We have a new North Suburban Reassessment Report from Assessor Fritz Kaegi. As a “reformer,” this Assessor publishes a lot more information than his predecessors. In fact, he publishes all the code for his assessment models.
Accurate assessments are said to be important because assessing a property too high can “destroy wealth by diminishing the market value of the property.” Which is true, but do not taxes based on accurate assessments also destroy wealth? What the Assessor seems to mean by a “fair” assessment is an assessment that is calculated in accordance with applicable laws and ordinances. This definition of “fair” comes mainly from our friends in the Legislature and County Board, with some role for other government officials. “Fair” in Cook County means that owners of houses or vacant land should pay taxes at 40% of the rate applied to ordinary industrial or commercial property, unless special favors have been bestowed. In the rest of the State, “fairness” requires rates in the absence of special favors to be uniform. In all areas, “fairness” requires that religious and most nonprofit educational facilities are entirely exempt from tax. The report uses Evanston as an example of where “fairness” was violated. If commercial/industrial property were assessed “fairly,” meaning at 2½ times the rate applied to residential, then the average homeowner would have paid $205 less municipal tax, and the average commercial property $839 more. (The difference in total tax burden, including school and other taxes, would of course have been several times greater but is not calculated in the report.) The “unfairness” was due to the Board of Review granting substantial reductions to many owners of nonresidential property. And so Crain’s decided to title their article about this report “Homeowners get clobbered by County property tax appeals board.” I suspect owners, tenants, and customers of businesses using commercial property would put it differently.
But at least Crain’s mentioned the Assessor’s report. I’ve seen nothing so far in the daily press or elsewhere. Perhaps it is to come.
The report explains pretty well how the assessment process works. The majority of Cook County taxable real estate value is residential, which process will likely be generally familiar to homeowners. I learned a bit about how condominiums are assessed. It isn’t directly based on what the unit would sell for, but rather the total value of the building and the unit’s proportional share. The implication is that a condo owner can improve her individual unit without risking a tax increase, while improvements to common elements would be taxed.
Nonresidential assessments are a different matter. “Our office primarily relies on the income approach [to estimating nonresidential real estate value], with secondary support and consideration from the sales comparison approach…[T]he cost approach is less helpful, as many commercial properties … grow in value over time, even as their net book values [that is, construction cost less depreciation] decline.” Which seems to be another way of saying that land value can increase as a structure becomes less useful, but for some reason the Assessor doesn’t mention land value.
Unlike administrators of sales or income taxes, the Assessor can calculate, objectively, the quality of his work by comparing assessments to actual sales. The report covers this (of course finding that things have improved under the current administration, which I suspect is actually true.) There’s also a statistical summary for every reassessed township (including maps, since a lot of folks don’t know which township they’re in).
And the Assessor congratulates himself for automatic renewal of senior citizen [partial] exemptions, which previously required annual application. The annual requirement was established in 2012 because, hey, senior citizens die or move away and might not get around to cancelling their exemption. I guess that problem was magically solved.
By all means, if you’re concerned about local finance, get yourself a copy of this report.