Ald. Edward M. Burke’s tax victories are costing City Hall millions

As an attorney in private practice, Ald. Edward M. Burke has cost Chicago taxpayers millions of dollars.

Since 2003, Burke and his small Loop law firm, Klafter & Burke, have won more than $18.1 million in property-tax refunds for Chicago property owners, records reviewed by the Chicago Sun-Times show.

Burke’s victories have cost City Hall more than $3.6 million in lost revenue.

City Hall gets about 20 cents of every property-tax dollar paid in Chicago. So the city has to pay back 20 cents of every dollar that’s refunded.

Burke, long the most powerful alderman in Chicago, has won those refunds by filing appeals with the Cook County assessor, the Illinois Property Tax Appeal Board and the Cook County courts.

The 14th Ward alderman and chairman of the City Council Finance Committee has found his greatest success in the courts, where he’s won $10.6 million since 2003 in refunds on 378 parcels within the city limits. That’s the same court system where, for years, Burke has used his political muscle to exert authority over who’s chosen to serve in the judiciary.

City Hall’s Law Department can challenge the lawsuits Burke files. But it rarely does that, filing a court challenge just once in the past three years, records show.

The Law Department says it doesn’t have the staff to step in and challenge every tax-refund lawsuit that’s filed by Burke and other clout-heavy law firms, including one headed by House Speaker Michael Madigan (D-Ill.). Since 2003, lawsuits have been filed seeking tax refunds for more than 31,000 parcels of property in Chicago.

City officials say they focus on the lawsuits that seek the biggest tax refunds. And that rarely includes Burke’sclients.

“The decision to intervene is based upon the value of the property and the amount of reduction being sought,” says Roderick Drew, a spokesman for the city Law Department. “The name of the law firm representing the taxpayer has nothing to do with the decision to intervene.”

City Hall relies on Cook County State’s Attorney Anita Alvarez, whose office is legally required to defend any tax appeal involving property in Cook County, whether it’s filed in court or before the Property Tax Appeal Board.

Burke often wins his tax fights by negotiating settlements with the state’s attorney’s office, which Alvarez has headed for five years.

Burke is a political supporter of Alvarez. He has hosted a campaign fund-raiser for her at his Southwest Side home. And political funds controlled by Burke or his wife, Illinois Supreme Court Justice Anne Burke, have given Alvarez more than $30,000 in campaign contributions.

James P. Nally, a lawyer for Alvarez’s campaign fund, minimizes her part in the tax cases. Nally says they are handled by her staff and that Alvarez “plays no role . . . and has absolutely no involvement.”

Burke is one of four lawyers at Klafter & Burke, whose other name partner, Melvin Klafter, died 25 years ago. The firm specializes in property-tax appeals. One Burke client has told the Sun-Times the alderman’s law firm gets 30 percent of any tax savings he wins.

Fifty-nine of his clients – which include major corporations such as AT&T, Commonwealth Edison and Walgreens – do business with City Hall or other Chicago governmental agencies, including the Chicago Board of Education, according to Burke’s most recent ethics statement.

Because of his law practice and his efforts to cut the amount of taxes his clients pay to City Hall, the Chicago Public Schools and other city taxing bodies, Burke has abstained from voting on issues involving his clients so frequently he is Chicago’s most-conflicted alderman.

This year, Mayor Rahm Emanuel’s administration sought to intervene in a lawsuit that Burke filed seeking a tax refund for the downtown headquarters of Blue Cross and Blue Shield of Illinois, which insures city of Chicago employees.

But officials say the city withdrew its objection when Alvarez’s office and Burke cut a deal, settling the lawsuit by refunding $99,383 from the $8.1 million tax bill the insurance company paid three years ago. The deal cost City Hall about $20,000.

Altogether since 2005, Burke has gotten the insurance company six refunds totaling $360,027. About half of that came out of the city public schools’ coffers and about another 20 percent from City Hall.

In another instance, Burke was the only alderman to abstain from voting when the city council voted 47-0 on Dec. 17, 2008, to buy Michael Reese Hospital on the city’s South Side for $91 million as part of then-Mayor Richard M. Daley’s failed plan to lure the Olympics to Chicago.

Burke, representing Michael Reese, ended up getting its owners a tax refund of $637,069, convincing the assessor’s office it had overvalued the hospital, which has since been torn down. The tax refund cost City Hall about $127,000.

Burke also does property-tax work for six of the 14 banks where City Hall keeps hundreds of millions of dollars on deposit. They include BMO Harris Bank, which had $38 million in city deposits earlier this year. Six years ago, Burke got the bank a property-tax refund of $105,373 on its building at 111 W. Monroe. Earlier this year, Burke won another refund – of $100,233 – on the Harris building, which the bank no longer owns but still occupies.

Burke’s firm has won more than $424,000 in refunds for Commonwealth Edison over the past eight years through appeals to the state and by suing to challenge the property assessments for 80 ComEd properties across the city. ComEd also has hired Burke to file tax appeals for some of its suburban properties.

Last December, Emanuel signed a measure that Burke co-sponsored and voted for that was touted as a way to cut Chicagoans’ utility bills by letting them buy electricity from ComEd or Integrys Energy, while guaranteeing that ComEd would continue to deliver electricity to consumers.

“ComEd has worked with Klafter & Burke for many years,” company spokeswoman Noelle Gaffney says, adding that the firm and others the utility uses are “paid a percentage of the refunds they generate” but declining to say how much that is.

Asked about his tax work, Burke notes that his tax lawsuits involve suing the Cook County treasurer’s office, which collects property taxes on behalf of local governments, and not City Hall – though the city still ends up having to pay when he wins.

“In the matters you cite, the city is not a party,” Burke writes. “If and when the city intervenes, the firm of Klafter & Burke withdraws, as the record clearly demonstrates.”

Besides the $18.1 million in tax refunds that Klafter & Burke has won since 2003 for Chicago property owners, it has won another $10.9 million for property owners in suburban Cook County, treasurer’s office records show.

Like many law firms that specialize in property-tax cases, Klafter & Burke tries first to persuade the county assessor and the Cook County Board of Review to lower the valuation set for its clients’ properties, thus lowering the amount of taxes they will have to pay. Often, it continues its efforts to cut their taxes even after the taxes have been paid, aiming to win refunds by finding an error in the assessment or filing appeals with the Illinois Property Tax Appeal Board or in court, or both. Since 2003, Burke’s firm has won Chicago property owners $1.6 million from “certificates of error” and $5.9 million in refunds from the state tax board. City Hall lawyers are legally barred from fighting the majority of Burke’s appeals to the state – those seeking less than a $1 million cut in the property assessment – under a 2002 measure Burke helped pass in the City Council, the Sun-Times has previously reported.

One of Burke’s top City Council aides, Michelle Murphy, the daughter of former U.S. Rep. Morgan Murphy Jr., is a first cousin of Bernard Murphy, who is one of the City Hall lawyers whose duties include fighting tax-refund cases.

Their late grandfather, Morgan Murphy Sr., served as chairman of ComEd in the 1970s.

City Hall says Bernard Murphy plays no role in deciding which property-tax lawsuits the city fights.