Civic Federation Highlights “Serious Concerns” with Mayor’s Proposed Real Estate Transfer Tax

By  Leigh Giangreco, Crain’s Chicago Business | March 13, 2024

The Civic Federation has “serious concerns” about the “Bring Chicago Home” ballot measure, which seeks to raise money for city programs combatting homelessness through a higher real estate transfer tax.

In an analysis released March 13, the fiscal watchdog group took aim at a proposal it says leaves questions open about the tax’s goals and could harm the city’s ailing commercial real estate sector. The March 19 ballot measure proposes a tiered structure that would lower the real estate transfer tax for properties under $1 million while raising the tax for those above $1 million. A third tier would raise the tax for properties above $1.5 million to 3% — quadruple the current rate.

“Our concerns focus on a lack of crucial information and analysis about the proposal, its implementation and its potential negative impact on the local economy,” the group said in its March 13 statement. “The city’s work on this policy proposal is incomplete. Given the stakes, it is critical that city leaders move quickly to meet the moment with additional public-facing details about implementation and analysis of possible consequences, both positive and negative.”

The organization echoed talking points from Bring Chicago Home’s detractors, who have argued the city has not laid out specific goals for how it plans to spend the revenue it would make from the higher transfer tax. The Civic Federation noted that the city has existing low-income housing programs, but contended that the city hasn’t done enough to articulate how Bring Chicago Home would fit into that wider policy picture.

“Without well-articulated goals and metrics and a full accounting of alternative or related measures that would mitigate Chicago’s existing housing challenges, it will be impossible for the residents of Chicago to hold the city accountable for whether funds generated by the new tax have actually helped to improve the lives of people who are experiencing or at risk of homelessness,” the Civic Federation said.

During a March 11 recording of the local political satire show “Good Evening with Pat Whalen,” City Comptroller Chasse Rehwinkel pushed back on the idea that the city has no plan for how it will implement the revenue from Bring Chicago Home. Rehwinkel did not express any opinions about the measure itself but simply said everyone is able to vote on March 19.

“Part of the budgetary season is collecting those ideas to figure out what you’re going to do in that year. So it’s kind of weird to say, ‘You don’t have a plan,’ ” he said. “The taxation itself is a special revenue fund. . . .It will always be to help with the homelessness issue. It will be determined in any given year what that looks like, depending on the structure of the City Council advisory board budgets, things like that. But, I think it’s a little disingenuous to say that there isn’t a plan when you’re talking about a special revenue fund.”

The Civic Federation is not arguing that the city has no plan but rather that the plan isn’t fully fleshed out, said Civic Federation President Joe Ferguson.

“On the revenue side, there has been no analysis and no accountability and no seeming consideration for the potential adverse consequences here,” Ferguson said, “given the state of the real estate market, especially downtown, and given the fact that there are all sorts of avoidance behaviors that we have seen in other cities.”

Though the Civic Federation acknowledged the proposal has some advantages, it characterized the tax as a “volatile, economically sensitive revenue source” that would shift the burden toward commercial properties at a time when the sector is still reeling from the COVID-19 pandemic. Earlier this month, retail vacancy in the Loop topped 30% for the first time, and 2023 closed out with record-high, downtown office vacancy.

Among the questions the Civic Federation says the city has not answered are the reasons behind the marginal rate structure for the tax. That very question is being argued in court, and the Civic Federation has not taken a position on the case.