2016 Illinois Legislative Wrap-Up
The regular session of the Illinois General Assembly adjourned on May 31 with no resolution to the budget stalemate that had log-jammed many other major legislative proposals and created an unusual, but increasingly familiar, political dynamic in the state house.
Nonetheless, BOMA/Chicago's legislative team was quite busy during the session fighting against an increase in ComEd rates, a property tax hike and new legislation that would expose building management and employees to criminal charges.
Below is a summary of major issues of concern to BOMA/Chicago members during the past legislative session from Ron Tabaczynski, BOMA/Chicago Director of Government Affairs.
For the first time in recent state history, both chambers of the legislature adjourned without having a budget plan in place for two consecutive years (further entrenching the current budget impasse that has lasted almost a full 12 months). House and Senate Democrat leaders have stated that they intend to continue working with the Governor and Republican leaders on developing both: (a) a full, comprehensive FY17 budget with agreement on appropriation spending levels, new revenues and business reforms; and (b) a “stop gap” budget in the event a full agreement is not reached before the new fiscal year begins on July 1, 2016.
The House has announced that it will meet in legislative session every Wednesday in June beginning on June 8, however, the House Speaker has already cancelled the first two scheduled session dates. The Senate announced it will not reconvene unless there is actual progress from the working groups that require review and legislative passage, and the leaders affirmed they will conduct regular (currently weekly) “working group” meetings to develop both a possible “stop gap” budget and full, comprehensive FY17 budget that includes portions of the Governor’s business reforms.
There are currently two critical “deadlines” that the legislature is cognizant of while meeting in its second “continuous session” over the upcoming summer months: (a) June 30, 2016...the date before the FY17 fiscal year begins; and (b) August 20, 2016...the date around most schools are scheduled to open, but only if a K-12 budget is enacted into law (whether that is HB 2990, a “stop gap” bill, or a full, comprehensive budget deal). If the legislature does not enact a budget (whether partial or full) into law by June 30, it will be the first time in recent state history that the State of Illinois has gone a full 12 months without a fully-enacted budget.
How does this impact BOMA/Chicago members? Moody's and S&P have already lowered state bond ratings due to the budget impasse, which will increase interest on $26 billion in current debt obligations while creating higher premiums for future bond offers and limiting future transportation projects. If appropriation spending isn't authorized by June 30, the state will jeopardize $23 billion in existing spending for schools, 911 call centers, domestic violence shelters, federally-funded social and human services and higher education.
For the second year in a row, Exelon and ComEd were pursing legislation that would have resulted in a massive rate increase in part to bail out Exelon’s two unprofitable nuclear facilities which it has threatened to close. Along with a “Clean Jobs” bill, the three pieces of legislation morphed into a single omnibus energy proposal as the utility giants pulled out all the stops to pass something this session. The strange political dynamic and grid-locked legislative process this session made it possible for the utility giants to be aggressive with their demands with little effort to “right-size” their proposal. BOMA/Chicago, and other organizations, has characterized the legislation as a gross over-reach by both Exelon and ComEd at the expense of consumers. Recent testimony by BOMA/Chicago's Director of Government Affairs Ron Tabaczynski and Energy Counsel Mike Munson helped to quash the legislation this year.
Unfortunately Exelon/ComEd’s request for a rate increase isn’t going away. Major energy legislation is expected to be around in 2017, either in the January “lame duck” session or the regular 2017 session. While much of the legislation is geared at providing a multi-billion dollar bailout for two Exelon nuclear facilities, ComEd remains intent on getting micro-grid provisions passed - which would allow the company back into the generation business. ComEd is also seeking to have its energy efficiency programs become rate-based programs under their guaranteed rate of return, so that programs that currently provide savings for consumers become revenue generators for the utility.
How does this impact BOMA/Chicago members? BOMA/Chicago buildings make up about 5% of ComEd's total load. Some analysts estimate the cost of the ComEd/Exelon proposal to be about $7.7 billion over the next 10 years, with commercial customers paying the majority of the increases.
Mayor Emanuel has abandoned his preferred legislation, Senate Bill 1488, that would double the homeowners' exemption and effectively shift even more of the property tax burden on commercial real estate buildings and tenants.
If the legislation would have passed, commercial property taxes would have increased by as much as 22%, while many homeowners would have seen a decrease in their tax bills.
After BOMA/Chicago met with the Mayor's office and Governor Rauner, conducted an effective media and grassroots campaign, testified against the bill, and worked with a coalition of organizations across the state to actively oppose the legislation, Mayor Emanuel has been convinced to move forward with a city tax rebate program to provide relief to homeowners. The City is reportedly looking at different funding source options.
How does this impact BOMA/Chicago members? While an expansion of the homeowners' exemption would have shifted even more of the tax burden on commercial real estate buildings and tenants, a rebate program will more than likely provide relief to those homeowners who need it most using a designated funding source - instead of relying on commercial buildings and tenants to foot the bill.
House Bill 6036, as amended, would have created a new felony offense called "criminal building management," which would apply to the wide array of persons associated with ownership or management of commercial real estate. It would have included employees, officers and directors of real estate trusts, corporations, governmental bodies, pension funds, and labor unions, among others. Under the legislation, a Class 4 felony (1-3 years in prison; $25,000 fine) would result when such a person "knowingly permits or causes the physical condition or facilities of the commercial real estate to become or remain in any condition that is a contributing factor in the injury or death of a first responder."
Proponents of the legislation pointed to recent first-responder fatalities in Chicago and the failure of civil fines to force building owners to correct the most egregious incidents of negligent building management.
While the proponents clearly targeted dilapidated, mismanaged and dangerous buildings as the need for the legislation, the simple and broad wording of the proposed amendment, combined with the complex realities of actual building code administration in a large municipality, creates some significant problems that the authors did not intend.
BOMA/Chicago was successful at mobilizing broad opposition to the bill by building a coalition of business organizations and labor unions, and won a significant victory on April 6 when the bill's sponsor declined to call it for a vote before the House Judiciary - Criminal Law Committee. Instead, she scheduled it for a subject matter hearing on April 13. BOMA/Chicago testified in opposition.
The bill was not called for a vote, but the author, Rep. Kathleen Willis (D-Addison), vowed to keep the subject matter alive and pursue the legislation in the next session. Following the subject matter hearing, the author filed a revised amendment for the purposes of keeping the discussion on the legislation open during the upcoming legislative interim. While the resulting language to be introduced next session is expected to be far more limited, it will still be problematic for building owners.
Staff is working with our state legislative consultants, Morrill & Associates, on a strategy to pursue during the summer to fundamentally change the concept of the legislation and will continue to monitor the developments of this legislation.
How does this impact BOMA/Chicago members? If enacted into law, a building owner, manager or employee could be held criminally liable, including potential jail time, if a building condition contributes to the death of a first responder at your building.
The Illinois House and Senate overrode Governor Rauner's veto of Senate Bill 777, which extends by 15 years the time that the City of Chicago has to bring the police and fire pensions to 90% funding. The newly enacted law will keep property taxes from increasing by an additional $220 million this year. Without the bill becoming law, the City would have been mandated to reach 90% funding level by 2040 and the reported city payments to police and fire pensions in 2016 would have been $550 million (instead of $330 million).
How does this impact BOMA/Chicago members? Now that the bill is law, reported city payments to police and fire pensions in 2016 will be reduced from $550 million to $330 million, avoiding another massive property tax increase that is especially burdensome on commercial buildings and tenants.
For more information about government affairs on the state, county or city level impacting the commercial real estate industry, contact Ron Tabaczynski, Director of Government Affairs at email@example.com or (312) 870-9611.