Mayor Brandon Johnson's administration asks judge to stay ruling on referendum changing real estate tax

Anthony Vazquez/Sun-Times

Chicago is laying the groundwork to appeal a judge’s ruling that dealt a major blow to Mayor Brandon Johnson's plan to raise the real estate transfer tax on high-end property sales to generate $100 million in annual revenue to combat homelessness.

Hours after Circuit Court Judge Kathleen Burke declared the binding referendum invalid, the city filed a motion asking Burke to stay both her fundamental ruling and her motion denying the city’s petition to intervene in the case “while the city appeals” those rulings.

“The stay should be granted because there is a substantial case on the merits,” the city’s motion states.

“The court’s order denying the city’s petition to intervene prevented the city from opposing the plaintiff’s motion for judgment on the pleading. This was a clear contravention to applicable law and an abuse of the court’s discretion.”

The city argues the Chicago Board of Election Commissioners “could not and did not adequately represent the city’s interests” and, in fact, “failed to raise any substantive arguments in response” to the legal arguments made by the real estate industry that the referendum violated state law.

The Building Owners and Managers Association of Chicago, the Chicagoland Apartment Association, the Neighborhood Building Owners Alliance of Chicago and others were among the industry groups that argued the ballot question was unconstitutional and violated state law by asking voters to approve both a tax cut and tax hike at the same time.

The suit called the referendum measure a “textbook example” of “log-rolling” — a legislative tactic combining a politically unpopular proposal with a popular one to win voters' approval.

By failing to offer voters a detailed explanation of how the $100 million will be spent, the suit claims, the City Council also violated Illinois Supreme Court precedent requiring a municipal referendum to be “self-executing” without “gaps to be filled” later.

“Because the city was not allowed to intervene, these arguments were not raised. … Instead, the court granted the motion for judgment on the pleadings with no opposition to the substantive arguments,” the city’s motion states.

The city “not only has sufficient interest” in the legal proceeding. It is a “necessary party to the litigation” because the Council has “proposed amending its municipal ordinances on transfer tax and needs approval through referendum to do so.”

The city continued: "The court’s injunction … interrupts and precludes the city’s legislation process. The city not only has in interest in seeing its legislative process continue unimpeded. But has an interest in protecting its citizens’ right to vote as part of the process required by law."

The ballot question asks voters to authorize the City Council to quadruple the real estate transfer tax on the value of property transactions $1.5 million and over and triple the tax on the value of sales from $1 million up to $1.5 million — but cut the tax on homes costing under $1 million.

Changing from a flat tax to that three-tiered structure is estimated to raise $100 million more a year to address homelessness.

Supporters say rental subsidies and mental health care as some of the potential uses, but the specifics would be determined by an advisory board and yet-to-be-passed spending ordinance. Revenue wouldn't be budgeted for use by the city until 2026.

Johnson and other supporters of the referendum argued the city needs a dedicated revenue stream to combat rising homelessness, and estimated under the change, about 93% of property sales would see a tax cut.

“There is no harm in letting an election on an advisory referendum go forward. Even if it were to pass, it would still require enactment by City Council and would still be subject to all of plaintiff’s challenged raised in their complaint,” the city’s motion states.

The Chicago Board of Election Commissioners will meet Tuesday to decide whether to appeal Burke’s ruling.

Meanwhile, Election Board spokesperson Max Bever said the written ruling issued Monday provides a bit more clarity on what happens next.

“Early voting and vote by mail will not be paused. The question has been invalidated by the judge. So, per her written court order, the votes for the referendum question are suppressed and will not be counted,” Bever said.

“This, of course, could be changed by future court order. So ultimately, these votes are sequestered and will not be counted at this time.”