CRE Strikes Back In Transfer Tax Battle, Appeals To Illinois Supreme Court

Chicago's real estate transfer tax saga is taking another twist, as lawyers representing commercial real estate interests are bringing a recent appellate court decision to put the Bring Chicago Home measure back on voters' ballots to the state's highest court.

Attorneys Michael Kasper and Michael T. Del Galdo filed an appeal to the Illinois Supreme Court on behalf of BOMA Chicago Monday, hoping to invalidate the referendum before votes are counted on March 19.

BOMA initially succeeded in striking a question on increasing taxes on property sales of more than $1M from the ballot when a Cook County Circuit Court judge ruled in its favor in late February. But a 1st District Illinois Appellate Court judge overturned that decision last week.

“The referendum question is misleading and manipulative, and we believe it is important to see this through,” BOMA Executive Director Farzin Parang told Crain's Chicago Business. “The appellate court’s opinion implies that an illegal referendum cannot be challenged until after an election — after voters have already been harmed. Given the importance of this topic, we will ask the Illinois Supreme Court to hear an appeal.”

The tax measure would establish a tiered system to reduce the burden on property sales of less than $1M to 0.6% and increase the rate on larger sales. The transfer tax on sales between $1M and $1.5M would be 2%, while the transfer tax on property sales over $1.5M would go up to 3%, quadrupling the current rate. The city would put tax revenue toward fighting homelessness in Chicago. 

BOMA kicked off the legal battle in early January when it filed a lawsuit to stop the vote, objecting to the referendum on several grounds:

• The ballot language asks a three-part question that requires voters to weigh in with a single yea or nay on three separate policies, in violation of municipal code and the Illinois Constitution.
• The portion of the proposal that would lower taxes on sales smaller than $1M doesn't belong on a ballot, in violation of a state statute that only allows the city council to hold referendums on increases.
• State Supreme Court precedent requires that referendum questions be self-executing, or able to stand on their own.

Maxica Williams, chair of the End Homelessness Ballot Initiative Committee and board president of the Chicago Coalition for the Homeless, told Crain's that the city's voters have a right to a legislative process free of interference, which she said the appellate court confirmed in its decision. 

“The real estate lobby continues its efforts to silence Chicago voters on a popular referendum to address a housing crisis they have created and benefit from — all while 68,000 people have no stable place to stay,” Williams said. “Chicagoans know what’s right for their communities — not billion-dollar developers who hide behind PACs and throw roadblocks up in the democratic process.”

As the referendum nears, supporters and opponents of the tax measure have been rallying the troops and spending big outside the courtroom. Most recently, the Chicago Teachers Union and other referendum allies organized an event to get students to the polls ahead of next week's election, Illinois Policy reports. The CTU is asking its members to get voting-age students, those who will turn 18 by the general election in November, to attend a rally that culminates in a trip to an early voting station, according to Illinois Policy. 

CRE interests have a lot on the line with the referendum. Sales of nonresidential properties would account for about 75% of the increased tax revenue, or an average of about $120M of the $160M the tax would generate per year, according to a University of Chicago analysis.

Parang told Crain's the city is lacking a detailed plan for how it will effectively help people who are homeless, as well as a sustainable revenue plan. 

“If passed, this referendum would create a backdoor property tax for everyone in Chicago,” he said. “It would give the city hundreds of millions of dollars in blank checks with no actual plan to support the homeless and no accountability.”