REAL ESTATE TRANSFER TAX
On March 21, 2006, Lake Forest voters approved a referendum
that allowed the City to impose a real estate transfer tax
on the sale of real estate within the City. Revenues
generated from the transfer tax fund infrastructure
improvements (repairs to streets, sewers, bridges, etc.)
that would otherwise be postponed or eliminated. The Lake
Forest City Council believes that well-maintained streets,
sewers, etc. help support and preserve community character
and property values.
Who pays the tax and when?
The Lake Forest City
Council approved an ordinance specifying that the tax
be applied as follows:
- The transfer tax be levied on the buyer of any
residential or commercial real estate in The City of Lake
Forest.
- The transfer tax be imposed on all transactions
which close on or after July 5, 2006.
- Exemptions from paying the tax may be given for
contracts that are executed before May 1, 2006 but have a
closing date after July 5, 2006. (The deed must be
recorded on or before December 31, 2006 to be exempt); or
deeds recorded prior to July 5, 2006.
- A rebate of the transfer tax owed in an
amount up to $2,000 will be given to Lake Forest residents
who move between residences within Lake Forest.
On
November 17, 2008, the City Council amended the Real
Estate Transfer Tax Ordinance by extending the
$2,000 refund opportunity from one to two years
after a resident first sells his or her home and
then buys another home within Lake Forest.
Note: As of November 18, 2010 transactions
revert to one year after a resident first sells and
buys another home within Lake Forest to apply for
the rebate.
Sales and purchases taking place between
November 17, 2008 through November 17, 2010 will
still have the two year period to request the
$2,000.00 refund.
- Individuals refinancing their home or changing a name
on their deed must apply for an exemption stamp. This is
required by the Lake County Recorder’s Office and can be
obtained for a fee of $50.00 at City Hall.
Purchasers of real
estate in Lake Forest need to pay the tax at Municipal
Services
(800 N. Field Drive) during regular business hours. The
tax must be paid with cash or a certified check for transfer
stamps for a home purchase. Cash, personal check, Master
Card or Visa Card are acceptable for exempt transactions.
The forms required for payment of the real estate transfer
tax can be downloaded from this site.
This allows purchasers to print out and complete the
necessary forms prior to coming to Municipal Services to report the
closing of a real estate transaction.
What is the real estate transfer tax
rate?
The rate is $4.00 per $1,000 of value, paid by the buyer
at the time of closing.
Levied on residential and commercial real estate
transactions at the time of sale, this
translates to $3,600 on a property with a $900,000 value.
What forms are needed?
When purchasing or selling real estate in Lake Forest,
a number of steps must be taken before transfer tax stamps
can be issued. Checklists have been developed to provide a
quick overview of actions required by the
buyer
 (40k - 1 page)
and seller
(41k - 1 page).
Downloadable forms are available as follows:
For more information, please contact
Laronda Haines at (847) 810-3620 or at
hainesl@cityoflakeforest.com.
Need for Real Estate
Transfer Tax Referendum
Note: The following
Real Estate Transfer Tax
information can be downloaded.
(146k - 3 pages)
Preserve Community Character
The first and most important priority in Lake Forest is
to preserve community character.
Well-maintained infrastructure (streets, sewers, street
lighting, etc.) is critical to the community and has a
direct impact on property values. In order to maintain a
balanced budget in light of rising costs, The City of Lake
Forest has reduced operational expenses, postponed capital
projects, and deferred infrastructure maintenance. By
deferring maintenance, the City has fallen one year behind
in the street repair program, three years behind in the
sidewalk replacement program, and is unable to fund needed
street light improvements throughout the community.
To maintain our aging infrastructure, what annual
level of funding is required?
The City Council projects approximately $1.6 to $1.8
million is needed annually to maintain the City’s streets,
sewers, sidewalks, street lighting, municipal buildings,
trees, etc.
What additional funding sources has the City Council
considered?
The City Council has analyzed a number of alternate
revenue sources to provide funding, including a:
- 2% restaurant tax ($440,000 estimated annual revenue);
- additional 0.5% sales tax ($700,000 estimated annual
revenue);
- non-retail business employee (head) tax ($290,000
estimated annual revenue); and
- real estate transfer tax ($1.4 million estimated
annual revenue).
Is there any other single source of revenue that would
generate a level of funds similar to the real estate
transfer tax?
Yes, the City Council could increase property taxes to
generate sufficient funds for the continued maintenance of
our streets, sewers, sidewalks, bridges, and street lighting
improvements.
What nearby communities have a real estate transfer
tax and in what amount?
Highland Park $5.00/$1,000
Fort Sheridan (Highwood) $5.00/$1,000
Lincolnshire $3.00/$1,000
Mettawa $5.00/$1,000
Wilmette $3.00/$1,000
Skokie $3.00/$1,000
Evanston $5.00/$1,000
Who will pay the real estate transfer tax and at what
rate?
The City Council has determined that the rate will be
$4.00 per $1,000 of value, paid by the buyer at the time of
closing. This translates to $3,600 on a property with a
$900,000 value. Based on projected real estate sales and
projected rebates (see below), this rate would generate $1.4
million to address the City’s long-term infrastructure
needs. The tax would be levied on residential and commercial
real estate transactions at the time of sale.
Now that the real estate transfer tax has been
approved, can the City increase the rate of the tax at any
time?
No, voter approval of a referendum is required for any
additional increase. The City Council can, however, lower
the rate by ordinance if the tax generates more revenue than
is needed for infrastructure improvements.
Will there be any exemptions to the proposed real
estate transfer tax?
The City Council has determined that a rebate of the
transfer tax owed in an amount up to $2,000 would be given
to Lake Forest residents who move between residences within
Lake Forest. A number of other North Shore communities have
enacted a real estate transfer tax, but Highland Park is the
only community that provides a similar rebate ($1,000).
Other exemptions would include governmental entities,
not-for-profit organizations, and transfer of deed
transactions.
On
November 17, 2008, the City Council amended the Real
Estate Transfer Tax Ordinance by extending the
$2,000 refund opportunity from one to two years
after a resident first sells his or her home and
then buys another home within Lake Forest.
Note: As of November 18, 2010 transactions
revert to one year after a resident first sells and
buys another home within Lake Forest to apply for
the rebate.
Sales and purchases taking place between
November 17, 2010 through November 17, 2012 will
still have the two year period to request the
$2,000.00 refund.
How will the real estate transfer tax revenue be used?
The City Council adopted an ordinance on February 17, 2005
requiring that, if approved, these tax revenues will only be
used for infrastructure improvements (e.g., roads, sewers,
bridges, street lights, sidewalks).
What are the advantages of a real estate transfer tax?
A real estate transfer tax:
- is a sustained, single source of revenue that would
generate sufficient funds to help preserve property values
and community character by maintaining Lake Forest’s aging
infrastructure;
- diversifies the City’s revenue sources, thereby
reducing dependency on property taxes;
- would have a significant impact on Lake Forest’s
long-term financial stability by helping to maintain a
balanced budget;
- shifts some of the tax burden from current Lake Forest
residents to non-residents (approximately 70-75% of real
estate purchasers are non-Lake Forest residents); and
- has been successfully implemented in other North Shore
communities (Highland Park, Wilmette, Mettawa, etc.) as a
supplementary revenue source.
What are the disadvantages of a real estate transfer
tax?
A real estate transfer tax:
- would impact only those buying property so it is a
relatively narrow-based tax (approximately 4-5% of Lake
Forest’s housing stock turns over each year); and
- is not deductible on state or federal income tax
returns. The amount of the real estate transfer tax
ordinarily increases the cost basis of the purchased
residence. Residents should refer to their tax advisor on
this matter.
Will the imposition of a real estate transfer tax
discourage individuals from purchasing a home in Lake
Forest?
The real question is what impact (if any) a real estate
transfer tax or higher property taxes would have on a
buyer’s decision. Whether or not the imposition of a real
estate transfer tax or an increase in property taxes impacts
an individual’s decision, the City Council believes the
quality of the City’s infrastructure has the greatest
bearing on property values and community character.
If the real estate transfer tax referendum is
approved, how will it affect Lake Forest?
Revenues generated from the transfer tax will be used to
fund infrastructure improvements that would otherwise be
postponed or eliminated. Well-maintained streets, sewers,
etc. help support and preserve community character and
property values.
Whether a real estate transfer tax is approved or
property taxes are increased, the City Council will continue
to look for ways to control operating and capital expenses
to maintain a balanced budget and pursue outside funding
sources (partnerships, grants, etc.) and modifications to
City services (outsourcing, etc.).
|
