Fourteen years ago, the Chicago City Council agreed to build a parking garage at Midway Airport for car rental companies, but Ald. Edward M. Burke (14th) abstained from voting because he represented two of the rental agencies that would lease space there.
Now, the city’s longest-serving alderman has helped Avis and Budget drastically reduce their property taxes at the garage, getting them refunds and interest totaling $1,936,380.91.
Those are among the biggest tax refunds Cook County has issued in the past 10 years.
The alderman’s law firm, Klafter & Burke, collected two refund checks totaling $877,970.81 on Feb. 1. On Monday, Cook County Treasurer Maria Pappas issued two more refund checks totaling $1,058,410.10 for the car rental businesses owned by Avis Budget Group.
Subtracting the refunds Avis Budget got for 2013, 2014 and 2015, it ended up paying a total of $3.1 million in taxes.
And another refund — of more than $400,000 — is in the pipeline.
The refunds came after federal authorities charged Burke with shaking down a Burger King operator in his Southwest Side ward by withholding approval for city permits to obtain legal business for his law firm.
Burke hasn’t been charged with any crimes related to the tax refunds he obtained for the car rental companies.
Burke was able to get the tax refunds by convincing former Cook County Assessor Joseph Berrios that his staff wildly overestimated the value of the business the car rental companies were doing on the city-owned property.
Berrios acknowledged that his staff made mistakes in calculating the value of the business done by all seven of the car rental companies that lease space in the Midway garage, according to a Chicago Sun-Times analysis of records from the assessor’s office, the treasurer and the courts.
Altogether, Berrios admitted 18 tax assessments made by his office were wrong and issued what are called certificates of error for each of them, records show.
Those certificates of error — some that still await final approval and payment — add up to $3.7 million for the seven car rental agencies.
But records show that only four of the companies have gotten refunds — the two represented by Burke and two others, National/Alamo and Enterprise, represented by the law firm of Burke’s political ally Victor Reyes. Reyes Kurson Ltd. has gotten them $1.2 million in refunds and interest.
Those car rental companies ended up paying $1.36 million in property taxes for those years — 2013, 2014 and 2016.
Reyes’ clients also are expecting additional refunds.
The three other companies at the Midway garage — Hertz, Thrifty and Dollar — aren’t in line for refunds because their attorney, Richard Worsek, caught the errors before the tax bills were due. Berrios reduced their assessments and issued “certificate of error hand bills” so they could pay property taxes on the revised valuations in advance of getting final approval from a judge.
“These were major mistakes made by the county,” Worsek says. “Needless to say, we were not about to have our clients unnecessarily pay hundreds of thousands of illegally imposed taxes and wait two-plus years to get their money back.”
Berrios’ errors have resulted in the Burke and Reyes clients getting refunds of as much as 60% on some of their real estate tax bills since the garage opened in 2013, the Sun-Times found.
Those refunds will cut into the money that would go to fund the Chicago Public Schools, City Hall and other government agencies.
Berrios was voted out of office last year amid accusations he failed to accurately assess the value of businesses and homes, leading to inaccurate tax bills. He didn’t respond to messages seeking comment.
His daughter Vanessa Berrios, who was the assessor’s director of industrial and commercial assessments, approved three of the certificates of error for Burke’s clients.
“I don’t have any recollection of this,” she says of the assessment errors on the Midway parking garage.
Fritz Kaegi defeated Berrios and has been the county assessor since December.
His spokesman Scott Smith says: “We haven’t seen any information that explains the thinking that went into these reductions. In the prior administration, the documentation for why certain decisions were made on commercial assessments has either been missing or is insufficient.”
Berrios also issued certificate of error hand bills to the Burke and Reyes clients who could have paid lower taxes for 2013 and 2014, but instead they paid the erroneous bills and then relied on their politically connected lawyers to get them huge refunds.
Burke, who remains in office while awaiting trial on the federal corruption charges, and his law firm didn’t return messages seeking comment.
Burke reported that Avis and Budget were clients in his ethics statements filed with City Hall, but he doesn’t disclose what he’s paid.
In a written statement, Reyes Kurson Ltd. says its clients “paid real estate tax bills that were based on erroneously inflated assessments . . . and the company is entitled to receive refunds equal to the amount of its overpayment.”
The tax problems date to May 2013, when the car rental companies began leasing space at the new parking garage that the city built for them.
On July 27, 2005, the City Council agreed to build the Midway garage, planning to pay for it with borrowed money that would be repaid by airport revenues.
But the project remained on hold until May 2011, when Mayor Richard M. Daley signed a contract shortly before leaving office to hire Walsh Construction, another client of Burke’s law firm, to build the garage. The final cost was $74.8 million, with Walsh getting $53.3 million, according to a city aviation department spokesman.
The car rental agencies banded together to lease the garage from the city for 30 years, paying the city about $6 million a year in rent. The garage at 5150 W. 55th St. opened in May 2013.
The companies should have begun paying leasehold taxes — the mechanism used to charge property taxes for businesses operating on government-owned land.
But the companies didn’t receive any property tax bills for nearly two years because the assessor didn’t create individual property identification numbers so taxes could be collected from each company.
Why that took until January 2015 isn’t clear.
The companies got their first bills later that year.
That’s when Worsek began challenging the assessments, arguing that Berrios’ office had overvalued the property, failed to treat each company the same and left them with unreasonable property tax bills.
Worsek’s protests led Berrios and the Cook County Board of Review to lower the assessments that year by as much as 60%.
That left Hertz, Thrifty and Dollar paying a total of about $760,000 in property taxes, or about 37% of the $2.1 million overall tax bill for the garage.
Burke and Reyes didn’t challenge those initial assessments. And they didn’t challenge the assessments in 2016, when Berrios also issued “omitted assessments” to retroactively collect property taxes from the seven companies for 2013 and 2014, when they weren’t taxed at all. The companies also were charged interest on those retroactive bills.
The result was that each of the car rental companies got three tax bills that year — covering 2013, 2014 and 2016, all payable in 2017.
Since all of the refunds that Burke’s and Reyes’ firms got for their Midway clients involved assessment reductions of more than $100,000, the Cook County state’s attorney’s office had to bring the cases before a Cook County judge for approval. Such requests are routinely approved.
Though school boards and other taxing bodies can challenge property owners’ efforts to cut their taxes by getting their assessments lowered, they are not allowed to fight refunds when the assessor admits a mistake and issues a certificate of error.
Contributing: Darnell Little, Peter Metros