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Cook County, parking operators in dispute over possibly millions in back taxes that could leave consumers pinched

Thursday, January 03, 2019
Chicago Tribune
by Gregory Pratt

Cook County, parking operators in dispute over possibly millions in back taxes that could leave consumers pinched
Cook County Board



Cook County Board

Cook County Board President Toni Preckwinkle presides over the Cook County Board in Chicago on Nov. 21, 2017. (Zbigniew Bzdak/Chicago Tribune)

By Gregory Pratt•Contact ReporterChicago Tribune
January 2, 2019, 8:35 AM

Cook County Board President Toni Preckwinkle’s administration is doing more than 20 audits of private parking operators dating back seven years to determine whether they owe potentially millions in back taxes related to residential apartment parking, records and interviews show.

The issue has the potential to affect many Chicago-area residents and cost parking lot operators millions that could ultimately be passed on to consumers. If individual parking companies end up getting hit hard by an audit, they’re likely to raise their own prices to try and recoup that money, ultimately hurting consumers.

At the heart of the issue is a conflict between Cook County and parking operators over the basic rules around off-street residential parking. Cook County and Chicago charge 9 and 22 percent taxes, respectively, on the monthly charge for parkers, while allowing a tax break for off-street parking that is meant to alleviate overcrowding on congested streets. The operator collects the tax from the customer, then pays it to Cook County.

But in recent months, parking industry officials said, the county has changed how it interprets the exemption by demanding that residential parking agreements be documented in leases or addendums to leases in order to be claimed. As part of the audits it’s conducting, the county also is reviewing several years’ worth of records to see if back taxes are owed — leading operators to cry foul.

Preckwinkle officials, meanwhile, said the county has not changed its rules but has focused on whether parking companies owe money they should have been paying all along. The county said it’s constantly performing audits of all types, and this exemption was found in several parking tax audits conducted beginning late last year.

The off-street residential parking issue is potentially thorny for Preckwinkle, who also is running for Chicago mayor, as her political opponents seek to portray her as being overly reliant on regressive taxes, such as the county’s now-rescinded pop tax. Preckwinkle’s also likely to face questions over the county in 2016 increasing the sales tax by 1 percentage point, an about-face on the key issue that propelled her into office against Todd Stroger in 2010. She later cast the move as necessary for the county’s pensions, debt costs and transportation infrastructure needs.
Related $8.3 million in Cook County property tax overpayments will be refunded automatically
$8.3 million in Cook County property tax overpayments will be refunded automatically

Preckwinkle also supported a December vote by county commissioners to restore a 6 percent tax on parking reservations made through apps such as SpotHero that was set to be cut this month.

Officials note the parking issue isn’t a new tax but an outgrowth of the county’s efforts to audit taxes currently on the books. During Preckwinkle’s first year in office, the county had five field auditors compared with 21 today, three audit supervisors and six revenue assessment analysts whose focuses include refunds, tax discovery initiatives and bulk sales, officials said.

“Since taking office (Preckwinkle) has simply professionalized the county’s operations, and this is another example,” Preckwinkle spokesman Nick Shields said. “Before (Preckwinkle), the Department of Revenue primarily collected tax payments. Our efforts to properly administer and audit to our tax ordinances do not equate to a change in rules.”

Still, there’s tension between the county and affected parties.

County officials said they are working through more than 20 audits. So far, audits have generated $700,000 for the county in unpaid back taxes, though the county won’t say how many audits that amount encompasses. Officials also declined to say how much they think the county will recoup from its audits but estimated it could be millions.

The Chicago Parking Association and the Chicagoland Apartment Association have expressed concerns, particularly over the county’s attempts to reach into past years for back taxes.

“Changing the policy, or (changing) the way they’re enforcing it is understandable,” CAA Vice President Michael Mini said. “To hold (operators) responsible for not complying with something they thought they were complying with all along and were given no indication they were in violation of is unfair.”

Shields countered, “It’s our opinion (that) the operators should have been aware of their obligation and collecting this tax all along.

“In instances where there appears to be a genuine attempt by a business operator to comply, we can negotiate to waive penalties,” Shields said. “That process happens on a case-by-case basis if the taxpayer can prove that they have made an effort to comply.”

Representing the Chicago Parking Association, attorney Stanley Kaminski in June wrote to county revenue director Zahra Ali, noting there’s “controversy over the proper collection of the Cook County Parking Tax as it relates to residential off-street parking.”

The county said it would interpret an exemption for apartment residents “in a stricter fashion than the city,” Kaminski wrote. The county said it requires that the lease period in the parking agreement “exactly match the same lease period in the apartment lease,” Kaminski wrote.

That, Kaminski said, would be a burden on month-to-month parkers and snow birds, among others, whose parking needs don’t always match the lease.

The county’s “overly strict construction of the county exemption defeats the intended purpose of the exemption to not penalize apartment tenants for having to use off-street parking to alleviate the overcrowding of the limited on-street parking in the city,” Kaminski wrote.

Part of the dispute also revolves around whether Cook County’s ordinance allows for a separate parking agreement or whether it has to be included in the lease itself.

Chicago allows parking lot operators to provide a “separate writing or supporting documentation” of an arrangement for parking with its residents.

Through Kaminsky, the Chicago Parking Association asked the county to re-evaluate its interpretation of the lease requirements for the off-street parking exemption and apply the law “as we believe it was intended.” But, the group said, if the county wants to make a change, the tax should not apply retroactively.

In its response, the county said the section “clearly states that the parking agreement must be part of the house or apartment lease.

“Contrary to your letter, the county has never issued any opinion or made any statement indicating a different reading of the ordinance,” Ali wrote.

Assuming that the parking agreement is not part of the lease, the county still expects the parking agreement to cover the remainder of the lease, Shields said.

“A parking agreement that is not in the lease does not qualify for the exemption,” he said. “In an effort to work with the parking operators, we have agreed to consider for exemption parking agreements that are separate from the lease provided the terms have a beginning or end date coinciding with that date in the lease.”

gpratt@chicagotribune.com
Twitter @royalpratt


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