An advisory panel to Mayor Harold Washington soon will recommend new taxes on the development and ownership of commercial buildings in Chicago, with proceeds going to a ”linked development” fund for neighborhood projects.
Developers would pay a $2 ”exaction fee” for each square foot of new office or commercial space they build, according to a draft report by the mayor`s Advisory Committee on Linked Development.
The plan is sure to draw fierce opposition from developers and owners of downtown office buildings who maintain that the payments would drive up rents, drive out tenants and chill downtown growth.
The soon-to-be-released proposal, a copy of which was obtained by The Tribune, also includes a ”minority report” by five pro-business members of the 21-member committee. They warn that the plan would ”force tenants and jobs to locate in the suburbs.”
Yet the mayor might have little to lose and much to gain by embracing the plan. The ”link” concept is favored not only by Washington`s core constituency of inner-city activists but also by a predominantly white, middle-class coalition of parish groups on the city`s Northwest and Southwest Sides.
”Our neighborhoods have suffered long enough while our tax dollars go to support downtown development,” said Joseph Crutchfield, a member of the advisory committee. He is also one of the leaders of the Save Our
Neighborhoods, Save Our City Coalition, the parish-based group that pushed hardest for ”linked development.”
Crutchfield said similar ”link” taxes on new office construction in Boston and San Francisco have not hurt those downtowns.
The mayor`s advisory committee, formed last September, has as its co-chairmen Walter Clark, executive vice president of Citicorp Savings, and Msgr. John Egan of the Catholic Archdiocese of Chicago.
The plan`s most controversial element is the $2-per-square-foot exaction fee. Developers would pay the fee before obtaining a city building permit and again in each of the first four years the building is occupied.
Existing buildings also would contribute through a new ”use tax” of 10 cents per square foot on ”all occupied office and commercial space in the city.”
The tax would be similar in form but far less harsh than the 6 percent commercial lease tax proposed by Washington in 1983. That proposal died after a ferocious lobbying effort by downtown interests.
The advisory report concedes that the dime-per-foot ”use tax” would cause rent increases for downtown office tenants, but it says the rise would be no more than one-half of 1 percent. The cost to the owner of a typical 2,000-square-foot neighborhood store would be about $200 a year.
The mayor`s advisers predict that the exaction fee on new buildings would yield $4.8 million for the neighborhood fund by its third year. The ”use tax” would yield $17 million in its first year, they said.
Those taxes, plus elimination of tax exemptions now enjoyed by insurance companies and real estate trusts, would produce a $26.8 million fund for neighborhood renovation projects across the city, they said.
The money would be dispensed in the form of loans and grants to qualifying housing, commercial and industrial projects in the neighborhoods, with preference given to projects sponsored by community organizations.
The fund would be administered by a permanent committee of business leaders, community group leaders and elected officials.
The least controversial part of the plan is to extend the city`s existing real estate transaction tax, amounting to $5 for every $1,000 in sales price, to ownership changes carried out under the cover of secret trusts. Property held in trust often is conveyed by simply changing the name of the trust beneficiary, an action not subject to the city`s transaction tax.
The advisory co
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