason Earvin. "And we can direct investment in some of the most challenged communities ... and with our youth in some of the most troubled parts of the city."

After the vote, Emanuel noted record-high summer job creation for youth, record-high project starts in commercial and residential real estate and the city using reforms to place pensions on the path to solvency.

"Chicago's employment is at a 15-year high that we haven't seen since 2000 since the tech bubble," Emanuel said. "What we have done, not just today, but over the last five years is give people confidence in the city that we are going to take care of our business, get our fiscal house in order."

(Editing by Matthew Lewis)