After three votes and a flip-flop shortly after 12 a.m. on July 24, City Council settled on a plan to approve a graduated increase in the real estate transfer tax. To take effect, the increase must be approved by voters in a referendum.
City staff recommended that City Council approve an increase in the real estate transfer tax from $5 per $1,000 in the sales price of real estate to $7 per $1,000, and that the payment be split equally between the buyer and the seller. Currently the seller pays the entire tax. Staff estimates that the increase would generate an additional $1.4 million in revenues annually.
Alderman Ann Rainey, 8th Ward, immediately urged that staff’s recommendation be defeated. In its place, she moved that the transfer tax remain at $5 per $1,000 on real estate sales up to $1.5 million, that it increase to $7 per $1,000 for property selling for in excess of $1.5 million, and that it increase to $9 per $1,000 for property selling in excess of $5 million.
She said her proposal would generate an additional $600,000 in revenue per year.
Ald. Rainey’s motion was defeated by a 5-3 vote, with only Aldermen Rainey, Robin Rue Simmons, 5th Ward, and Peter Braithwaite, 2nd Ward, voting yes.
Ald. Rainey expressed her disappointment in the vote, telling her fellow aldermen, “You had a chance to do something that was not regressive and you blew it.”
A motion was then made to approve the staff’s recommendation to increase the tax to $7 per $1,000 for all properties, with the payment equally split between the buyer and seller.
Ald. Simmons said, “There’s no space for an increase in taxes for the average Evanston resident. I can’t support it. We have families that are losing their homes. We have seniors that are losing their homes. I don’t know how we can consider this, especially as we have been pursuing the opportunities for affordable housing.”
Ald. Cicely Fleming (9th Ward) said, “I won’t support it for all the reasons Ald. Simmons said.”
Ald. Judy Fiske (1st Ward) said one of the reasons she could support it was the staff proposal reduces the cost for the seller from $5 per thousand to $3.50 per thousand. “It eases the cost on those folks.”
Ald. Eleanor Revelle (7th Ward) said, “I see the real estate transfer tax as a one-time tax for residents. An unfortunate alternative that we might be faced with is we might be raising the City portion of the property tax, which everyone would then pay year after year. I see it as a better alternative.”
She added that splitting the cost of the transfer tax between the buyer and seller would relieve the burden on sellers who were planning to downsize.
The motion to approve staff’s recommendation failed by a 5-3 vote, with Aldermen Rainey, Rue-Simmons, Thomas Suffredin (6th Ward), and Peter Braithwaite (2nd Ward) voting no.
Then, Ald. Fleming who had initially voted against Ald. Rainey’s proposal, moved to reconsider it. Ald. Rainey supported the move, saying, “We need to get serious about raising revenues in this budget year.” Ald. Braithwaite added, “Once you’re talking about $5 million, you’re talking about commercial real estate.”
The motion to reconsider and a motion to approve Ald. Rainey’s proposal each passed by a 6-2 vote, with Ald. Fiske and Suffredin voting no.
Before a change in the real estate transfer tax may be imposed, it must be approved in a referendum. To get it on the ballot for the Nov. 6, 2018 ballot, the City must hold a public hearing and adopt a resolution placing the referendum on the ballot by Aug. 13.