Progressive Real Estate Tax Hike Referendum Gets Public Hearing

EVANSTON, IL — The Evanston City Council holds a public hearing Monday on a proposal to ask voters if they want to become the first municipality in the state to implement a progressive real estate sales tax. The city faces an Aug. 30 deadline to file the paperwork with the county to get the referendum on the ballot Nov. 6.

On July 23, staff recommended putting a proposal on the ballot which would have split the cost between buyers and sellers. That would have reduced the current $5 per $1,000 in sale price to $3.50 per $1,000 for sellers of Evanston real estate while adding a $3.50 per $1,000 for buyers. That plan, a flat increase from $5 to $7 per $1,000 overall, would have raised about $1.4 million annually.

The City Council rejected the flat increase by a vote of 5-3, with 2nd Ward Ald. Tom Suffredin, 5th Ward Ald. Robin Rue Simmons, 8th Ward Ald. Ann Rainey and 9th Ward Ald. Cicely Fleming voting no. They opted for a progressive tax that has been projected to generate about $850,000 in revenue next year.

Here's how it breaks down:

• Real estate transfer taxes would remain unchanged for sales of any property under $1.5 million, remaining at $5 per $1,000.
• For properties sold for between $1.5 million and $5 million, the tax would increase from $5 to $7 per $1,000.
• For properties sold for more than $5 million, taxes would increase by more than 44 percent, rising to $9 per $1,000. (There were nine such deals in 2017, according to city staff.)

Here's the full text of the question voters would be asked if the referendum is approved:

Shall the City of Evanston impose a real estate transfer tax increase of forty percent (40%) to establish a new transfer tax rate of seven dollars ($7.00) for every one thousand dollars ($1,000.00) of value, or fraction thereof, for sales from $1,500,000.01 up to $5,000,000.00 AND a real estate transfer tax increase of eighty percent (80%) to establish a new transfer tax rate of nine dollars ($9.00) for every one thousand dollars ($1,000.00) of value, or fraction thereof, for sales from $5,000,000.01 or more to be paid by the seller of the real estate transferred?

The current rate of the real estate transfer tax is five dollars ($5.00) for every one thousand dollars ($1,000.00) of value, or fraction thereof, and the revenue is used for the City’s general fund. The revenue from the increase is to be used for the funding of the City’s General Operating Fund, with the increase being used for improvements related to public safety, public health, parks and recreation services, street improvements, and other necessary City services.

According to the city's legal department, no other Illinois municipalities who have adopted progressive real estate transfer tax schemes. Other places in the country have adopted similar sliding scales and have not been struck down, Evanston's lawyers said.

In the last 12 years, Evanston voters have twice rejected increases to the city's real estate transfer tax, according to the Cook County clerk's office. However, they have never been asked to consider a shift to a progressive tax structure.

Voters narrowly defeated a 2006 measure to increase the tax to fund affordable housing, and a 2008 referendum to pay for pensions for public safety employees failed by nearly 18 points.

Earlier: Real Estate Transfer Tax Hike Set To Bring In $1.4 Million »