Chicagoans who show up at the polls on March 19 may not get the chance to authorize a fundamental change in tax policy to confront the longstanding problem of homelessness — at least not if a coalition of real estate and development groups have anything to say about it.
The coalition filed a lawsuit in Cook County Circuit Court Friday seeking to knock off the ballot the binding “Bring Chicago Home” referendum that asks voters whether to allow the City Council to raise the real estate transfer tax on high-end property sales to confront homelessness.
The suit asserts that the referendum measure is a “textbook example” of a time-honored, but illegal legislative tactic known as “log-rolling,” which combines a politically unpopular proposal with popular one to sugar-coat and therefore convince voters to swallow the bitter pill.
To appease the business community and minimize Council opposition, Mayor Brandon Johnson went along with a “three-tiered progressive structure” that frames the tax policy change.
The new tax rate on sales under $1 million would be .60%, down from the current rate of .75%. Sales of $1 million or over, but under $1.5 million, would entail a 2% tax, more than 2.5 times what they pay now. And sales of $1.5 million and higher would require a 3% charge, four times the current rate.
Farzin Parang, executive director of the Building Owners and Managers Association (BOMA), called that a classic example of “log-rolling.”
“You bundle a popular idea with unpopular ideas so you can get the unpopular idea passed,” Parang told the Sun-Times. “We don’t really have any reason for this tax decrease. It’s actually contrary to all of our rhetoric about progressive tax structures. But, we’re gonna throw it in there so that we can distract voters.”
“They included a tax decrease to incentivize people into quadrupling taxes,” Parang added. “There’s no public policy rationale for that. It’s pretty obvious that they did it as a bit of political cleverness/cynical manipulation. And a relatively straightforward reading of the state statute that governs how transfer taxes have to be increased in a referendum say you have to have a referendum to create a new transfer tax or increase a transfer tax.”
If Johnson and his City Council allies wanted to cut the transaction tax on property sales under $1 million, they could have “done that on their own months ago,” Parang said. Instead, they waited to throw it into the referendum that, by law, can only be used to “impose a new transfer tax or increase an existing transfer tax,” the lawsuit states.
By failing to offer voters a detailed explanation of how the $100 million will be spent, the suit claims, the City Council also violated the Illinois Supreme Court precedent that requires municipal referendums to be “self-executing” without “gaps to be filled” in later.
The suit seeks an order declaring the resolution a violation of both the Illinois Constitution and the state Municipal Code, along with injunction barring the Chicago Board of Election Commissioners from certifying the referendum for the March 19 ballot.
Ald. Carlos Ramirez-Rosa (35th), the mayor’s former City Council floor leader and Zoning chair, denounced the lawsuit as a “Hail Mary from very rich and powerful people who do not want to pay their fair share in taxes.”
“These are multi-national corporations. These are big-time, downtown building owners. They have been very opposed to the Bring Chicago Home referendum and proposal for a very long time. They tried to beat it in the Council. They couldn’t. They know that voters are ready to vote `yes,’ “ Ramirez-Rosa said.
“The city had attorneys prepare the referendum language to ensure that it met the requirements laid out under state law,” Ramirez-Rosa added. “I’ve already heard from legal experts who have looked at this specific complaint and said that it’s a stretch and that the city will likely prevail in court.”
Doug Schenkelberg, Executive Director of the Chicago Coalition for the Homeless, branded the lawsuit a “political maneuver, orchestrated to protect the interests of greedy landlords and multi-national real estate corporations at the expense of Black, Brown, working class, and homeless Chicagoans.”
“This legal challenge is a last-ditch, desperate attempt to deprive Chicago voters of their right to have their voices be heard,” Schenkelberg was quoted as saying in a statement.
Former Mayor Lori Lightfoot campaigned on a promise to raise the real estate transfer tax on high-end property sales to create a dedicated funding source to combat homelessness but broke that promise, infuriating what was her progressive base.
Johnson is determined to avoid that mistake to combat homelessness, a problem made worse by the ongoing migrant crisis.
The mayor’s office had no immediate comment on the lawsuit.