Rauner’s Proposed Property Tax Freeze: The Devil’s in the Details

In last week’s State of the State address, Governor Bruce Rauner offered up a bold agenda to turn the state around while focusing on efforts to make Illinois competitive again. Some of his key points included increasing education funding, raising the minimum wage, reforming workers’ compensation and unemployment insurance, “modernizing” the sales tax, hiring more prison guards – and providing property tax relief.

Here at BOMA/Chicago, you can bet our ears perked up when Governor Rauner declared that the property tax burden is one of the biggest impediments to growth and proposed to freeze them for two years.

As our building owners and managers know only too well, property tax is one of the largest and least controllable expenses for commercial office buildings and continues to be an oppressive burden for commercial real estate in the City of Chicago. Our buildings pay some of the highest property taxes in the nation, with only marginal exceptions in New York City and Washington, D.C. According to our most recent Economic Impact Study, property taxes account for as much as 75% of a building’s operating expenses and consume as much as 25% of a building’s gross revenue.

More importantly, despite Chicago being a market where high commercial office rental rates are not the norm, property taxes consume a disproportionate share of gross operating expenses. Two leading sources of tax trends in U.S. markets maintain that Chicago has either the highest or second highest ratio of property taxes to operating expenses.

But let’s not celebrate a property tax freeze too soon. The harsh reality is that our state’s financial condition is deplorable with a Fiscal Year 2016 budget deficit around $9 billion, projected first year revenue loss from the temporary income tax hike rollback at $3.9 billion, and measures to shore up state employee pension plans reliant on a ruling by the Illinois Supreme Court. Not to mention the additional funds necessary to invest in education and hire more prison guards as called for by the Governor.

We also want to be careful that we’re not robbing Peter to pay Paul by exchanging a property tax freeze for a “modernized” sales tax – which more than likely means extending sales tax to services – or any other taxes or fees that could be just as burdensome on the commercial real estate industry as a property tax hike.

The Governor will deliver his Budget address on February 18, and we look forward to hearing more details about how he will implement a property tax freeze given the state’s current fiscal condition and we will continue to monitor this important issue for our members.

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Stay Safe During Bitterly Cold Temperatures and Dangerous Snow Conditions

By Mark Peterson, External Affairs Officer, FEMA Region V

CHICAGO – Dangerously low temperatures and accumulating snow are in the forecast for much of the Midwest and the U.S. Department of Homeland Security’s Federal Emergency Management Agency (FEMA) wants individuals and families to be safe when faced with the hazards of cold temperatures and winter weather.

“Subfreezing temperatures and wind chills can be dangerous and even life-threatening for people who don’t take the proper precautions,” said Andrew Velasquez III, FEMA Regional Administrator. “It is important for everyone to monitor their local weather reports and take steps now to stay safe, whether traveling or at home, during times of extreme cold temperatures.”

During cold weather, you should take the following precautions:

  • Stay indoors as much as possible and limit your exposure to the cold;
  • Dress in layers and keep dry;
  • Check on family, friends, and neighbors who are at risk and may need additional assistance;
  • Know the symptoms of cold-related health issues such as frostbite and hypothermia and seek medical attention if health conditions are severe.
  • Bring your pets indoors or ensure they have a warm shelter area with unfrozen water.
  • Make sure your vehicle has an emergency kit that includes an ice scraper, blanket and flashlight – and keep the fuel tank above half full.
  • If you are told to stay off the roads, stay home. If you must drive, don’t travel alone; keep others informed of your schedule and stay on main roads.

You can find more information and tips on being ready for winter weather and extreme cold temperatures at http://www.ready.gov/winter-weather.

FEMA’s mission is to support our citizens and first responders to ensure that as a nation we work together to build, sustain, and improve our capability to prepare for, protect against, respond to, recover from, and mitigate all hazards.

Follow FEMA online at twitter.com/femaregion5, www.facebook.com/fema, and www.youtube.com/fema.

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Annual BOMA/Chicago food drive aims to collect 75,000 pounds of food

By Paul Morello, PR Manager, Greater Chicago Food Depository

Each year, 812,000 men, women and children – 1 in 6 in Cook County – turn to the Greater Chicago Food Depository’s network of agencies for assistance. The need is significant, but every holiday season, our community unites to provide a response.

The annual 1 City, 1 Food Drive campaign combines the efforts of more than 500 partner food drives to collect nonperishable food items at 250 public donation locations throughout Chicago and the Cook County suburbs from Nov. 1 through Dec. 31. This year’s goal is to collect the equivalent of 1.5 million meals for our hungry neighbors.

“Our community’s response to hunger through the 1 City, 1 Food Drive effort is inspiring,” said Kate Maehr, Food Depository executive director and CEO. “It’s an incredible example of our community’s generosity and ability to make a difference.”

1 City, 1 Food Drive would not be possible without the support of longtime food drive partners, including the Building Owners and Managers Association of Chicago. Since 2008, the BOMA/Chicago food drive has collected more than 206,000 pounds of food.

This year, Food Depository collection barrels will be in more than 140 BOMA buildings and member businesses from Nov. 12 – Dec. 12. The goal of the BOMA collection is 75,000 pounds of food. Buildings are also encouraged to turn their lights green from Nov. 24 – Dec. 5.

The food collected makes an immediate impact on hunger in our community.
“Honestly, the canned food I get from the pantry is all I have to eat sometimes,” said Magdalena Arroyo.

She’s a client at the Benton House food pantry on the Southwest Side of Chicago. The pantry is just one of many Food Depository agencies that receives shelf-stable food from food drives. She was recently laid off from her waitressing job.

“I use the beans and rice with some canned vegetables and that’s basically an entire meal,” she said.

For Susan Davidson, the canned items she receives at Benton House help feed her family.
“With living expenses rising, we have to stretch so much. This is just a godsend,” she said.
Susan’s husband is working full-time at a factory while she stays home to take care of their two autistic children.

“As long as I’ve got some rice and canned tomato sauce, I can make dinner,” she said.
Anyone can get involved in the 1 City, 1 Food Drive effort and every donation makes a difference in the lives of hungry individuals in our community. Here is a list of most needed food drive items:

  • Protein
    • Canned Beans
    • Peanut Butter
    • Tuna
  • Fruit and Vegetables
    • Canned Vegetables
    • Canned Fruit
  • Shelf Stable Grocery Items
    • Stew
    • Jelly
    • Canned Chili
    • Soup
    • Pasta Sauce

Click here for more information about the BOMA/Chicago Food Drive and the 140+ locations throughout Chicagoland to donate through December 12.

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Advocacy Challenges in the Wake of Illinois 2014 General Election

By Curt Fiedler, Morrill and Associates
Ron Tabaczynski, BOMA/Chicago Director of Government Affairs

Advocacy is often cited as the most important function performed by BOMA/Chicago on behalf of its members. As a trade association, BOMA/Chicago has an impressive history of effectiveness in representing member interests on issues concerning codes, taxation, energy, and labor. By building and maintaining relationships with officials at all levels of government, we have been able to impact regulations and legislation.

Our organizational reputation, expertise, and experience provide the foundation for advocacy success, but these resources are heavily bolstered by our involvement in the political process. Through our Political Action Committee, we support candidates that demonstrate a willingness to consider the perspective of commercial real estate and who appreciate the contribution that a competitive market makes to the economy.

When it comes to state government, BOMA/Chicago’s legislative team consists of in-house staff and a team of state lobbyists. Morrill and Associates has worked with BOMA/Chicago to monitor, support, defeat or amend legislation and executive action that affects the commercial office industry.

The 2014 Illinois General Election is now behind us and a new Republican Governor is preparing to take office. In the General Assembly, the House and Senate Democrats will retain their supermajority caucuses. The retention of “supermajority caucuses” will make relationship building between the legislative leaders and the Governor-elect that much more important because the Democratic caucuses will continue to have the ability to override any gubernatorial veto.

The election of a Republican governor also significantly changes the legislative dynamics in Springfield from one-party control (Democratic legislature and Executive) to a two-party balance (Democratic legislature; Republican Executive). This new dynamic, which inherently forces both parties to work together on issues, will impact every issue in Springfield for the next four years. The Democratic legislative leaders will want more active participation from Republican legislators on certain issues, and they will want the Republican governor to help generate that legislative support. Likewise, the Republican governor will request the Democratic leaders approve, advance, or concede certain matters over the course of the legislative session.

Another layer of complexity for Governor-elect Rauner will be the effectiveness of the communication between the administration and legislature (at all levels) during the transition period. The Quinn administration was viewed as ineffective due to its inability, on all levels, to effectively communicate with the legislative branch.

It is anticipated that many of the current state agency directors and staff will be replaced. The ability to find workable solutions to the various budget and policy issues faced by the new administration will depend upon the communication between newly hired administration staff – within both the executive branch and state agencies — with legislative leaders, individual legislators and legislative staff.
But there is opportunity in this adversity. BOMA/Chicago and Morrill & Associates have been through similar transitions and changes in Illinois legislative dynamics. As always, the team is prepared to engage on every level with the new administration and legislature on your behalf.
Make your voice heard.

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Working with Chicago Police/SWAT in response to a workplace violence incident

by Mark Kexel, Titan Security
Chair of BOMA/Chicago Open Security Emergency Preparedness Committee

Having up-to-date resources at your fingertips and strategic planning are critical to effectively responding to building threats, according to Lieutenant Mark Marianovich of the Chicago Police Department Special Weapons and Tactics (SWAT). A featured speaker at a recent BOMA/Chicago Open Security Emergency Preparedness Meeting, Lieutenant Marianovich outlined how the Chicago Police Department interacts with and supports building representatives during crisis situations from start to finish.

Gaining Access
Upon initial arrival at the scene, the first responding officer will need to gain immediate access to the security officer and building engineer to assess the situation and negotiate the building. In addition to obtaining information including subject description, type of weapon, backpacks or other bags in the subject’s possession, the officer will also need passcards or keys, up-to-date floor-plans and access to building radio communications and camera displays to monitor the search if possible.

The Search Begins
Once the second responding officer arrives, the search for the offender begins and the police take over the scene. Building representatives should be prepared to recall elevators and lockdown the building and everyone in the building should listen to and follow instructions, in addition to providing any information requested. Tenants may even be treated as suspects – which may include a pat-down – until the offender is identified.
While the average length of an active shooter is six to eight minutes, the amount of time to conclude search and rescue is closer to six hours. During that time, identifying and stopping the perpetrator is the absolute first priority, and next is providing aid to the injured. Even after the subject is taken into custody, the police will maintain control of the building for some time as all occupants must be located, identified and accounted for.

Planning Ahead
In addition to ensuring the most recent floor-plans are on-site and accessible by the security officer or building engineer, every building should develop a plan to handle what may seem to some as an unthinkable situation.

When developing the plan, consider ways to educate tenants about appropriate responses to threats in addition to police search and rescue. Lieutenant Marianovich urged everyone to follow the “Run, hide, fight” principle, emphasizing that offenders in these situations have only one intention – to kill or harm. If you can escape the scene safely, do so. If hiding is the best option, blocking entrances can discourage the offender from entering. Tenants should also find articles that can be used for defense purposes if necessary. Since tenants can be wary in this type of situation to open a door for anyone, they should also learn to verify police identity during search and rescue efforts by asking for identification or calling 911. The Police may issue an “all clear” using the building’s public address system as well, so be sure to listen to announcements or updates.

Building management should also consider developing pre-scripted announcements to tenants and set policies for their use. Management should also make every effort to alert and provide direction to tenants during crisis situations via some sort of mass communication system. Regarding use of the public address system, there’s a chance the offender may not even hear the message, and as Lieutenant Marianovich pointed out – the offender already knows of his/her arrival, why shouldn’t the tenants?

Other key components to consider in a response plan include tenant floor/office infrastructure (including glass doors, open office settings, etc), availability of cameras to view and the ability to recall elevators.

Be Prepared
Would you like to arrange a “table top” drill at your building to learn more? Contact the Chicago Police Department First District Business Liaison Officer, Sergeant William Brannigan, at william.brannigan@chicagopolice.org to arrange a “table top” drill at your building.

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CRE News: What We’re Reading the Week of October 6

By BOMA/Chicago

Each week, The Elevator Speech summarizes news related to some of the key industry trends, buildings, deals and dealmakers that shaped headlines. Below are articles that caught our attention the week of October 6.

Social Marketing Firm Moves Headquarters Downtown
SIM Partners, a social marketing technology company, has relocated to 14,500 square feet of space at 30 N. LaSalle St. The firm previously resided in Evanston from 2006 until its recent move downtown and plans to double its employee base within the next year.

Old Main Post Office Venture Fizzles
The venture between British developer Bill Davies and Sterling Bay to redevelop the vacant Old Main Post Office has fizzled after both parties were not able to agree on the final vision for the property. Sterling Bay withdrew from the venture after attempting to purchase the property for almost $150 million from Mr. Davies’ International Property Investors. Next steps for the Old Main Post Office, which has been vacant for 18 years, are unclear.

Raise Quadruples Headquarter Space
Chicago-based Raise Marketplace Inc., a firm that manages a website where people buy and sell unused gift cards, will quadruple its headquarters when it moves into the Sullivan Center from River North. Raise expanded its workforce from 21 employees to 100 in less than a year, sparking the move from 11,000 square feet at 311 W. Superior St. to 46,000 square feet at the Sullivan Center. The move will take place in March 2015.

Triple Pricetag for Sterling Bay Property
Sterling Bay has hired Bruce Miller, JJL’s Managing Director, to seek a sale of the 16-story West Loop office building located at 111 N. Canal St. This building has become one of the most sought after addresses for Chicago’s technology sector and is expected to fetch at least $300 million, which is triple the price from what Sterling Bay paid for the property in December 2012.

What CRE or Chicago news headlines from the past week captured your interest? Leave us a comment and let us know.

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CRE News: What We’re Reading the Week of September 29

By BOMA/Chicago

Each week, The Elevator Speech summarizes news related to some of the key industry trends, buildings, deals and dealmakers that shaped headlines. Below are articles that caught our attention the week of September 29.

BOMA Chicago Energy Center Hosts Panel on Smart Grid Technology
Members of BOMA/Chicago’s Smart Grid Initiative hosted a panel discussion earlier this week at the BUILDINGChicago/Greening the Heartland conference. Michael Cornicelli, Executive Vice President, T.J. Brookover, Vice President of the BOMA/Chicago Board of Directors, Ron Tabaczynski, Director of Government Affairs and Mike Munson, Metropolitan Energy, discussed how leveraging Smart Grid technology can transform Chicago’s commercial buildings. Click here to read a full recap of the panel.

Hefty Pricetag Despite Looming Anchor Vacancy
A venture of Golub & Co. and an affiliate of New York-based Goldman Sachs Group Inc. have sold 211 W. Monroe to GlenStar Properties LLC for about $58 million, which is approximately 32% percent more than the venture paid for the tower two years ago. The venture purchased the property in 2012 knowing that a major tenant, BMO Harris, would end its 250,000 square foot lease in December 2014. When BMO Harris leaves, the property will be about 82% vacant.

One Prudential Plaza Inks Big Lease
Cision AB, a Swedish public relations software provider, has signed a 49,500 square foot lease at One Prudential Plaza. This space will become the firm’s headquarters in early 2015, where it will house 400 employees. This deal is the largest lease at One Prudential Plaza since a venture of New York-based 601W Cos. and Berkley Properties LLC recapitalized the building in June 2013. One Prudential Plaza recently lost a lease for Integrys Energy Group Inc., leaving the building 42% leased.

John Hancock Acquires Monroe Street Tower
John Hancock Real Estate has acquired 55 W. Monroe St. for $244 million, or approximately $303 per square foot. The building is currently 92% leased to a variety of law firms and financial institutions. The seller of 55 W. Monroe, a venture of Chicago-based Hearn Co. and New York-based Mount Kellett Capital Management L.P., purchased the building in December 2011 for $136 million when it was 32% vacant.

Cook County Adopts New Real Estate Tax Incentive
The Cook County Board of Commissioners has adopted a new commercial real estate tax incentive known as the Class 7c Commercial Urban Relief Eligibility incentive aiming to encourage real estate development in the Chicago region. Class 7c is available to real estate primarily used for commercial purposes (goods and services and also hotel and motel). It joins other more commonly known Cook County incentive classifications, such as 6b (industrial), 7b (commercial) and Class L (landmarks), as well as municipal incentives such as tax increment financing and sales and hotel tax rebates, to expand the tools available to assist projects that would not otherwise be economically feasible. Click here for more information.

What CRE or Chicago news headlines from the past week captured your interest? Leave us a comment and let us know.

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