Here’s the Path Forward for Chicago Transfer Tax Lawsuit

With little time for a drawn-out court battle ahead of Chicago’s March 19 election, a lawsuit filed by local commercial real estate trade groups seeking to stop voters from deciding on a tax hike for property sales has to stay on a fast track, and at least one expert says it has a viable one.

Office landlord industry group BOMA/Chicago and other industry organizations filed the suit earlier this month to target the so-called “Bring Chicago Home” measure backed by Mayor Brandon Johnson, in an attempt to kill the referendum that could quadruple the city’s real estate transfer tax rate for the biggest sales, and potentially devalue large commercial properties.

While there are a little more than two months for the complaint to work its way through the court system before the election, there’s potential precedent and paths forward for the case, according to Michael Forde, an attorney specializing in litigation with Forde & O’Meara.

The referendum process is very specific in Illinois, and similar lawsuits have been filed in the past over other ballot measures, he said.

“These types of challenges to referendums are more common than you might think. “They succeed more often than you might think,” Forde said. “There are a lot of rules of the road in terms of how you have to word a referendum like this, particularly when it’s a transfer tax, because there’s a provision of state law that applies specifically to referendums affecting the transfer tax.”

Chicago Board of Elections spokesman Max Bever previously said the board did not believe it was the correct defendant in the case, because it didn’t initiate the referendum and doesn’t have a stake in the outcome.

But Forde said from a legal perspective, when plaintiffs seek an injunction, they target parties that can be instructed to take a particular action, and the board of elections in this case can keep the measure off the ballot or dismiss the results.

“They want an injunction that bars the board of elections from putting this improper, illegally drafted, illegally worded referendum on the ballot,” Forde said, and that the board can take action the suit is seeking to enjoin.

Bever said that the last day the ballot could be certified before it is printed is Feb. 8, the day that the board has scheduled vote-by-mail ballots to be shipped to voters. However, he said that if a court order to remove the question comes out of the suit, the board would not remove the question or reprint the ballot, and would instead suppress the results of the referendum.

BOMA filed the suit because citing three main issues with the referendum as its written:

How the referendum is worded, including how the ballot measure poses three separate questions despite Illinois law dictating that referendums only ask one.
The measure includes both a tax decrease for the majority of residential transactions while simultaneously instituting a tax increase for many commercial deals.
It combines a popular measure, that being the tax decrease for less expensive deals, with a controversial measure, that being a tax increase on larger deals, in what BOMA considers legislative “logrolling.”

Forde also said that there’s a clarity requirement for ballot referendums, which mandates that an average voter can understand the question that’s being asked.

“The plaintiffs have an interesting argument [about] just the wording of this referendum where it’s laid out in three paragraphs,” Forde said. “I don’t know that you can assume that an average voter is going to understand that this is not a multiple choice-type thing, and this is not either-or; that if you vote for this, all three of these things are happening.”