City couldn’t fight 98 percent of alderman’s tax appeal cases ruled on by state

Ald. Edward M. Burke, the most powerful member of Chicago’s City Council, is also Edward M. Burke, attorney at law. His specialty: getting property-tax cuts and refunds for an A-list of business clients that includes Commonwealth Edison, Northwestern Memorial Hospital, Avis Rent a Car and dozens of other companies that do business with City Hall.

As alderman, Burke helped pass a measure in 2002 that sharply limited City Hall’s ability to get in the way when his law clients go before an obscure state agency appealing for refunds of property taxes they thought were too high.

Burke (14th) was hardly the only alderman to vote for the resolution, which passed 47-0 and got so little attention at the time that even the head of the state agency it affects says he was unaware of it until now.

But unlike other members of the City Council, Burke had a financial stake in his vote, a Chicago Sun-Times investigation has found.

That appears to be a violation of the city ethics code, which bars elected officials from voting on matters that financially benefit themselves, though it’s unclear whether violators face any penalty.

In the decade since the City Council passed the measure, Klafter & Burke, the small downtown law firm the alderman heads, has won more than $3.1 million in tax refunds and interest payments by convincing the Illinois Property Tax Appeal Board to reduce the assessments for real estate the firm’s clients own in the city of Chicago, state and county tax records show. City Hall couldn’t challenge him in those cases or chose not to.

It’s not clear how much money Burke has made in these cases. He would not agree to an interview. One Burke client said the alderman’s law firm gets 30 percent of its tax savings.

When Burke wins, City Hall and other local governments lose. The city of Chicago has had to pay a total of more than $600,000 to Burke’s clients, most of the time without even being able to put up a fight.

As a result of the 2002 vote, City Hall has been shut out of 99 percent of all Chicago cases the state agency has decided, the Sun-Times found. The figure was slightly lower in Burke’s cases — 98 percent. Burke’s clients won refunds 92 percent of the time.

The measure that passed on Oct. 2, 2002, did two key things that benefitted Burke’s clients:

◆ City Hall can fight only the biggest appeals to the state tax agency — those seeking a cut of at least $1 million in the assessed property value. Most of Burke’s cases that have been decided by the Property Tax Appeal Board fell below that threshold, blocking any potential challenge by the city.

◆ With City Hall unable to fight most of his cases, Burke is spared the prospect of losing business. That’s because he routinely steps aside in the big-figure cases in which City Hall fights him, turning over those cases to a law firm, Deutsch Levy & Engel, whose offices are across the hall from the alderman’s firm. More than 20 years ago, Burke worked for the other firm in an “of counsel” position.

In a three-paragraph reply to a list of questions emailed to Burke at his request, the alderman declined to address the propriety of the vote he cast in 2002. He offered a brief defense of his clients’ appeals, saying they “are based upon appraisals of the properties or other legal arguments.”

In some cases, they clearly are also crafted to take advantage of the measure he helped pass.

For instance, six years ago, City Hall couldn’t challenge him when Burke asked the state tax agency to cut the assessment on a building in the Loop owned by AT&T. That’s because Burke asked for a property-assessment cut of $999,999 — exactly $1 under the amount at which City Hall could file an objection. There’s no indication that AT&T got a refund in that case, which was closed on Sept. 23, 2011. Burke has helped the company win millions of dollars in refunds in other cases. The Property Tax Appeal Board sometimes settles multiple appeals from a property owner with a refund in just one of the cases.

In another case, City Hall had to drop a challenge involving a Jewel supermarket at 94th and Ashland. Burke asked the state to cut the store’s 2002 property assessment by $1,008,855 — which would have brought Jewel a tax refund of more than $100,000. City Hall objected but had to back off when Burke’s firm lowered the assessment cut it was seeking below $1 million. Burke ending up getting Jewel a refund of $37,586.70.

The Sun-Times’ analysis also found that:

◆ City Hall could have disputed just eight of the 370 cases — just over 2 percent — the state tax board has decided involving Burke’s Chicago clients since the 2002 vote, all filed during Daley’s time in office. The city actually tried to challenge just two cases. And it ultimately dropped its objections in both. One was the 2002 Jewel appeal. The other involved a tax refund sought by a Gold Coast apartment building. The city’s lawyers dropped that challenge, saying the city’s policy is not to fight residential property owners seeking refunds.

◆ Since the 2002 measure was passed, City Hall has been blocked from being able to intervene in 99 percent of the appeals that the state Property Tax Appeal Board has decided.

◆ Chicago property owners have won more than $27.5 million in refunds in cases City Hall was barred from challenging. That includes cases filed by Burke as well as by other law firms — including the Loop firm headed by Illinois House Speaker Michael J. Madigan (D-Chicago).

◆ Those cases cost the city more than $5.5 million. The rest of the refunds were borne by the Chicago Board of Education, Cook County and other local governments. Other than the Board of Ed, those other taxing bodies rarely fight tax-refund appeals.

Burke, 69, who was first elected in 1969, is Chicago’s longest-tenured alderman and chairs the City Council Finance Committee, whose wide-ranging jurisdiction includes tax levies.

In many cases, clients seeking to reduce their real estate tax bite hire him to handle each possible step in the process — first asking the Cook County assessor’s office to reconsider its estimation of what a property is worth, then appealing that determination to the Cook County Board of Review. Burke often continues the appeals after the taxes are paid, going to the Property Tax Appeal Board, or to court, or both, seeking tax refunds.

Local governments can’t challenge the appeals until they reach the state board or court.

Though he would not answer most questions, Burke said he did not have a hand in writing the resolution that blocks the city’s involvement in most of these cases. Mayor Daley sponsored the resolution, and the mayor’s lawyers in the city corporation counsel’s office drew it up. Daley and Burke are longtime rivals who at that point had reached an uneasy political truce.

Mara Georges, who was Daley’s corporation counsel, said she suggested the resolution.

“I wanted some rules behind me,” says Georges, now partners with Michael Daley, the former mayor’s brother, in the law firm Daley & Georges. “I didn’t want anybody saying I was picking and choosing cases.

“It costs money to intervene. You have to have an appraisal.”

But a state official, speaking only on the condition of not being named, questioned why the city would limit its possible appeals.

“I would reserve the right to appeal any case,” the official said, noting that, when challenged, some property owners drop their appeals or lower the amount they’re seeking. “When the city’s in the business of fighting for every tax dollar you can get, you’d want to keep your options open. You’re supposed to be the watchdog of the funds.”

Contributing: Art Golab

Fact Box: The Tax-Limit Measure by the Numbers

$ 3.1 million – The amount in tax refunds and interest payments Burke’s law firm has won for clients.

$600,000 – The amount the city has had to pay to Burke’s clients.

99% –The percentage of cases the state Property Tax Appeal Board has decided that the city was unable to challenge thanks to the measure Burke helped pass.

$27.5 million – The amount Chicago property owners have won in refunds in cases City Hall was barred from challenging.