10/12/2011 12:18 pm ET Updated Dec 12, 2011

Rahm Emanuel Budget Address: Plan Includes Layoffs, Hotel Tax, Closed Police Stations

Chicago Mayor Rahm Emanuel's first budget proposal was unveiled Wednesday, and as the mayor said previously--it's bound to make some people unhappy.

The city currently faces a $635.7 million budget shortfall, which Emanuel hopes to fix by increasing certain fees, closing three police stations, cutting library hours and dipping into the city's contentious TIF fund.

“If you think you’re gonna balance a budget with a $637 million deficit that’s about 20 percent out of whack and you’re … gonna do it without controversy, call me. I’m really interested in the idea,” Emanuel told the Chicago Sun-Times Tuesday.

The Mayor's Office sent the media a list of some of Emanuel's budget proposals Tuesday night, but the list did not include information about possible layoffs. Over the summer, Emanuel said he would be forced to lay off more than 600 workers if the unions did not agree to work rule changes. Union leaders told Fox Chicago that "fewer than 500 workers will go," under his new budget plan, and they hope to avoid any further showdowns with the mayor.

Ultimately, Emanuel's plan calls for 517 total layoffs that will be effective January 1st, and the elimination of more than 2,000 vacant positions.

The plan also avoids additional income, property or sales taxes, which Emanuel promised during the mayoral campaign.

"The truth is, Chicago's last 10 city budgets have been in the red," Emanuel said to Chicago's City Council Wednesday. "Chicago cannot afford this kind of government any longer."

Police Station Closures

The Chicago Sun-Times reported Tuesday that Emanuel and Chicago Police Superintendent Garry McCarthy plan to close three Chicago police stations in order to save money. The stations were reportedly chosen due to low crime statistics and proximity to other stations with "similarly low numbers to absorb the operations." The Emanuel administration told WBEZ the move would allow them to hire more officers, but residents of the districts being closed have expressed concern. The closing districts are Wood (937 North Wood Street) , Belmont (2452 West Belmont Avenue) and Prairie (300 E 29th Street).

"There's going to be longer response time on 911 calls. There's going to be less police officers in those neighborhoods, and it's going to happen over time," Fraternal Order of Police President Mike Shields told NBC Chicago Tuesday night.

"The Chicago Police Department has significantly reduced high-level bureaucracy through a reorganization of top-level staff that created a streamlined command staff structure that is more efficient, works smarter, and saved one million taxpayer dollars," the Emanuel administration said in a statement. "The Department is going to do a similar consolidation at the district and area levels to ensure that we are getting the most out of every single officer, every single resource, and serving every single community and resident."

The budget also includes a previously discussed plan to merge the Chicago Fire Department and Chicago Police Department headquarters,

Tax On Hotels

The mayor's new budget plan includes a tax increase on hotels. The plan would bring the city's hotel tax from 3.5% to 4.5%, which the Emanuel administration says puts Chicago "on an equal level with other major cities" such as New York City and Los Angeles.

"With the anticipated 5-7% increase in hotel occupancies due to the next year’s G8 and NATO summits, as well as several other major conventions and conferences in Chicago, the City does not foresee a decrease in tourism revenue as a result of this modest increase," the mayor's office said in a statement.

New Or Increased Fees

During the election, talk of a "suburban tax" rubbed some commuters from Chicago's suburbs the wrong way. The mayor, however, believes those who contribute to congestion on the city's roadways should pay. The mayor's "congestion fee" would impose a higher tax on certain downtown parking lots during certain times of the day. Greg Hinz of Crain's reports that the money will possibly be used to "rebuild two downtown el stations and pay for an express bus system known as bus rapid transit."

"Our streets are crowded, roads in need of repair and pollution created by drivers is unhealthy for Chicagoans," the mayor's office said in a statement. "Suburban drivers who use city services and infrastructure need to help pay for the costs."

Emanuel also hopes the fee will increase the number of people using public transportation. Chicago residents driving SUVs, trucks or other gas-guzzling vehicles are also being asked to pay up. Owners of heavier cars that damage city streets will have to pay at least $15 more for city stickers.

Residents will also pay more for water under Emanuel's plan.

"Residents of Chicago currently pay the lowest price for water of any big city in America," Emanuel said Wednesday. "Today, we are asking for an increase in the fee for our water system. In return, we will greatly accelerate its repair."

He said the increased water fees would equate to about "five cups of coffee at Dunkin' Donuts a month."

Those arrested for drunk driving will also pay more impoundment fees under the new budget, and those caught carrying a handgun without proper identification will face harsher fines.

Changes To Garbage Collection

As he has stated previously, Emanuel believes changing the way the city collects garbage is an obvious way to save money. By switching from ward-based trash collection to the grid system, Emanuel estimates $20 million in savings.

"A grid system will not eliminate superintendents who will continue to ensure quality service delivery for Chicagoans, and it will allow the city to use the achieved savings to potentially expand recycling across the city," Emanuel's office said.

TIFs Are For Kids?

Declaring a surplus seems like a strange thing to do when the city has such massive financial issues, but Emanuel says Tax Increment Financing money that has been set aside for development projects should be used to fund Chicago's schools. By declaring a surplus, the city will be able to use $12 million as needed.

"Unallocated funds sitting in the TIF bank account do not put people to work or spur economic development, which is what TIF dollars are intended to do," the mayor's office said. "We need to return TIFs to their original purpose – making smart, strategic investments to help develop blighted areas, create jobs and improving economic development – and bring TIFs onto the City budget to increase transparency and accountability for this program."

Mayor Daley's use of TIF money has been widely criticized, and Emanuel has taken some flak over his handling of the funds as well.

Library Hours Cut

Chicago library hours will be cut under Emanuel's plan, though the mayor insists no libraries will close and all programs and services will remain. Cutting library hours on Monday and Friday mornings will reportedly save $7 million a year.

“When everybody was hearing they were gonna be closing libraries, if they say we’re only gonna lose hours, more people are accepting of that," Ald. Pat O’Connor (40th) told the Sun-Times, adding that libraries are considered safe havens in many communities.

On Wednesday, Emanuel also introduced a $20 million Chicago Innovation Loan Fund. The Fund will make loans city departments "for projects that cannot be otherwise funded from existing budgets without endangering service levels," the mayor's office said in a statement.

"The New Innovation Fund will be used for new projects citywide that are going to lead to new revenue and efficiencies down the line. Departments must show return on investment up front to be given the funding and will be required to pay back the fund once the savings have been achieved."

Emanuel says the changes detailed in his new budget will save taxpayers $417 million, which would eliminate a large portion of Chicago's deficit.

Check out a complete outline of Emanuel's proposed budget HERE [PDF].

WATCH Fox Chicago's coverage of the budget address here: