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

EVANSTON, IL — Voters would be asked to approve a 40 percent increase to Evanston's real estate transfer tax under a plan before the City Council. The proposal splits the tax burden evenly between buyers and sellers. The recommended referendum, which must be approved Monday to appear on the November ballot, does not include a progressive rate targeting more expensive properties.

The current Evanston real estate transfer tax rate is $5 per every $1,000 paid for property. Staff recommend a flat increase to $7 per $1,000. But instead of being paid entirely by the seller, both sides of the transaction would kick in $3.50 per $1,000 spent. Taxes for those unloading Evanston property would decrease, while buying property would become more expensive. The change would tack more than $1,200 onto the price of the median Evanston home.

Last year, the city collected almost $3.7 million in real estate transfer tax on 1,236 property sales. If voters approve the increase to the tax, it will bring in an additional $1.4 million in annual revenue, according to a memo from City Manager Wally Bobkiewicz to aldermen and the mayor.

"Reducing the tax amount the seller has to pay increases the likelihood of the tax ultimately being approved by voters," Bobkiewicz said.

Earlier this month, aldermen expressed interest in creating a progressive transfer tax. Ald. Ann Rainey, 8th Ward, suggested Evanston consider becoming the first Illinois municipality to implement a progressive real estate transfer tax. She suggested creating a higher rate for pricier homes and directed staff to explore the idea. According to the staff memo, there have never been any successful lawsuits challenging progressive real estate taxes. However, the memo to aldermen did not provide a recommendation one way or the other.

A chart provided with the memo shows 79 properties subject to the transfer tax and worth $1 million or more were sold last year, and 34 were sold at more than $1.5 million. (Raising the transfer tax by $10 per 1,000 for those 34 properties alone would bring in more than $2.4 million in additional revenue.)

Evanston voters have been twice asked about increasing the transfer tax in the past 12 years. Increases were rejected both times. Bobkiewicz suggested the reason for the defeats was because both proposals only increased taxes for the seller.

In November 2006, a measure was defeated by fewer than 1,000 votes as 51.7 percent of voters opposed an increase aimed at funding affordable housing programs, Evanston Now reported. Another real estate transfer tax referendum, that one aimed at paying for police and fire pensions, failed in February 2008 by 58 percent to 42 percent.

According to the staff memo, July 23 is the deadline for the City Council to decide any changes to the real estate transfer tax. A notice of a public hearing would need to be published in a local newspaper before Aug. 3, according to state law, and a public hearing and final adoption of the proposal can be approved at the City Council's Aug. 13 meeting. The final deadline to file the paperwork with the county for a tax referendum to appear to the Nov. 6 ballot is Aug. 30.