As an addendum to my prior post, it has been fairly pointed out that leasehold taxes have been paid on 1800 Sherman Avenue for 2007.  Importantly, in 2004 leasehold taxes were a part of the discussion regarding the removal of 1800 Sherman from the tax rolls.  At the time, an argument was made that a significant loss would not be felt due to the fact that leasehold taxes would make up for the loss.  This was difficult to believe because there was a track record of other university buildings, such as the then Birl building also in the Research Park, having tenants who had not paid leasehold taxes, and worse the County doing little to collect.  So this argument seemed ridiculous and unreliable.  To be clear, there was a track record of leasehold taxes not being paid on university owned properties.

In preparing my original comments I made a mistake and hastily presumed that as before, leasehold taxes would not be collected.  I did not check for newly assigned PIN numbers to1800 Sherman Avenue, nor did I cross reference them with the Cook County Treasurer’s office. Instead I relied on past experience, information from my own recollections and documents, and prior City Council meeting minutes.

It has been called to my attention that during 2007 budget discussions there was a budget memo issued (#43), requested by Alderman Rainey regarding 1800 Sherman Avenue and leasehold taxes. 

The memo shows that for 1800 Sherman Ave.:

•   2003 Final EAV $ 8,738,131 with 2004 Taxes Due ($ 824,880) that were Paid by NU 11/04 and;        
•   2004 Final EAV was $ 9,879,252 with 2005 Taxes Due ($ 813,062) and the amount paid by NU ($ 715,064) on 10/26/05.   

However, Northwestern filed Complaint # 6-905 (Certificate of Error) based on exemption granted in June 2004.  So, did the university receive a correction based on exemption for those two years?  If so, then $1,539,944  [824,880 + 715,064] was lost to NU’s exemption. 

The memo goes on to state:

 “The leasehold PIN’s for the entities leasing space in the property commonly known as 1800 Sherman Avenue were not created until 2006. Therefore, there have been no tax bills sent to businesses leasing space in the NU-owned 1800 Sherman Avenue building until last week [January of 2007], when first installment tax bills were sent out by the County Treasurer. Since no assessed values were assigned to the individual leasehold PIN’s in 2005 (and therefore, no tax amounts were determined and/ or billed), the tax bills for each of the leasehold PIN’s currently have $0 billed (first installment taxes are always ½ of the total taxes billed in the prior year).” 

Presently, $639,000 in property taxes have been paid in 2007, and $53,000 is still outstanding. Whereas this represents the total amount of taxes paid, these tax dollars are still diverted to the DT II TIF and still represents a loss of revenue. Most of the first half bills for 2008 also have been paid.  This is delightful news to me!  As critical as I can be of our City Council, it is refreshing to see that this matter was aggressively pursued.

But still, the memo also clarifies that there was some question as to how tax years 2005 and 2006 could be collected.  The memo reads:  

“The 2006 tax bill for 1800 Sherman Ave represented the 2005 assessment for the entire building (prior to leasehold PIN’s being formed) and was erroneous, as the building was rendered exempt in 2004. The disputed assessment and subsequent tax bill represents approx. $ 1,400,000 due in property taxes.”

“What is not clear, however, is how much of the erroneous 2005 assessment will likely be reapportioned to represent the 2005 values for the area represented by the leasehold parcels. The City is investigating how the County will capture (or assess) the area represented by the leasehold parcels for tax year 2005 since the actual PIN’s were not created until 2006.”

Thus, the assertion I made that the city and schools are losing $1M in tax revenue each year as a result of the university's purchase of 1800 Sherman is factually inaccurate. Based on the memo, it looks like closer to a loss of  $400,000 per year.   However, the fact the university purchased the building in violation of prior agreements with the city remains true and thus far, based on the above information, it appears that there has been a loss of revenue to the TIF of at least $ 2,939,944 that may not ever be made up.

The university continues to escape taxation on the portion of the building it uses for its own purposes.  While those portions rented to commercial tenants are generating leasehold property tax revenue for the DT II TIF today, it remains to be seen how long the building will remain occupied with those who pay leasehold tax.  Revenue to the City and other taxing bodies will not flow from the TIF until 2010/2011.

As someone who (generally speaking) does my homework, and wouldn’t be caught making public statements that are not true, the taste of my own foot in my mouth is rather foul.  I regret the error, and stand corrected.