WATCHDOGS: The Donald & the Democrat; Burke saved Trump $11.7M
Ald. Edward M. Burke, one of Chicago’s most powerful Democrats, has saved Donald Trump $11.7 million in taxes on Trump Tower, the Sun-Times found.
A law firm headed by Ald. Edward M. Burke, one of Chicago’s most powerful Democrats, has helped Republican presidential candidate Donald Trump and investors in his luxury downtown hotel cut their property taxes by 39 percent over seven years, saving them $11.7 million, a Chicago Sun-Times analysis has found.
Burke — one of 47 Chicago aldermen who voted to approve development of Trump International Hotel & Tower in 2002 — won reductions in six of the seven years for the hotel, retail and other commercial space in the skyscraper, records show.
Now, Burke’s law firm, Klafter & Burke, is trying to get partial refunds of those taxes for the billionaire and his investors. The firm has filed appeals in court and to a state agency, arguing the taxes paid were too high in some years.
Burke is among an elite group of current and former Chicago politicians working for law firms that specialize in helping property owners navigate Cook County’s arcane property-tax system. These clout-heavy lawyers try to persuade other elected officials — the Cook County assessor, the Cook County Board of Review’s commissioners and judges — to lower the estimated values of buildings and other real estate.
When they succeed, that means lower property taxes for their clients — and higher bills for other property owners to make up the difference. The attorneys generally work for a percentage of the savings.
Trump first hired Burke’s law firm in 2006, according to a spokeswoman for Trump Hotels.
Trump didn’t respond to questions about how much he pays the Southwest Side ward boss or why he chose him over other property-tax lawyers.
Burke declined to comment.
Burke — a law school classmate of former Mayor Richard M. Daley and a former Chicago cop — replaced his late father as 14th Ward alderman in 1969.
Representing a predominantly Hispanic ward at City Hall, he has amassed a $10.4 million political war chest. He’s used that to bankroll the campaigns of politicians including former Gov. Pat Quinn and Cook County State’s Attorney Anita Alvarez — whose office ends up working against Burke when he sues county officials seeking lower property taxes for Trump and other clients.
Burke, 72, also is a powerful member of the Cook County Democratic Party, overseeing the committee that decides which lawyers the party endorses for judge.
In 2001, Trump decided to redevelop a coveted site on the Chicago River where the Sun-Times had operated in a seven-floor building since 1958. Originally, he was an equal partner with Hollinger International, the newspaper’s owner at the time. Trump eventually bought full control of the site amid a federal Securities and Exchange Commission investigation of Hollinger chairman Conrad Black, who ended up in prison for looting the company.
The 92-story residential and commercial skyscraper was under construction when Burke began handling property-tax appeals for Trump, county records show.
The alderman contested the values that then-county Assessor James Houlihan placed on the entire property in 2006, 2007 and 2008. Burke’s appeals were rejected by the Board of Review, a panel of three elected commissioners — two Democrats and a Republican — that decided Houlihan’s property assessments were correct.
In six of the following seven years, Burke was successful in persuading the assessor, the Board of Review or both to lower the assessments — and ultimately the tax bills — for commercial space including 339 hotel condominiums owned by Trump and his investors.
Burke also has filed separate appeals challenging the assessments on the tower’s 480-plus residential condos — when Trump owned them and after he sold them to buyers including Chicago Blackhawks star Patrick Kane. In addition to the money Burke has saved Trump and his investors on the commercial space, he has won tax reductions for Trump, Kane and hundreds of other residential condo owners.
To calculate the savings Burke got for Trump, the Sun-Times obtained county records showing the initial values the assessor assigned to each property in the tower and compared them to the final property values set by the Board of Review. The newspaper then calculated the tax cuts Burke won from the assessor and the Board of Review on the hundreds of tax bills for commercial property that county officials sent to Trump’s company — 401 North Wabash Ventures LLC — and to investors who bought dozens of hotel condos Trump operates.
In 2009, Burke saved Trump’s company almost $1.1 million when he got the Board of Review to slash the assessor’s estimated $141 million market value by 21 percent for the entire tower, which had yet to be subdivided into individual commercial spaces and residential condos. Trump paid $2.7 million in taxes that year.
Burke later went to court, seeking tax refunds from the Chicago Public Schools, City Hall, Cook County and other governments, arguing Trump’s taxes were “erroneous, excessive, illegal and void” because the assessor and Board of Review overvalued the skyscraper. Alvarez is fighting the suit. City Hall has intervened in the case. Because that created a conflict of interest for the alderman, Burke handed it off to another law firm.
In 2010, Burke saved Trump’s company almost $3.5 million by convincing Houlihan he’d overvalued the entire skyscraper. Houlihan lowered his $432 million estimation of the value to $122 million after Burke argued that most of the residential condos hadn’t been sold, the tower’s storefronts along the river were vacant, the hotel had largely been unoccupied and sales of hotel condos hadn’t worked out as planned. Burke’s law firm even called the concept of selling hotel rooms to investors a “failed business model.”
Trump ended up paying $3.9 million in taxes that year on the commercial space and hundreds of residential condos he had yet to sell.
In 2011, Burke saved Trump and his growing group of hotel investors $1.7 million by convincing Houlihan’s successor, Joseph Berrios, another powerful Democratic Party leader, that Houlihan had been overvaluing the commercial space, which was now taxed separately from the residential property.
“The hotel is NOT located in the prime Michigan Avenue hotel area, yet it is being valued greater than those established and better located hotels,” attorney Kelly Keeling Hahn of Burke’s firm wrote, adding, “The entire retail space of the building is un-leasable.”
Initially, Houlihan decided the commercial space owned by Trump and his investors was worth $75 million. Burke got that cut by 65 percent.
“Upon taking office, assessor Berrios realized that the previous administration had erred very significantly by over-assessing some of the property,” Berrios spokesman Tom Shaer says, explaining the retail space not only has gone unoccupied but hasn’t even been finished.
The Board of Review rejected Burke’s efforts to win Trump additional savings.
Trump and his investors paid $1.3 million in taxes on the commercial space in 2011 — less than half the taxes it had been facing.
In 2012, Burke saved Trump and his investors $1.7 million by getting Berrios to lower their property values, then persuading the Board of Review to lower them more. Initially, Berrios valued Trump’s properties at $103 million. Burke got that cut by 40 percent, resulting in Trump’s group paying $2.5 million in property taxes.
Burke is now appealing those payments before the Illinois Property Tax Appeal Board, seeking a partial refund.
In 2013, Burke won his largest savings for the Trump group — more than $3.5 million — after the assessor recalculated the skyscraper’s value as part of the every-three-year reassessment of all property in Chicago. Initially, Berrios valued the Trump properties at $129.3 million. Burke got the assessor to cut that by 60 percent. So the group’s tax bills totaled almost $2.3 million. Again, Burke has filed a lawsuit hoping to get a partial refund of the taxes paid.
In 2014, Burke lost his attempts to cut the taxes on the commercial space. Trump and his group paid $2.3 million in taxes that year.
Last year, Burke shaved $242,545 off the Trump tax bills by persuading Berrios to lower the latest assessments by 9 percent, cutting the market value of the commercial space from $56.4 million to $51.1 million. The Board of Review refused to cut further. Trump’s group ended up paying $2.3 million in property taxes. Burke again has filed suit seeking a partial refund.
This year, Burke’s firm appealed the Trump taxes again, seeking a 20 percent cut in the value of the commercial space.
“Having 80,000 square feet of vacant river walk space is an enormous detriment to the hotel,” Keeling Hahn of Burke’s firm wrote. “While the retail is at the bottom of one of Chicago’s luxury hotels, there is no market for retail space which has no direct access to major foot or car traffic.”
The Board of Review rejected Burke’s request, keeping the market value at $62.7 million.
Contributing: Data Reporting Lab editor Darnell Little
TRUMP’S ILLINOIS CAMPAIGN GIVING
Donald Trump and his businesses have made $92,294 in political contributions to Illinois candidates and political action committees since 2001, the year he announced plans for Trump Tower. The recipients:
Mayor Rahm Emanuel: $50,000
Cook County Democratic Party: $12,500
Former Gov. Rod Blagojevich: $9,000
Ald. Brendan Reilly (42nd): $5,500
Illinois Hotel & Motel PAC: $5,085
Former Gov. George Ryan: $5,000
Former governor candidate Edwin Eisendrath: $4,359
Green Industry PAC: $850
SOURCE: Illinois State Board of Elections