As a candidate for governor, Democrat Chris Kennedy has called for a sweeping overhaul of a property tax system he calls "a racket" that enables politically connected lawyers to arrange lucrative breaks for their clients.
But as the part-owner and manager of a four-acre parcel near the Merchandise Mart, Kennedy leveraged the very system he now condemns to shave $1.5 million off property tax bills for the lot, known as Wolf Point, just as he and partners were priming it for a $1 billion high-rise development.
An investigation by the Better Government Association found that Cook County Assessor Joseph Berrios had initially calculated a $23.5 million fair market value in 2012 for the then mostly undeveloped Wolf Point property. That was up sharply from the pre-2012 valuation by the assessor's office of $13.5 million.
Instead, Kennedy appealed the valuation through the law firm of Thomas Tully, himself a former Cook County Assessor, who since 2012 has donated more than $135,000 to political funds tied to Berrios.
The appeal was so successful that Berrios' office didn't just roll back the increase, it slashed the market price valuation down to $6.2 million—less than half what it was prior to 2012.That steep reduction translated into tax bills of $279,333 in 2012 and $283,113 for 2013, each year far below the $546,978 charged for 2011 alone.
Had the higher valuation stuck, the Kennedys' Wolf Point combined tax bills for 2012 and 2013 would have totaled more than $2 million.
In an interview, Kennedy argued that the lower valuation and taxes were fair because the Wolf Point property, located at the confluence of the Chicago River and its north branch, was at the time being used only as a surface parking lot.
"During that period, the taxes paid are consistent with the taxes paid by peers in the parking lot business," Kennedy said. "We were very much in the middle of the pack with our peers."
At the time the appeal was filed, however, the Kennedy investment group had already launched an effort to seek city approval for radically transforming Wolf Point into three mixed use residential and commercial high rises, the first of which opened on the site in 2016.
Kennedy defended the decision to hire Tully for the appeal as one in keeping with his fiduciary duty to co-owners of the property, most of them siblings and cousins from the extended families of the late President John F. Kennedy and his brothers, the late New York Senator Robert Kennedy and the late Massachusetts Sen. Edward Kennedy.
Chris Kennedy, who long has managed the property on behalf of his relatives, is a son of Robert Kennedy. Among his partners in the investment is Caroline Kennedy, the daughter of President Kennedy.
A major focus of Chris Kennedy's campaign for governor has been what he sees as the inequities of a property tax system in Cook County driven in part by political donations to Berrios from lawyers who specialize in tax appeals.
"I don't believe there's any integrity in the system," Kennedy said in his interview with the BGA. "There's no rule of law."
In a separate prepared statement supplied to the watchdog group, Kennedy lambasted the current system as one "that benefits the wealthy who can afford lawyers and leaves those who can't behind. I know firsthand how it works and how to change it."
Property tax fairness emerged as a campaign theme for Kennedy after media reports earlier this year about a big tax break obtained by billionaire investor J.B. Pritzker, a key rival of Kennedy's for the Democratic nomination.
The Chicago Sun-Times reported that Pritzker saved nearly $230,000 in taxes on a Gold Coast mansion he owned next door to his personal residence by arguing that the second home was "uninhabitable."
That prompted Kennedy to contend in a recent speech that the flawed property tax system had enabled Pritzker "to avoid paying his fair share."
In a video posted on his campaign website, Kennedy claims the system is designed to give an edge to those who can afford connected lawyers to arrange tax breaks through the assessor's office. "Because they pay less, we pay more," Kennedy complained.
Though Kennedy's family has long been associated with East Coast politics, it also has a significant Chicago connection that stretches back to the 1940's when his wealthy investor grandfather, Joseph P. Kennedy Sr., purchased the Merchandise Mart and Wolf Point.
Chris Kennedy arrived in Chicago years ago to manage both properties for his family, though the Mart has since been sold off.
The Kennedy family connection to Tully reaches back to at least the late 1970s when, as a private attorney, he represented them in assessment disputes involving the Mart. In 1974, Democrat Tully was elected Cook County Assessor, but left in 1978 to return to private practice where he began doing Chicago tax work for the Kennedys.
Michael H. Moirano, a lawyer representing Tully, said Tully declined to discuss any matters involving his property tax work, citing privacy concerns for his clients.
Photo by Michen DeweyWolf Point
'WE ASSESS PROPERTY, NOT PEOPLE'
In a prepared statement, Berrios said all donations to him are irrelevant to the decisions of his office. "For all properties, campaign contributions play no role, none, in assessments and appeals. We assess property, not people," Berrios said.
However, the decision to reduce the valuation was forcefully defended by Thomas Jaconetty, a top Berrios aide. Jaconetty cast doubt on the validity of the previous $13.5 million valuation for the Wolf Point property because it was calculated prior to Berrios' taking office in 2010.
"We don't know where the $13.5 million comes from," said Jaconetty, the deputy assessor of valuation and appeals. "And so, I wouldn't rely on that number meaning anything."
The appeal filed by Tully centered on an argument that the assessor had mistakenly thought a revenue producing three-story parking garage occupied the Wolf Point property. Such a structure had once existed but had long since been demolished and replaced by a surface parking lot.
In the appeal, Tully said it was proper to only consider revenue produced by the surface lot in calculating the property's value for tax purposes. Berrios' office agreed, choosing not to factor in the development potential of a property that the Kennedy group had already begun trying to exploit by 2012.
"Valuing it as its interim use as a surface parking facility makes all the sense in the world because that's the use to which it was being put and could be put at that point in time," Jaconetty explained, adding that at the time the appeal was approved future development of Wolf Point was uncertain.
CUT AND BONUS
The success of the appeal led to a big tax cut for the Kennedys which included an immediate, albeit modest, bonus. Instead of having to pay the second installment on the Wolf Point property tax bill for 2012, they got a refund check from the county worth $21,505.
Richard Almy, an international expert on assessment procedures, questioned why Berrios' office did not require the owners of Wolf Point to seek an independent appraisal of the property's value before acceding to their appeal.
"One would think that if you're going from $23 million to $6 million valuation there should be some back up for it other than an income statement from the parking lot," said Almy, former executive director of the International Association of Assessing Officers.
If there had been such an appraisal, Almy continued, it would be common practice to value property by a standard known as highest and best use. "I doubt whether you could find an appraiser in 2012 to opine that the highest and best use was a parking lot," said Almy.
In 2012, values of other properties near Wolf Point were rising. Owners of the Kingsbury Plaza development a few blocks north said their land was worth $150 per square foot in an appraisal submitted to Berrios. After the Kennedy appeal, the assessor pegged the value of Wolf Point at $35 per square foot.
Two years later, after having received final zoning approvals, the Kennedys negotiated a sale of a portion of their investment for $20.3 million while still retaining a significant share of the overall development, according to real estate transfer documents and Kennedy.
The assessor's office then raised its valuation of the soon to be developed land to $21.9 million for 2014 - more than three times the value it established in response to the Tully appeal two years before.
Chris Kennedy said the lower valuation was appropriate for Wolf Point in 2012 because City Hall was still mulling approval of its development and it was not yet clear the project could get off the ground.
DONATIONS NOT UNUSUAL
Tully's donations to Berrios, though large, are not unusual. Tully is part of a cottage industry of property tax lawyers who help clients navigate the complicated county tax system, and over the years many of those attorneys have made frequent contributions to the political coffers of Berrios and other elected assessment officials.
State records show that Tully, since January 2012, has donated $135,700 to political committees backing Berrios as assessor, another in his separate capacity as 31st ward Democratic committeeman and another for his ward organization. Some of the Tully money also went to the Cook County Democratic Party which Berrios controls as chairman as well as a campaign fund for Berrios' daughter, Toni, a former Democratic state representative.
In mid-June, Tully gave $6,000 to political funds controlled by Berrios. Those donations followed by just days the publication of an investigative report in the Chicago Tribune alleging a pattern of unfair residential assessments that often advantaged wealthier property owners who could afford attorneys to shepherd their appeals.
Chris Kennedy said he was "totally unaware" of Tully's donations, some of which were made through a political committee still controlled by Tully even though he has not held public office since 1978.
Kennedy earlier proposed a ban on campaign contributions from property tax lawyers. Prompted by BGA questions about Tully, Kennedy said he now thought the proposed ban should be expanded to other, more indirect, forms of giving.
"People shouldn't be able to use a campaign committee to make donations if they're also in the property tax appeals business," Kennedy said. "I like that idea. It hadn't occurred to me frankly. But it's a great point."
Chuck Neubauer and Sandy Bergo write for the Better Government Association, a Chicago-based watchdog group.