Wrigley deal: Bars, rooftops get home-run breaks on property taxes

Welcome to Wrigleyville: Home of the world champion Cubs — and some of Chicago’s best deals on property taxes.

Take Casey Moran’s, one of the most popular bars in the booming neighborhood.

Two years ago, Cook County Assessor Joseph Berrios reclassified Casey Moran’s from commercial to residential property after its owner, Kevin Killerman, created a tiny apartment above the bar. That drastically cut Killerman’s property taxes by 60 percent, saving him more than $110,000 so far.

A block away, Berrios similarly has classified a two-story bar called Trace as residential property, even though a bartender there says there aren’t any apartments on the property. That’s saved its owners more than $17,000 in property taxes this year.

And the Ricketts family, owners of the Cubs and Wrigley Field, have saved hundreds of thousands of dollars in taxes on 10 apartment buildings known as Wrigley Rooftops. All are classified as residential property — even though their rooftop bleacher businesses generate far more revenue than their residences, records show.

Around Wrigley Field, bars and restaurants compete for customers. But when it comes to property taxes, they operate on an uneven playing field, a Chicago Sun-Times investigation has found.

Cook County is the only county in Illinois that taxes residences less than commercial property. That tax break is extended to thousands of buildings that include both businesses and apartments, resulting in lower tax bills for their owners — while forcing the rest of the county’s taxpayers to pay more.

Nowhere is that more apparent than in Wrigleyville, where the owners of some buildings have saved as little as $16,000 in real estate taxes this year and as much as $175,000 because they have at least one apartment in buildings primarily devoted to business.

This is the result of a law the Cook County Board passed 17 years ago at the urging of then-Assessor James Houlihan to give property-tax breaks to “mom and pop” businesses operating in storefront buildings across the city and suburbs — primarily buildings that aren’t larger than 20,000 square feet and have no more than six apartments.

They get taxed based on 10 percent of their properties’ assessed value — the same as the owner of any bungalow or split-level home in Chicago or the Cook County suburbs. Property that’s classified as commercial is taxed on 25 percent of the assessed value.

That’s led to widespread inequities for property owners in Wrigleyville, where many bars are taxed at the higher commercial rate, in some cases even as the bar next door is taxed on the much lower residential-assessment formula.

The Sun-Times examined the property taxes of 65 buildings with bars, restaurants and other businesses around Wrigley Field. The assessor has classified 32 of them as residential because they include at least one apartment — which doesn’t even need to be occupied to earn the tax break.

Collectively, those 32 properties paid $1.6 million in taxes this year — about $2 million less than they would have paid if they were taxed as commercial property, the Sun-Times found.

Had the law never been passed, it’s unlikely the properties’ owners would have paid that full $2 million, as they’d undoubtedly argue that some parts of their buildings should be taxed as commercial and others as residential. Still, those so-called split assessments would generate more tax revenue from those buildings than are currently paid, experts say.

The properties include 13 apartment buildings along Sheffield and Waveland avenues where fans flock to rooftops to watch the Cubs play. Over the past few years, the Ricketts family has bought 10 of those buildings, paying $872,933 on them in property taxes this year — about $1.3 million less than they would have paid if they were classified as commercial real estate.

The rooftop building with the largest property-tax bill is owned by George Loukas, who also owns the famous Cubby Bear bar and manages the rooftop buildings owned by the Ricketts family. Loukas paid $188,756 in taxes on his rooftop this year. It’s one of only three rooftop buildings that are taxed as commercial property, not residential.

Treating a business as a home for tax purposes is so lucrative around Wrigley Field that many landlords are saving more on their property taxes than other neighborhood businesses have to pay, including Luis Auto Repair, which is across the street from the ballpark.

The body shop’s taxes have doubled over the past five years, leaving owner Luis Resendiz with a much larger tax bill than many of the bustling bars. He’s now in danger of losing his property because he hasn’t paid his taxes for the past two years, owing more than $78,000 to an Atlanta company that paid his delinquent taxes.

Few property owners in Wrigleyville would discuss the disparity in property taxes. “I would be f—ing myself if I talked to you,’’ one business owner told a reporter.

Property taxes have risen so much in the neighborhood that Ald. Tom Tunney (44th) says he advises businessmen to follow his example. He decided several years ago to move his Ann Sather restaurant by half a block to a storefront building with apartments upstairs so he could cut his taxes.

“When I talk to business owners, I’ve tried to educate them on this issue,” Tunney says. “I ask them, ‘Can you put an apartment upstairs?’ ”

Cook County has 13,984 properties that have storefronts with no more than six apartments. Eighty percent of them are in Chicago, and 1,087 are in Lake View Township, which includes Wrigley Field.

The assessor has no mechanism to verify the existence of the apartments in those commercial buildings, though Berrios spokesman Tom Shaer says the office often gets copies of leases, rent rolls and other documents from building owners trying to convince the assessor that their properties are worth much less than the county estimates.

Laurence Msall, president of The Civic Federation, a tax-policy organization, questions the county’s policy of giving tax breaks to some commercial property owners solely because their buildings include apartments, saying the move hurts everyone else.

“Everybody in the taxing district ends up being taxed at a higher rate for the gift that’s given to some property owners,” Msall says.

Under the Cook County ordinance, though, Shaer says the assessor has no choice but to give the cheaper residential classification to any commercial property that includes six apartments or less, provided the building is less than 20,000 square feet.

Pete Silvestri, one of the Cook County commissioners who voted to reduce the property taxes on the storefront buildings that also contain apartments, says the ordinance was never intended to give tax breaks to bars or rooftops in Wrigleyville. Silvestri, R-Elmwood Park, says the county board should re-examine the impact of the ordinance.

To do that might entail a deeper analysis of the nearly 14,000 properties affected by it.

“None of these things were the intent,” Silvestri says. “It was to help mom and pop stores that were failing . . . to give them some property-tax relief to compete against these massive developments.

“I can guarantee you that nobody brought up rooftops or successful bars,” the commissioner says, suggesting that the county give split tax bills so the commercial space is taxed more than the residential space.

Killerman’s bar is one of the few businesses that pays less in property taxes than it did five years ago, when the Cubs finished in last place.

The owner of several bars on the North Side, Killerman also has had a stake in the company that sells beer at Lollapalooza. He spent several years trying to cut his property taxes on Casey Moran’s by filing appeals to lower the value the assessor placed on the property at 3662 N. Clark St., which the county says is worth $1.9 million.

His luck changed two years ago when he hired Steven Pearlman, a property-tax attorney who, like many other lawyers who seek tax-assessment reductions from Berriors’ office, has contributed to the assessor’s campaign fund.

Pearlman filed documents with Berrios that said Killerman had a small apartment on top of the bar, a space that had once been used as the “owner’s lounge.”

Those documents show that a female employee of Casey Moran’s leased the apartment for $700 a month — a lease that saved Killerman $51,751 in property taxes after Berrios reclassified the property from commercial to residential. As a residential property, Killerman paid $36,436 in taxes last year, but he would have paid $88,187 if the bar remained classified as commercial, county records show.

This year, Killerman paid $39,834 instead of $99,586, a savings of $59,752.

When a reporter visited the apartment on the third-floor of the bar’s turret, a woman answered the door, saying no one lived there — and there was no apartment. She then closed the door.

Killerman hung up on the reporter. His attorney didn’t return phone calls.

A block north of Casey Moran’s, the owners of Trace, a small, two-story bar, have been getting significant reductions in the property taxes for years because the property is classified as residential.

The assessor’s website says there are four apartments in the 2,922-square-foot building sitting on a 2,100-square foot lot, though there are no visible signs of any residential living space at the property. Also, a bartender told the Sun-Times that there weren’t any apartments there.

The property owners, Nathan Hilding and Jason Akemann, who operate several restaurants in Chicago, didn’t return phone calls. But their attorney, Peter Issac, says there is, in fact, an apartment on the property.

“There’s a small apartment in the rear of the building,” Issac says. “It’s been there for years before Trace bought it. I don’t believe anybody lives there.”

Still, Shaer, the assessor’s spokesman, says the assessor’s office has decided Trace should be reclassified to a commercial property, which would make its real estate taxes soar from the $11,599 the owners paid this year. The bar’s tax tab would have been $28,998 if the property had a commercial classification this year.

“We thank you for calling this to our attention,” Shaer says. “With 1.85 million properties in Cook County, we occasionally need to receive this type of information.”

After years of legal skirmishes with the owners of the rooftop apartments along Sheffield and Waveland, the Ricketts family began buying up the buildings in 2015.

They now own 10 of the 13 rooftop buildings, paying $64.5 million for “all real estate and non-real estate assets,” according to documents filed with the assessor by the law firm of Thomas M. Tully, a former Cook County assessor who represents the Ricketts family.

All 10 Ricketts buildings are taxed as residential property, though documents filed with the county show that most of their revenue comes from the business operations, not the apartments.

Operating under the name Wrigley Rooftops, the Rickettses had ticket revenue of $6.4 million from the rooftop bars during the first six months of 2016. After paying taxes and expenses, the documents show the rooftop businesses had net income of $399,147 the first six months of last year.

Just over the ballpark’s right field wall, the Rickettses own two buildings at 3617 and 3619 N. Sheffield, where six apartments are licensed as vacation rentals by the city of Chicago, and guests must pay the city’s hotel tax. Operating as the Inn at Wrigleyville, nightly prices range between $329 for the one-bedroom “MVP suite” to $720 for the “Home Run Suite,” which sleeps nine people.

Though the buildings are operated as a hotel with a thriving bar business on the rooftop, the properties are classified as residential. So the Ricketts family paid $161,622 in property taxes this year. Had the buildings been classified as commercial, the tax bills would have topped $400,000.

The assessor’s office didn’t know the apartments in those buildings were leased as hotel rooms until the Sun-Times asked. “Based upon a review of the party’s website, we will conduct further inquiry regarding the revenue stream for this property,” Shaer says.

A spokesman for the Ricketts family, Dennis Culloton, declined to discuss the finances of the Wrigley Rooftops. Culloton notes that the vacation rentals began under the previous owner and that all of the buildings had been classified as residential when the family bought them.

“We inherited all of the assessment classifications and assessments when we bought the buildings over the past couple years,’’ Culloton says. “The classification is ultimately up to the assessor. If it were classified as commercial, that would be up to the assessor. But there are other questions about how it would be zoned. It’s zoned as residential.”

Altogether, the Rickettses paid $3.5 million in property taxes this year: $2.2 million on Wrigley Field; $430,739 on the new office building and park next to the ballpark and $872,933 on the 10 rooftop buildings.