Since the passage of the city budget last October, Mayor Rahm Emanuel has promised to create a property tax relief program to alleviate last year’s record property tax increase. But the last program operated by the city encountered significant legal and bureaucratic barriers to success.

To better understand how a new property tax relief program could work, Aldertrack delved into documentation and news reports of Mayor Richard M. Daley’s 2010 program. This report reviews our findings.

Since draft legislation promoted by Mayor Emanuel in Springfield to doubling the homeowners exemption failed to pass the General Assembly, aldermen are expected to receive their first briefing from mayoral staff next Tuesday on options for a city-run property tax relief program.

The biggest barrier to any city-managed property tax relief program is the Illinois Constitution’s Article IX, which which states all “taxes upon real property shall be levied uniformly by valuation” and limits the power of providing tax exemptions to the General Assembly. This forces the city to contort the program into a “rebate” or grant program, which poses its own bureaucratic hoops to jump through.

Aldermen have proposed their own solutions–to protect older, long-term homeowners with high reassessments; owners within 400% of the poverty levellandlords who don’t raise rates on renters; or owners earning less than $100,000 a year– each one making calculating relief a bit more complicated for a city-run program.

“Any rebate plan will remain true to the Mayor’s goal of protecting low- and middle-income families that can least afford it,” city Budget spokesperson Molly Poppe told Aldertrack in April, saying the office would take aldermanic suggestions into consideration. Poppe’s office is hampered by the same problems that plagued the Daley administration when they instituted their own property tax relief plan–constitutional limits, administering and paying for promotion and rebates, and making sure residents have the right proof to support their payout.

Mayor Daley’s 2010 property tax relief program, aimed at offsetting impacts from the 2008 recession, has been remembered in recent weeks for its low participation rates. At its first application deadline, just 36,621 of 200,000 eligible homeowners put in an application. $35 million was set aside for the program, but ultimately the city paid out just $2.1 million. The program drew its funds from a portion of the city’s parking meter revenues and was administered by the Chicago Tax Assistance Center within the Office of Budget and Management.

The plan offered a small offset for property tax hits during the 2008 recession: relief between $25 and $200 for primary residences. The recession had hit homeowners hard. Making matters worse for low value homeowners was a phase-out of a state law capping the annual increase in a home’s taxable value at 7% and a drop in that year’s exemption (from $26,000 to $20,000).

When then-Mayor Daley announced the plan in October 2009, he pegged the average relief amount at about $150 and that half of Chicago’s 400,000 homeowners would be eligible. At the time, Ald. Joe Moore (49), a frequent mayoral critic, called the program a “gimmick” and later told the Tribune, “Most people didn’t even see any value in taking the time to apply for it,” because the relief was so low.

Moore joined four other aldermen in voting against the measure in the Finance Committee that year, and the plan was deferred and published a few weeks later. Seven aldermen submitted a substitute ordinance to give lower income homeowners more relief, but it failed.    

To work around the Illinois Constitution’s Article IX, Mayor Daley chose to implement his $35 million relief program as a series of individual grants. Government accounting rules made it even more complicated: the city was required to track every grant issued, meaning each of the estimated 200,000 eligible homeowners in the program would represent a grant line in the budget, and each grant would have to maintain a trackable account with city. Dodging an accounting nightmare, the city issued bank cards with Chase Bank.  

Under Daley’s plan, lower income homes with higher property tax increases were eligible for more money. For example, if someone’s income was less than $25,000 a year, and their property tax increase was over $350, they’d receive a $200 grant from the city. The chart provided in the relief grant application:

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Homeowners were required to complete a paper application, provide a copy of their Second Installment 2008 property tax bill (received in October 2009), a Certificate of Error Recommended (if one was received), a copy of a photo ID, and write in their income from their 2008 federal tax form. The application essentially relied on the honors system: applicants wouldn’t have to provide a copy of their tax form, but would have to sign an affidavit saying the income statement was true. The form reminded signers that lying on the form could lead to a city penalty between $500 and $1,000, and the city reserved the right to ask for proof of income and other information as part of its audit program.

Homeowners could drop off applications during business hours at City Hall, four revenue sites around the city (North Center, Gage Park, River North, or Calumet Heights) or mail them to City Hall.

The catches:

  • The program was only for owner-occupied properties. No relief for renters.
  • Anyone who owed debt to the city–parking tickets, drinking tickets, building code violations, or taxes–wasn’t eligible.
  • Anyone who received it was “encouraged to seek advice from a tax advisor,” because the grants qualified as taxable income.
  • It took staff between six and eight weeks to process requests and get bank cards out to recipients. A misspelling or improperly transcribed number could throw off the all-paper system between different revenue office locations and City Hall.

The initial program was slated to have an open application period of two months, and though it was “heavily promoted”, it was extended to bring in more applicants.