4 Fee Hikes Affecting Developers in Rahm's 2016 Budget
The time of reckoning is here. Mayor Rahm Emanuel’s 2016 budget calls for a nearly $600M property tax hike he says is necessary to shore up police and firefighter pensions. As hearings on the mayor's budget begin, there are other tax increases in the works that could affect the future of Chicago development if left unchecked.
Chicago Association of REALTORS senior director of government affairs and public policy Brian Bernardoni (left, with Executives Source One Realty's David Hanna) says he's keeping tabs on four proposed tax increases. The first is the Personal Property Lease Transaction Tax, which will go into effect Jan. 1. This legislation allows the city to impose a tax on companies obtaining consumer credit reports, real estate listings and prices, legal research and other online database searches, and storing spreadsheet research, presentations, calculations and other work on cloud-based platforms. Brian calls the tax “insidious.”
The second is a proposed “congestion tax” aimed at suburban drivers, an idea floated at various points during Emanuel’s time in office. A congestion tax in London has generated $1B in revenue, but Brian says one in Chicago could reverse economic growth in the city, particularly in the CBD. Brian adds the mayor should be committed to making Chicago a great place to work and play, and the impact of a congestion tax will wind up on someone’s spreadsheet outside the city, possibly leading those companies to bypass Chicago as a business destination.
As for the buzzed-about raise in property taxes, the Chicago Association of REALTORS has started outreach to building owners and operators across Chicago and Cook County, urging them to appeal their assessments. This is the only controllable aspect of the property tax debate for property owners. Brian says appealing assessments used to be mainly a residential argument, and many commercial real estate operators he's spoken with were unaware the assessments could be appealed and how they affect property taxes. It’s uncertain what next year’s assessments will look like, especially in the CBD, but Brian suspects they will increase significantly. The downtown market has been strong, as evidenced by the near-record sales of office buildings, and future assessments will reflect that when the assessments are calculated. Where Brian is most concerned is in neighborhoods outside the CBD. He believes the downtown market has the elasticity to withstand the property tax hike, but the property tax burden almost always falls on building owners south of Roosevelt Road and west of Western. Brian feels those communities could be exposed, leading to a decline in commercial real estate development and neighborhoods losing the character that originally attracted residents to them.
The mayor’s budget also calls for a hike in building permit fees. Brian says the REALTORS association supports the move, if the revenue's directed to expediting the permit process. Otherwise, it would be another obstacle standing in the way of out-of-town developers from doing business in Chicago.