An Insurgent Campaign Is Targeting the Very Heart of the Chicago Democratic Machine — and Just Might Win

For the better part of the past four decades, the office in charge of assessing and collecting property taxes in Chicago has been firmly in the grip of the city’s Democratic machine. The process the party has set up is a boon for tax lawyers, who then give heavily to the party. The result is a system that goes light on big businesses and the wealthy while putting a disproportionate share of the burden on the city’s black and brown residents.

This year, the machine is under assault.

A primary race for control of the Cook County Assessor’s Office — between a political novice, Fritz Kaegi, and one of the most powerful figures in Chicago politics, Joseph Berrios — is turning into a genuine slugfest, pitting the city’s ascendant progressive bloc against the old guard of the Democratic machine. The primary will be held on Tuesday, March 20.

Berrios’s challenger, Kaegi, decided to quit his comfortable career as a mutual fund manager last spring and run for county assessor. Kaegi’s bid against Berrios, who also heads the Cook County Democratic Party, is emblematic of a broader fight for the party’s future in the city — and across the country. Progressive, Bernie Sanders-inspired politicians have had resounding success in elections nationwide over the last year — perhaps most notably in Virginia, where left-wing, grassroots candidates made massive electoral gains in November. Now, this race is a major test for the burgeoning political revolution in Chicago, where Sanders exceeded expectations in the 2016 Democratic primary despite having no party support.

Can the progressive movement succeed in building power from down the ballot on up in a city that’s famous for sleazy top-down machine politics?

“Our property tax system is not fair today. It is corrupted,” Kaegi told The Intercept. “Berrios represents machine politics in Cook County and all the things that people really detest about the system.”

Kaegi seems to have cobbled together an impressive insurgency, positioning himself as a reformer who wants to overhaul the office and bring much-needed updates and transparency to the county’s property tax assessment process. Kaegi has pledged not to take any money from property tax appeals lawyers, often a significant source of funding for Chicago Democrats, and he may not need it anyway — he’s already pumped more than $800,000 of his own money into his campaign.

Despite his time in the financial industry and his lack of political experience, Kaegi said he’s a committed progressive. He supported Sanders in 2016, he said, and ultimately voted for Hillary Clinton in the general election. A review of state and federal campaign finance records show that he has been a generous donor to a number of Illinois Democratic candidates and groups going back as far as 2004. Soon after he quit his job, Kaegi headed to Iowa for a candidate training program held by Wellstone Action, a group dedicated to building a pipeline of progressive candidates in the mold of the late Minnesota Sen. Paul Wellstone.

When Clem Balanoff, chair of Our Revolution Illinois — a group built from the remnants of the 2016 Sanders campaign — and a longtime progressive activist in Chicago, first met Kaegi last spring, he was skeptical of his background as an investment manager. “They ain’t my kind of guys usually,” Balanoff told The Intercept. But as Balanoff got to know him better, he became convinced Kaegi’s campaign vision was aligned with Our Revolution’s, and that he could take on Berrios.

It helps that he is the most visible and well-funded challenger in a small field. (Andrea Raila, a property tax expert, is also running, but her campaign has not gained much traction.) There aren’t a whole lot of established Democrats willing to risk their future political careers on a long-shot bid against a powerful party leader. Indeed, Berrios, who was first elected in 2010, didn’t face a single challenger — in either the primary or general — to his 2014 re-election bid.

So while a wealthy self-funding former investment manager with an MBA from Stanford may not seem like a natural standard bearer for a progressive movement, Our Revolution Illinois has rallied behind him. After polling its membership, the group endorsed Kaegi in November, and political support for him has only continued to grow. Chuy García, who challenged Mayor Rahm Emanuel in 2015 and is now the leading candidate to replace Rep. Luis Gutiérrez, D-Ill., (who is backing Berrios) has endorsed him. Three Chicago-area members of Congress, the longtime county clerk, and a growing group of progressive legislators and aldermen have all endorsed him, too.

There aren’t a whole lot of established Democrats willing to risk their future political careers on a long-shot bid against a powerful party leader.

In recent months, Our Revolution has bird-dogged the assessor’s office, calling for public hearings, investigations, and oversight into what it is calling a secret “Berrios tax” on minority and low-income communities. “We’ve made a conscious decision to make this a top priority,” Balanoff said. “If you look at the [most loyal] voters of the Democratic Party, they’re the ones who are getting screwed the most.”

The issue of unequal property tax burdens has become a political firestorm in Cook County — and Berrios sits at the center of it all. An ongoing series of investigations by the Chicago Tribune and ProPublica Illinois has found that Berrios has facilitated a system, in which wealthy homeowners and downtown commercial property owners pay less in taxes as a percentage of property value compared with black and Latino homeowners in Chicago’s lower-income neighborhoods. In an interview with The Intercept, Berrios’s campaign spokesperson Monica Trevino and campaign manager Mario Lopez claimed that the Tribune and ProPublica stories are willfully inaccurate and that when he first took office in 2010, Berrios “inherited a broken system.”

Berrios’s office boasted in a 2015 press release that it had implemented a new modeling technique that improves residential property assessment fairness by 25 percent. But as the Tribune uncovered, the assessor continued to use an inaccurate and opaque system that openly encourages homeowners and businesses to appeal their often-erroneous initial assessments. Wealthier homeowners and business owners who can afford property tax appeal lawyers get generous breaks on their property tax bills. Berrios’s office will often not adjust an assessment on a property from one year to another, even if it had granted a reduced valuation previously, creating a feedback loop for future appeals. As the Tribune reported, “In 2015 alone, residential property owners filed assessment appeals involving 370,000 parcels, winning reductions 80 percent of the time.”

The appeals process is a lucrative scheme for the Democratic Party, which fills its campaign coffers with money from tax lawyers. Those property tax appeals lawyers have made a killing, bringing in more than $130 million between 2009 and 2015. The kickback for Berrios has been generous. Since 2009, he’s raised more than $5 million — more than any county assessor in history. About half of those funds have come from property lawyers and others involved in cottage industry that has cropped up around the appeals process.

“That, to me, is pay-to-play politics on steroids,” Balanoff said.

Illinois Speaker of the House Michael Madigan, D-Chicago, center, talks with his staff inside Illinois Gov. Bruce Rauner’s office during veto session at the Illinois State Capitol Wednesday, Nov. 16, 2016, in Springfield, Ill.

One of Berrios’s closest political allies is Mike Madigan, the state Democratic Party boss, House speaker, and a founding partner of Illinois’s most powerful commercial tax law firm, which secured its clients $1.7 billion in assessment reductions between 2011 and 2016. Madigan is a toxic political figure in Illinois, who many blame for the state’s massive debt and ongoing pension crisis. Many Democrats, especially in the gubernatorial primary, are scrambling to distance themselves from him and his public perception as a crooked politician.

Tax attorney Ed Burke, also one of Chicago’s most powerful alderman, is another Berrios ally. Burke is currently working to secure what’s estimated to be as much as $3 million in property tax reductions for President Donald Trump’s downtown Chicago hotel and retail space. His law firm began representing Trump in 2006 and has filed half a dozen lawsuits on behalf of the president seeking refunds of property taxes paid as far back as 2009, the Chicago Sun-Times has reported.

The heightened scrutiny of Berrios and Cook County’s lopsided property taxes has galvanized the issue for Democrats — it’s a particularly important matter in the heated gubernatorial primary. Gubernatorial candidate Chris Kennedy has gone so far as to call on Berrios to resign and wants to prohibit property tax appeals lawyers from making campaign contributions to local assessors or their affiliated political organizations or serving in public office. (His opponents point out that a company headed by Kennedy hired Madigan’s law firm to secure a property tax break).

Another candidate for governor, state Sen. Daniel Biss, has called Berrios’s assessment process a “self-dealing racket” while touting his own legislative plan to fix the system. Democratic frontrunner J.B. Pritzker also supports reforming property taxation but has avoided criticizing Berrios. The Cook County Democratic Party got behind Pritzker early. Property tax policy isn’t something Pritzker wants to be loud about on the campaign trail: The billionaire received a $230,000 property tax reduction on the Gold Coast mansion that he bought next door to his own, claiming it was “uninhabitable.”

Berrios’s campaign manager defended campaign contributions from property tax appeals lawyers. “He accepts [contributions] from property tax attorneys” because he is not rich, said Trevino, and “cannot self-fund his campaign like Fritz Kaegi.” Berrios has more than $1.2 million on hand, according to the latest campaign filings.

For his part, Kaegi wants to implement a new assessment model that will dramatically reduce regressiveness by more accurately valuing properties in the first place, scale back the reliance on appeals, and make the whole process more transparent. “We’re committed to showing our work for every property that we value — and not just for the people who appeal,” Kaegi said. “We’re going to open up our data and algorithm to outside parties so they can scrutinize how the office works and work to eliminate bias.”

Meanwhile, Berrios becomes more embattled by the day. Within just the past month, representatives of Latino and black neighborhoods sued him for alleged racial discrimination in the assessment process, reports found that he’s flouting anti-political patronage and nepotism reforms in his office, and he was slapped with a $41,000 fine for failing to return excessive campaign contributions from property tax attorneys.

On the ropes, Berrios is aggressively countering Kaegi. He tried, and ultimately failed, to keep Kaegi and another candidate off the ballot. His campaign has zeroed in on Kaegi’s career as an investment manager at Columbia Wanger Asset Management. They’ve run attack ads, including a radio spot, featuring Illinois Secretary of State Jesse White, claiming Kaegi managed a fund that invested $30 million in CoreCivic, the private prison giant.

Kaegi, who has filed a defamation lawsuit against Berrios, vehemently denies those charges, saying that he was no longer overseeing the fund when the investment was made and that he actively blocked the company from investing in private prisons while he was there. Politifact and the Better Government Association have whacked Berrios’s charge as “mostly false,” but the county assessor is not backing down. Kaegi has not provided “any definitive evidence that when the investment was made he wasn’t there,” Trevino told The Intercept in an email.

“They can’t defend their record so they want to lie about somebody else,” said Balanoff of Our Revolution. “They think if they can spend enough money to muddy the waters, somehow, someway, [Berrios is] going to get re-elected. The electorate is far too smart for that stuff.”

While a wealthy self-funding former investment manager with an MBA from Stanford may not seem like a natural standard bearer for a progressive movement, Our Revolution Illinois has rallied behind him.

Berrios’s campaign aides also question Kaegi’s progressive credentials, and accuse him of being a “Wall Street Republican” because, the campaign says, five of Kaegi’s campaign donors have also given money to Republican Gov. Bruce Rauner.

Asked about Kaegi’s campaign donors, DeRondal Bevly, the candidate’s communications director, said, “Kaegi is a lifelong Democrat and, given that his voting history is public record, any suggestion to the contrary is an intentional attempt to deceive reporters/voters.”

“Almost every campaign has some donors to it who have donated to candidates or issues that are not aligned with them. Berrios has even more of them,” Bevly added. The Kaegi campaign provided The Intercept with a list of more than 50 individuals, law firms, and other companies that have contributed to Berrios’s campaign or his affiliated political organizations and also given to GOP candidates.

While it might be a political long-shot, Kaegi and Our Revolution are confident that they can build enough momentum to secure an insurgent victory in the upcoming primary on March 20. Kaegi said his campaign has internal polling that shows while 80 percent of voters recognize Berrios’s name, only 19 percent support him. “We don’t consider it an uphill battle. We consider it a battle that is energizing people and they are opening their eyes to the mandate for change that there is,” Kaegi says. “If we get our message out, we will win.”

Having prioritized the issue of property taxes, Our Revolution is in the process of formally asking where Democratic candidates for other political offices stand on the assessor’s race. “We’re going to make it very public,” Balanoff said, “because people have to understand who will continue to stand with the Democratic machine and its big donors and who is really interested in reform and change.”

Top photo: Lincoln Park, residential area in the Northwest Side in Chicago in November 2007.