A coalition of real estate, construction and business groups want a judge to prevent voters from deciding the fate of a proposed real estate transfer tax to combat homelessness in the upcoming March primary election.
In a lawsuit filed Friday in Cook County Circuit Court the groups allege the ballot language combines multiple questions in violation of the Illinois Constitution and state law and should be barred from appearing on the March 19th ballot. The lawsuit is the latest effort from opponents to stymie the referendum question, which is a top priority for Chicago Mayor Brandon Johnson, progressive alderpersons and advocates in an effort to dedicate an estimated $100 million to prevent homelessness.
The plaintiffs attempting to block the referendum include the Building Owners & Managers Association of Chicago, the trade association for the city’s commercial office building industry, which boasts it represents “the city’s largest office buildings and a segment of Chicago’s commercial real estate heavily impacted by the proposed referendum,” according to the complaint.
The Chicagoland Apartment Association, the Neighborhood Building Owners Alliance, the Women Construction Owners & Executives (WCOE) Chicago Caucus are also plaintiffs, among others.
In November, the City Council passed a resolution to have Chicagoans decide whether a one-time tax on the sale of high-end properties should be adjusted to a tiered, marginal tax. Under the proposal, portions of property valued above $1 million would be taxed at higher rates, while property valued under that amount would see a tax cut. At least $100 million annually is estimated to be generated from the tax, which the city plans to use to address homelessness.
Plaintiffs argue in their lawsuit that state law lays out a specific process by which the city can adjust the real estate transfer tax, and that including a tax cut for properties under $1 million is unlawful. The lawsuit argues that state law requires a referendum to only impose a new transfer tax or increase an existing one, not decrease it. That, plaintiffs argue, is in order to prevent legislative “logrolling,” the practice of passing unpopular legislation by bundling it with a more favorable proposal.
The complaint argues it’s a “textbook example” of logrolling.
“It combines a popular idea (lowering taxes) with an unpopular idea (raising taxes) in order to carry the unpopular idea to passage,” the complaint argues.
The lawsuit also argues the ballot language violates the Illinois Constitution because it “is a compound question combining three separate questions,” and that voters should be allowed to decide each of the three tiered tax changes separately.
The ballot language specifies that the revenue generated from the tax will be used “for the purpose of addressing homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing in the City of Chicago.”
But opponents argue in the lawsuit that the language of “addressing homelessness” is not specific enough for voters to decide on and does not give “any further explanation to the voters as to what will, and will not, be done with the funds raised, and who will make those decisions.”
If approved by the voters, the issue would go back to the City Council to vote on implementing the tax changes in addition to passing an additional ordinance creating a dedicated fund for the revenue and specifying how the money will be used. The lawsuit argues the ballot question cannot “stand on its own” because it relies on alderpersons and city officials taking additional action.
The lawsuit is filed against the Chicago Board of Election Commissioners. In a statement Friday, spokesman Max Bever said as an agency independent of the city, the elections board is not the proper defendant in the case. He pointed to the city itself and the City Council as entities the lawsuit should be directed at.
“The Board has nothing to do with initiating this referendum question and it has no stake in the outcome of the referendum or litigation. The Board follows Illinois Election Code and places a question on the ballot as submitted by Chicago City Council ordinance and as certified by the City Clerk,” Bever said in a statement.
Ald. Carlos Ramirez-Rosa, 35th Ward, said multiple attorneys reviewed the ballot language to ensure it properly conforms with state law, and argued it is the latest effort by real estate industry groups to avoid having to pay increased taxes.
“They have misrepresented what this is and what it will do every opportunity that they’ve had, because they’re seeking to misinform the public because they’re trying however they can to avoid paying their fair share in taxes,” Ramirez-Rosa said. “This is their Hail Mary with this lawsuit.”
Doug Schenkelberg, executive director of the Chicago Coalition for the Homeless, which is part of the Bring Chicago Home campaign, echoed those sentiments.
“This lawsuit is 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,” Schenkelberg said in a statement Friday. “This legal challenge is a last-ditch, desperate attempt to deprive Chicago voters of their right to have their voices be heard.”
The campaign for the ballot initiative is starting to heat up ahead of the March primary. Volunteers in support of it plan to fan out across the city this weekend to knock on doors, as well as conduct virtual phone banks.
The Political Action Committee, “End Homelessness,” has disclosed raking in $719,052 in support of the referendum since the Council passed the referendum question in November. The vast majority of that cash came from the Michael Reese Health Trust and Service Employees International Union Healthcare of Illinois and Indiana.
At least one PAC in opposition to the proposal, the REALTORS® in Opposition to Real Estate Transfer Tax, has raised about $114,000 since then from the Illinois and national realtors associations.
Postcards paid for by the PAC last year, warned property owners in blaring capital letters, “Chicago Property Owners: Your Taxes Are Going Up!” before the resolution had been approved by the City Council and urged residents to oppose the measure.
Critics of the tax have argued the real estate transfer tax is not a stable source of revenue, and that increased taxes would trickle down to higher costs onto renters while leading to a slowdown in the real estate market – especially on commercial properties in Chicago’s downtown that is still recovering from a downturn in use amid the pandemic.
But advocates that aim to prevent homelessness for years have called on the city to create a dedicated funding stream to provide housing and support services for the rising number of people experiencing homelessness in Chicago. Affordable housing projects would be exempt from the tax increase, and the tax cut on property valued under $1 million dollars accounts for nearly 96% of all property sales in Chicago, Johnson’s administration has previously said.
Tessa Weinberg and Mariah Woelfel cover Chicago government and politics at WBEZ.