Downtown building owners call Emanuel’s tax relief plan ‘untenable’

Downtown building owners on Wednesday denounced as “simply untenable” Mayor Rahm Emanuel’s plan to raise the homeowner exemption and soften the blow of a $500 million property tax increase by shifting even more of the burden to commercial properties.

The Building Owners and Managers Association of Chicago said the 60 percent property tax hike for police and fire pension and school construction will be tough enough for downtown building owners and their business tenants to absorb.

If the Illinois General Assembly goes along with the mayor’s plan to hold harmless owner-occupied homes valued at less than $250,000, businesses will have to carry even more of the burden than they do now.

In Cook County, commercial property is assessed at a rate of 25 percent of market value compared with 10 percent for residential property. The higher the homeowner exemption goes, the more businesses will have to pay.

“The mayor’s property tax proposal completely disregards the unfair burden commercial buildings currently shoulder and the long-term impact on more than 10,000 business tenants in Chicago’s downtown that will ultimately pay the bill,” Ron Tabaczynski, director of government affairs at BOMA/Chicago, said in an emailed statement.

“Already commercial buildings are assessed 250 percent of residential building assessments and pay more than 2.5 times the property taxes on equitable values — most of which is passed on to business tenants, both small and large. We believe Chicago taxpayers are sophisticated enough to realize that saving a few hundred dollars on residential property taxes won’t compensate for lost jobs and lost tax revenue when businesses opt to relocate, scale back or close their doors as a result of this unprecedented property tax hike.”

Tabaczynski said the $500 million property tax increase “would have resulted in an overall tax bill increase of about 12 percent,” but only if the record increase were fairly “distributed” between residential and commercial properties.

“The expansion of the homestead exemption credit, however, shifts the majority of the burden for this increase onto commercial properties, meaning that commercial properties could see increases of 20 percent or more in property taxes. That’s before additional increases are considered for schools, parks and other property tax levies,” he wrote.

“An increase of this magnitude is simply untenable for many businesses occupying commercial buildings.”

Earlier this week, Emanuel sloughed off the gripes and fears of downtown building owners and their local Ald. Brendan Reilly (42nd).

The mayor likened those sky-is-falling complaints to what happened in 2011 when he raised Chicago’s already-high hotel tax in his first city budget.

“A lot of the hotel industry was nervous then. They were critical. That was 8,000 rooms ago. We’ve added 8,000 rooms both built and are being built right now. Record tourism, convention and hospitality growth in the city. And as you know, we have two new office buildings going up in the city. One of ‘em was done on spec,” Emanuel said.

“So, while there will be a change, it will be done fair and progressive and we’ll continue to promote a business environment that fills up these office buildings in a way that also has built up our hotels.”

The mayor added: “I’m committed to making sure that seniors on fixed incomes, people who go from paycheck to paycheck at the end of the month are held harmless. … It is fair. It is equitable. It’s progressive.”

The warning from downtown building owners may well be a moot point.

Despite the mayor’s appeal to reconsider, Republican Gov. Bruce Rauner appears to be dead-set against the mayor’s plan to increase the homeowner exemption.

Rauner has insisted on a two-year statewide property tax freeze as part of the package of pro-business, anti-union reforms that triggered the state budget stalemate.

Signing off on Emanuel’s plan to raise a homeowner exemption that now stands at $7,000 of a home’s assessed valuation could not only undermine Rauner’s agenda and weaken his political hand. It could saddle the governor with some of the blame for the largest property tax increase in modern Chicago history.

“We applaud the mayor for proposing a property tax freeze for some families, but he should support a property tax freeze for all Chicagoans. The mayor should only consider a property tax increase in the context of structural reforms that give homeowners and job creators faith in the future of Chicago,” Rauner’s spokesman Mike Schrimpf said in an emailed statement.

“Too many areas of Chicago are already suffering from massively high unemployment and are unattractive to businesses and manufacturers that provide good-paying jobs. We shouldn’t make that problem worse, which is what a property tax hike without structural reforms will do.”

Schrimpf noted that Rauner has offered almost $500 million in financial relief for his old friend Emanuel. That includes $200 million in increased annual payments for the Chicago Public Schools “while protecting the district’s special $600 million block grant deal” and nearly $250 million more in annual savings through “structural reforms.”

“The mayor can and should do a lot more to reform the city’s finances if he wants the governor’s support,” Schrimpf wrote.