Johnson prepares appeal of real estate’s win in transfer tax fight

Mayor Brandon Johnson’s administration is doubling down on squaring off with Chicago’s real estate industry.

Officials on Monday announced plans to appeal a judge’s order that blocked City Hall from intervening in a lawsuit won Friday by industry trade groups that invalidated a ballot initiative that would hike property transfer taxes, if passed by voters in the March 19 election.

In a major blow to the city’s proposed transfer tax referendum, known as Bring Chicago Home, Cook County Judge Kathleen Burke denied the city’s request to become a party to the lawsuit on Friday and then went a step further to grant trade groups’ request to stop votes on the referendum from being counted.

Now, the city has filed a motion to prevent these orders from taking effect as it plans to appeal Burke’s order that blocked it from joining the lawsuit. The suit was filed against the Chicago Board of Elections by industry groups led by the Building Owners and Managers Association.

Attorneys for the industry groups argued that asking voters about both a tax decrease for sales prices under $1 million and an increase for real estate deals totaling $1 million or more constitutes a version of “legislative logrolling” that is prohibited in order to prevent voters from deciding on proposals that would turn both popular and unpopular policies into law with one action.

Attorney Michael Forde, who specializes in commercial litigation, said the city’s appeal will be an uphill battle given that Burke denied its motion to intervene in the case based partly on the fact that it was not filed in a timely manner. The trade groups filed suit on Jan. 5, and the city didn’t try to intervene until 35 days later. 

“I don’t think that either the trial court or the appellate court will have much sympathy for the City, given the trial court’s perception that it was too late to intervene,” Forde said in a written statement Monday.

In its motion filed Monday, city attorneys cited past cases where motions to intervene have been filed along similar timelines and appellate courts allowed the party to join the case. It claimed that Judge Burke did not cite any legislation or case law in deciding that the city did not ask to intervene soon enough.

The lawsuit filed by trade groups alleges violations of the Illinois Constitution and the Illinois Municipal Code.

The city filed a motion to intervene on the basis that the lawsuit had been filed against the wrong party — the Chicago Board of Elections — and argued that the Board would not be able to “adequately represent the city’s interests” given that it only handles matters of election code, not the municipal code.

Since Judge Burke did not let the city intervene, there was no one to put up a “substantive” defense against the trade groups’ arguments, city attorney Scott Crouch wrote in the motion filed Monday.

“This is because the Board defendants were not authorized to raise such arguments,” Crouch said in the motion. He said that during the proceedings, one of the Board of Elections attorneys even said it was “improper for the Board to weigh in on the referendum’s constitutionality.” 

Crouch argued that the city wasn’t given a fair shake and that it will be impacted if it is not able to implement the new tiered transfer tax structure, which is intended to fund services for the homeless.

Attorneys for the trade groups, Michael Kasper and Michael Del Galdo, refuted this argument in court on Friday, saying that the Chicago Board of Elections is the right entity to sue given that it oversees elections. Kasper and Del Galdo filed a motion asking Burke for a final decision on the lawsuit and the Board of Elections was given the opportunity to file a response to that motion, which it did.

Proponents of the referendum have encouraged voters to still vote on the ballot question over the next few weeks as the judge’s ruling could be overturned if it goes to the appellate court.

Early voting began on Feb. 15 with the referendum question printed on the ballots of all Chicagoans as the Friday ruling was issued too late in the process to exclude it. Early voting and vote by mail will not be paused, according to a statement from the Chicago Board of Elections.

“This is subject to change by future court order, so the votes for the question are being sequestered but will not be counted at this time,” Board of Elections spokesperson Max Bever said Monday. The Board of Elections will decide whether it will file its own appeal on Tuesday. 

Crouch also argued that Burke should grant the city’s motion for a stay as it appeals the case out of respect for the electoral process.

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.

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.