Judge blocks Johnson-backed transfer tax referendum from voters

Major win for Chicago commercial real estate industry and a blow to mayor’s signature campaign promise

Judge Declines to Let City Hall Intervene in Transfer Tax Lawsuit
Mayor Brandon Johnson, Kasper & Nottage's Michael Kasper and BOMA's Farzin Parang (Getty, Kasper & Nottage)

In a major blow to Chicago Mayor Brandon Johnson and a win for the real estate industry, a Cook County judge on Friday blocked a referendum that could have raised the city’s transfer tax on large property sales that was set to be decided in next month’s primary election.

The referendum, called Bring Chicago Home by its supporters, will still appear on the March 19 ballot for Chicago voters as it’s too late in the game to take it off, but the judge ruled in favor of real estate trade groups that filed a lawsuit in January to suppress the voting results on the transfer tax changes.

“This referendum would be a backdoor property tax on all Chicagoans, and it is important that our elected officials not mislead voters otherwise,” Farzin Parang, head of the Chicago chapter of office building trade group Building Owners and Managers Association, said in a statement.

Also on Friday, Judge Kathleen M. Burke denied the city’s motion to intervene in the lawsuit, which was brought against the Chicago Board of Elections by a slew of industry groups spearheaded by the Building Owners and Managers Association. Neither City Hall nor the Board of Elections have decided whether to appeal the ruling, but both are considering such a move.

“We are disappointed in the court’s ruling, but will be exploring every legal option available,” Johnson’s office said in a statement. “We firmly believe the referendum is legally sound and the final arbiter should be the voters of the city of Chicago.”

Burke also denied the Board of Elections’ motion to dismiss the lawsuit during the more than two-hour hearing.

The board put out a statement Friday that it is waiting on Judge Burke to file a written order on the results of Friday’s hearing before making its next move.

“The Chicago Board of Election Commissioners has not yet moved to appeal this decision and is still evaluating its options,” board spokesperson Max Bever said. “Early voting and voting by mail in Chicago will continue until the board is directed otherwise.”

Attorneys with the city declined to comment Friday on whether they planned to appeal the ruling.

The plaintiffs called the combination of both a tax decrease for sale prices under $1 million and an increase for real estate deals totaling $1 million or more a version of “legislative logrolling” that’s prohibited in order to prevent voters from deciding on proposals that would turn both popular and unpopular policies into law with one action.

Moving forward, either the Board of Elections or the city can choose to appeal Judge Burke’s decision with the appellate court, according to Ed Mullen, an election attorney working with the ballot initiative. If they do, things could move quickly.

“We’ve seen cases like these go from the Board of Elections to the Supreme Court in 30 days,” Mullen said in an interview.

Judge Declines to Let City Hall Intervene in Transfer Tax Lawsuit
Advocates of the Bring Chicago Home campaign stand silently as Ed Mullen, an election attorney working with the ballot initiative, answers questions about a Cook County Circuit Court judge’s decision to block voters from weighing in on the real estate transfer tax referendum.

Voters should still plan to cast their vote on the ballot question as they go to vote over the next few weeks as the judge’s ruling could be overturned if it goes to the appellate court, Bring Chicago Home campaign organizers said Friday.

The pews of courtroom 1704 in the Richard J. Daley Center were packed as Burke read her ruling late Friday afternoon. Advocates with the Bring Chicago Home campaign waited eagerly. When the decision finally came down, the room erupted in protest with the organizers chanting “68-K, need a place to stay.” 

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They were referring to the approximately 68,000 people in Chicago who are homeless and living on the streets, in shelters or living “doubled-up” by sleeping on the couches or floors of other people, according to the campaign’s website. This is the case for Bring Chicago Home supporter Shantonia Jackson’s adult daughter, who has been living with Jackson in her home that she can barely afford to keep, Jackson said.

“It’s supposed to be my city, my vote. And [Burke] just got through telling me that my vote doesn’t matter,” Jackson said in a press conference after the ruling.

The city requested to intervene in the lawsuit on the grounds that the trade groups had filed suit against the wrong entity, given that they claimed the ballot language violates Illinois Municipal Code, the city’s attorney, Susan Jordan, said in a hearing held last week.

The named defendant, the Chicago Board of Elections, does not deal with matters of Illinois Municipal Code but rather matters of election code, Jordan said. The city also claimed it had a right to intervene because its interests wouldn’t be adequately protected without being brought into the case and it would be adversely affected by the outcome of the case.

“Voters’ rights have just been disenfranchised by the real estate corporate elite who will use their money and their attorneys and their judges and their power to disenfranchise Black and brown voters,” Crystal Gardner, another organizer and deputy political director of labor union SEIU Local 73, said.

The trade groups claimed that the referendum shouldn’t be held because the ballot language would ask voters to weigh in on a new tiered system for taxing real estate sales in Chicago by posing more than one question. To do so, it would ask voters to approve a transfer tax decrease for sales under $1 million and two transfer tax increases — one for sales from $1 million to $1.5 million and another for sales over $1.5 million.

“This transfer tax hike would have resulted in serious ramifications in local neighborhoods,” said Michael Glasser, president of the Neighborhood Building Owners Association, one of the plaintiffs. “This measure would have amplified the cost of [affordable housing] investments without making housing more accessible, affordable, or improved in any way. It’s difficult to understand how this increase would have helped the homelessness.”

If passed by a simple majority of voters, the referendum would have increased the real estate transfer tax imposed on sales of more than $1 million to fund services for people experiencing homelessness, including quadrupling the 0.75 percent rate the city currently charges for deals over $1.5 million to 3 percent of the sale price.

Under the now-stalled proposal, the rate would have dropped to 0.6 percent for property trades less than $1 million, affecting the majority of local home purchases. Advocates of the plan estimated that upward of 95 percent of sales would get a transfer tax decrease. They also estimated that the tax would generate an additional $100 million in dedicated funds for homeless services each year.

In a years-long push dating to at least when Lori Lightfoot was mayor, Bring Chicago Home advocates had initially sought to increase real estate transfer taxes on all sales over $1 million without the tiered approach. Lightfoot campaigned on increasing the city’s transfer tax but didn’t deliver, upsetting progressive voters.

Johnson’s camp introduced the tiered element in what was viewed by some as a compromise with the real estate industry, and that was the version Chicago City Council ultimately approved for the ballot.

The funds generated by the proposed transfer tax increases would funnel into a dedicated fund overseen by an advisory board, lawyers for the Board of Elections wrote in a legal brief read by the judge. The referendum resolution passed by the City Council on Nov. 7 states that the funds would be used for “combatting homelessness, including providing permanent affordable housing and the services necessary to obtain and maintain permanent housing.”

Some of the dedicated funds would also go toward beefing up the number of shelter beds the city has available in case of extreme weather conditions.

The landlord and developer trade groups who sued are still open to finding other solutions to fund services to combat homelessness and affordable housing construction.

“Every renter and property owner in the city should be pleased with the court’s decision today. The most important thing that we can all do now is sit down together to develop a real plan for better homelessness prevention and to further housing stability,” said Jeff Baker, CEO of Illinois Realtors, which was set to dedicate $1 million toward the political campaign against the transfer tax hike leading up to the March 19 election.

Bring Chicago Home advocates also raised more than $1 million to campaign in support for the measure.