BOMA Chicago Leads Coalition in Lawsuit to Halt $1M Property Transfer Tax Proposal

Amidst a contentious debate over a proposed increase in Chicago's real estate transfer tax, BOMA Chicago, in collaboration with a coalition of business entities, has filed a lawsuit aiming to prevent the measure from reaching the March ballot. The coalition, led by Chicago's Building Owners and Managers Association, seeks an injunction against the Chicago Board of Election Commissioners to halt the referendum scheduled for March 19. The proposed tax, initially approved by the City Council in November, is intended to fund initiatives combating homelessness, with nonresidential property sales expected to contribute the majority of the increased revenue.

Criticizing the Referendum

BOMA Chicago's Executive Director, Farzin Parang, asserts that the proposed referendum sidesteps meaningful public policy discussion, characterizing it as a cynical manipulation of voters. Parang emphasizes the need for stakeholders to collaborate on a thoughtful and realistic plan to address homelessness in the city. The coalition objects to the referendum on multiple grounds, including alleged violations of municipal code and the Illinois Constitution, contending that the ballot's three-part question format compromises voters' ability to express nuanced opinions on separate policies.

Unraveling the Tiered Tax System

The heart of the proposed tax lies in a tiered system that redistributes the burden of property sales. Sales under $1 million would face a reduced transfer tax of 0.6%, while larger transactions would see increased rates. The coalition argues against the inclusion of the tax on sales under $1 million, pointing to a state statute that limits referendums to increases only. BOMA and its partners emphasize that such laws were designed to prevent the bundling of unpopular legislation with more acceptable bills, a practice known as legislative log-rolling.

Challenging the Referendum Process

BOMA and the coalition ground their legal challenge in the claim that the referendum violates the Illinois Constitution and municipal code. They highlight state Supreme Court precedent, arguing that referendum questions should be self-executing, capable of standing alone. The coalition raises concerns about the lack of detailed plans for managing the homelessness fund and allocating funds, asserting that the proposed language leaves critical questions unanswered. Despite promises of an advisory board, the coalition contends that the city has not provided a comprehensive plan to address public concerns.

The Ripple Effects of a Controversial Tax

If approved, BOMA and its supporters argue that the transfer tax increase will have profound implications, impacting every neighborhood in Chicago. Critics, including Neighborhood Building Owners Alliance President Michael Glasser, contend that the tax exacerbates challenges in financing housing, especially affordable housing. With Chicago property values already in decline, particularly in the office market, concerns mount over the potential adverse effects on commercial real estate. As the debate rages on, stakeholders grapple with the delicate balance between funding homelessness initiatives and supporting the recovery of the city's commercial industry.