Tribune exposes one scandal and misses a bigger one

Property tax needs attention

credit: From Sovereign to Serf (CC BY-ND 2.0)

The Chicago Tribune, or what’s left of it, has issued a pretty good report on inequities and corruption at the Cook County Assessor’s office. Of particular note, they’ve included a lot of detailed statistics looking at assessment/sales price ratios, as well as a lot of details of recent history.  I think it’s fair to describe their main points as:

  1. Less expensive homes typically are assessed at a higher percentage of market value than more expensive homes, and therefore pay more taxes than they would if assessments more accurately reflected market prices.
  2. Sophisticated homeowners are more likely than unsophisticated ones to appeal their assessments, and a large percentage of appeals are successful.  This is one cause of the problem in (1).
  3. The quality of assessments in Cook County doesn’t meet professional standards of accuracy.  The MacArthur Foundation funded development of new mass appraisal methods which may provide more accurate results, but the Assessor has made little or no use of them.
  4. The Cook County Assessor’s office suffers from some combination of corruption and incompetence.

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Another example of location value

Don’t know if fair use permits me to use Bloomberg’s picture, so here’s a goose in Aurora, maybe somewhere near the site of interest. Image credit: Kenneth Cole Schneider (CC BY-NC-SA 2.0)

Just in case anybody doubts that location has value in the 21st century, here’s a report from Bloomberg about a 31-acre Aurora parcel that became valuable because it’s adjacent to the CME Group‘s data center, enabling one to trade a millionth of a second faster. The site sold for $14 million, “probably twice as much as it’s worth” according to a local real estate exec. I would argue that it must be worth $14 million, else the buyer would not have paid it.

The article reports a couple other nearby deals, but provides no parcel numbers nor even a map, so we can’t see what the assessment of this parcel is.  There’s also no indication who the seller was.

More jobs –> less recidivism

Click this image of Abashiri Station, Hokkaido to learn how it relates to recidivism. Image credit: David McKelvey .license: Attribution-NonCommercial-NoDerivs 2.0 Generic

Many of us have long assumed that a strong demand for labor results in less crime.  At least, less of the kind of crime people get imprisoned for.  And of course we assume this works most strongly for people at the bottom of the economic ladder, a category which includes most of those released after serving time in prison.

Now we have a study (or more precisely, a report on a study because the original source is behind a paywall) which confirms this assumption. Basically, those released into a strong economy are less likely to return to prison than those released in slack times.  Because the study was apparently done at the county level, there would be enough cases that it’s not a statistical artifact. From the abstract:

[B]eing released to a county with higher low-skilled wages significantly decreases the risk of recidivism. The impact of higher wages on recidivism is larger for both black offenders and first-time offenders, and in sectors that report being more willing to hire ex-offenders. These results are robust to individual- and county-level controls…

So, since taxing privilege rather than production is an economic development tool, we can also assert that it is an anti-crime measure.

Declining number of homeless Americans

Here’s another assertion that our “civilization” is collapsing.  Of course I don’t know that it’s collapsing, maybe it is, but I decided to arbitrarily pick one of the signs identified in the article:

The “misery index” mushrooms, witnessed by increasing rates of homicide, suicide, illness, homelessness, and drug/alcohol abuse;

I haven’t time to look up all of these, so I picked one  — homelessness. It happens that the Federal Dept of Housing & Urban Development, while not doing other mischief, runs an annual point-in-time survey of the number of homeless.  And look what it shows:

source: The 2016 Annual Homeless Assessment Report (AHAR) to Congress. (PIT=”point in time”)

Observed homelessness is declining. That doesn’t mean rent isn’t too high, it doesn’t mean that people aren’t imposing on friends or relatives for temporary shelter, it doesn’t mean that lots of folks don’t lack the opportunity to earn a decent living, and it doesn’t mean that people don’t hide from government officials.  But it does mean that one arbitrarily chosen statistic, used to support the ongoing collapse, doesn’t.

An improved real estate tax can help revitalize the south suburbs

photo of a south suburban rainbow by Tom Gill (CC BY-NC-ND 2.0)

Thanks to Crains for an article discussing the multiple difficulties of maintaining the south side of Chicago, and the south Cook County suburbs, as viable communities. There are a lot of issues here, but two of them are real estate taxes and vacant lots. The article notes that effective tax rates – taxes as a percentage of property value – in the south suburbs are more than double the average (I suppose they mean the average for Cook County). And that’s for the south suburbs as a whole; in one area your annual tax bill will be over 10% of what your real estate is worth.

So of course there are numerous vacant lots as well as rundown properties. If you spend $100,000 to build a house in an area where the effective tax rate is 10%, you’ll pay $10,000/year tax (in addition to the tax on the unimproved land value). That’s far more than your mortgage, maintenance, and utilities would be, so you don’t build it.

In fact, it’s worse, because Cook County, in practice, assesses residential properties at a higher percentage of value than vacant land – 56% higher according to the latest data(pdf) from the Illinois Department of Revenue. Even more incentive to let the property run down.

Suppose, instead, that two changes were made:

(1) Assess the value of vacant land, as well as of houses, accurately. This is the responsibility of the Cook County Asssessor.

(2) Stop giving vacant land the discount that residential property gets. Currently, commercial and industrial properties are supposed to pay a tax rate 2.5 times what houses and vacant land pay. That might not be a good idea, but it’s the law as enacted by the Cook County Board. The Board could move vacant land into the same category as commercial and industrial land.

If these two changes were made, the effective tax rate on vacant land would be triple, or more, what it is today. That changes the calculation for the land owner. Suddenly the cost of holding land vacant is higher, which means the alternative – developing or selling it – is lower. That’s important, because more development means more housing and/or more jobs.

Of course this change would raise more revenue for schools and other governments, or perhaps could be used to lower taxes on other uses. The amount of revenue isn’t certain, since the Assessor does not share information on the number or value of vacant parcels.

There is absolutely no danger that owners will pick up their vacant land and move it out of Cook County. It is here to stay. We just need to fix the incentives to encourage development in areas where it is lacking.

This is not the whole solution to the difficulties of the south suburbs, but it is one useful step that costs homeowners and governments nothing.  All it requires is for Cook County officials to do their jobs.

How come a LaSalle County TV station is the most valuable in the country?

image credit: Brian Smith (CC BY-NC-SA 2.0)

Well now, more precisely, how come the spectrum held by  a TV station broadcasting from Ottawa fetched a higher price than any other station offered? WWTO is owned by Trinity Broadcasting and broadcasts on five digital subchannels according to the Wikipedia article.  According to the report today from the Federal Communications Commission, their spectrum sold for $304 million, highest in the U S. , while WYCC’s spectrum in Chicago fetched only $16 million.  I know there are all kinds of technical considerations that might explain the difference, but it’s a curious one. Some of us are suspicious when government-owned assets are sold for a comparatively low price.  Both stations are reportedly going off the air.

Nationwide, most of the spectrum has been “purchased” by wireless companies but apparently some will be returned to the “unlicensed” category for use by wifi and similar low-power devices.

So most of the spectrum will be used by private corporations to provide services from which they expect to obtain a profit.  Kind of like commercial land, which everyone agrees is subject to tax.  So why does the government not tax privately-held spectrum?

Let’s watch the Assessor on this one

Some people are Cubs fans, others find it more interesting to watch the Assessor.

Crains reports that a very prosperous Cub, Jon Lester, has purchased and demolished the building next door to his home,apparently so that he could have a side yard.  Purchase price was $1.35 million, so the land must be worth that much.  It cost Mr. Lester more, of course, since he had to pay to demolish the place, but let’s take the $1.35 million over to the Assessor’s office. There we see that the property was assessed at $100,463, indicating a market value of $1,004,630 for the land + building. Land alone is about a quarter of this, so the Assessor seems to be saying the land is worth $250,000.  But it isn’t. Obviously it was worth over a million dollars. (And, checking Zillow, I see that the price isn’t out of line for the area.  A 3125 sq ft lot at 1450 W. Grace is on offer for $1.05 million. )

Now, under Cook County’s current rules, the tax bill is based on the assessment of the total parcel and it makes no difference which part is land and which part is building.  But with the building gone, it’s important for the assessed value to represent what the land is really worth. Otherwise the rest of us taxpayers have to cover part of Mr. Lester’s share.

(In case the link above stops working, you can readily find the parcel on the Assessor’s web site. Search for 1446 W Berteau, or parcel number 14-17-305-025-0000)

From the Assessor’s web site

PUBLIC NOTICE TO SURVEY RESEARCHERS: Always offer “no response” as an option or YDAC

Random Cat (detail) photo by Ziggy Liloia (CC BY-NC 2.0)

I am often willing to complete surveys which appear to have a serious purpose and don’t require too much time.  But when I get to the last few questions they are usually something like:

  • What is your household income?
  • What is your race?
  • Something else personal?

Maybe I don’t want to tell you.  If you’re a wise survey designer, you offer me an option like “prefer not to answer” or “human”. But many surveys are less thoughtful, so it has been my practice to abandon the survey at that point. I’ve wasted my time and the surveyor gets no information (or maybe they save the truncated survey, I dunno.  Probably NSA has it.)

But now I have a new system — random numbers.  A spreadsheet can give you one, or get it from a site like this. Or just flip a coin as many times as needed. There’s your answer and it has a random chance of being correct.

So, all you surveyors who don’t provide a “no response” option, your data is crap.  Or more precisely, are crap.  YDAC.  Not my fault.

Is Trump not entirely bad?

Photo of Jan 21 2017 women’s march by Bob Matter.

Political commentator Bob Matter took this photo, and sent it with the comment “You know you picked the right guy when the tax lawyers are against him.”

But are they?  Sure, there’s a sign, but it’s hand-lettered, and carried by one guy. Maybe he’s a tax lawyer, and maybe he’s against Trump.  But tax lawyers ain’t stupid.  Nor impoverished. I bet they like whoever runs the government, and with Trump suggesting new rules on repatriation, a “border tax,” and a new “Dependent Care Savings Account,” which can be for benefit of the unborn and qualify for matching funds, there’ll be plenty of work for tax lawyers.

Maybe they hired an out-of-work actor to try to build some sympathy for their profession.

None of the above is meant to suggest that Hillary, or Jill, or even Gary would have reduced the demand for tax-related legal advice. As Henry George might have said: “It is not kings nor aristocracies, nor tax lawyers nor accountants, nor landowners nor capitalists, that anywhere really enslave the people. It is their own ignorance.” That’s why we have a Henry George School.

Sound concept, everything else wrong

Argyle station, one of the platforms to be widened. Graham Garfield photo from Wikimedia, Creative Commons Attribution Share-alike 2.0 generic license

Argyle station, one of the platforms to be widened. Graham Garfield photo from Wikimedia, Creative Commons Attribution Share-alike 2.0 generic license

[The following was written in September 2016, but for some reason was not published until January 2017.]

If good transit increases land values – which it does – then shouldn’t the increase in real estate values should be used to fund transit infrastructure?  Yes, if you do it right.

Case in point is CTA’s “Red Purple Modernization Project” and, in particular, the “Lawrence to Bryn Mawr Modernization.”  The structure is nearly 100 years old, been maintained somewhat, it seems reasonable that it might need rebuilding.   Maybe it’s even reasonable to widen the platforms (which must account for a lot of the >$1 billion cost), even tho we know from Granville and Loyola that elevator access can be achieved on existing narrow platforms.  It would be interesting to know of any evidence that narrow platforms actually are associated with more accidents or injuries than wider platforms.

We’re already stuck with a federal funding system thru which skilled local politicians have milked federal taxpayers for over $1 billion just for this 1.3 mi segment. But a local match is needed.  It’s not clear from the posted documents how much this match would be, but under new laws the State permits “Transit TIF’s” which can be used to raise much of it.

According to the CTA documents, “Transit TIF funds are created by growth in property value, known as increment, that occurs because of the investment in transit.” That’s almost certainly a lie, as a TIF absorbs the entire increase in assessed value that occurs during its life.  Increase due to better schools goes to the transit TIF.  Ditto for increase due to more effective policing, sanitation improvements, libraries, flood control, fire protection, or anything else the government does and pays for. Ditto for increases due to private activity that makes the area more desirable (for instance, good private schools have been shown to raise land values). Ditto for inflation, which has already returned to real estate values and will doubtless continue, on the average tho not every year, for decades.

So where will governments get the money to pay for schools, sanitation, libraries, and everything else including pension costs resulting from past services? The land value increase is already taken, as is the increase in improvements and from inflation.  So it’ll have to come from other taxes.  We’re already seeing higher taxes for nearly every kind of productive activity, and we’ll just see more.  It’s been pretty well demonstrated that people will put up with this.  Not a lot all at once, but a bit more every year.

We’re stuck with this, it is going to happen, the current crew will be re-elected repeatedly or similar ones put in their place. But, just for fun, we might consider what should have been done instead.

Well, first, a proper evaluation should have been done of restoring the third track on the parallel Metra line a mile or so west. Restore a couple of the stations which existed there sixty years ago, integrate the fare structure, and  we might find that two tracks would have been sufficient. But that would have required more coordination than legislators seem to feel is necessary.

Second, CTA needs to fix operational problems that constrain its capacity.  At Clark Junction, for instance, it takes about 18 seconds to reset the switches and signals after the route clears. Similarly, at Howard trains approaching from north and south are often held out because nobody can get empty trains out of the station, or perhaps sometimes because nobody got around to changing the signals. How could this be fixed?  How many more trains handled?