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:
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.
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).
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.
The Cook County Assessor’s office suffers from some combination of corruption and incompetence.
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.
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?
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)
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.
[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?
En route to writing something else, I discovered that the Center for Tax and Budget Accountability published a report last fall suggesting that Illinois might want to impose a severance tax on coal. I was surprised to learn that we didn’t already have such a tax, but encouraged that somebody is looking into it.
The report looks into severance taxes in several coal-producing states, suggesting that Illinois might raise anywhere from $1.6 million to $128.8 million, which might be shared with local governments, used as general revenue, or put into a permanent fund, or some combination. The numbers are pretty modest in the context of a state budget short by $4.6 billion for just the current fiscal year, but that’s no excuse to ignore them.
I did note a couple curious things in the report. On page five it asserts that, since most Illinois coal is consumed in other states, consumers in those states would pay most of the tax. I rather doubt that any consumers would pay it. Rather, since the coal market is national, implementation of a significant severance tax here would just reduce the value of coal deposits, so the tax would be paid by the owners or lessees of coal rights.
Second, there’s no discussion of existing real estate tax as it applies to coal deposits. Per 35 ILCS 200/10-175 it appears that coal rights, if not yet developed, are taxed on a value not to exceed $75/acre, practically a negligible amount. That’s an extremely cheap way for speculators to hold rights waiting for a price increase. But, per 35 ILCS 200/10-180, coal which is actually being mined is assessed much higher, based on its actual economic value as defined in the statute. So there’s already a substantial incentive not to mine the coal. A proper analysis would consider how a severance fee would affect this assessment, both in terms of revenue and incentives to mine or not mine.
Well, then, that would reduce economic activity in the region. On that basis, the University estimates the impact would be $900 million annually. That’s figured by counting staff salaries, student expenditures, capital improvements, and the multiplier effect of each.
But of course this is a phony argument, intended to maintain the flows of tax dollars to the state’s “higher education” system. Let’s just suppose that all government funding of the University stopped. Quite possibly it could remain in operation, as lots of nongovernment schools do. But suppose otherwise. Tomorrow morning we wake up and find that Northern Illinois University is going out of business. And, just to keep the exercise meaningful, suppose none of the other Illinois government schools are able to pick up the slack; maybe they went out of business too, or maybe they just won’t expand.
So now there’s a big campus for sale. Would a nongovernment school want to buy it? Or maybe one or more other organizations, such as a mental hospital, retirement community, corporate think-tank, drug rehabilitation center, penal facility, religious group, will want to buy the space? The campus won’t remain empty. It will be re-used or redeveloped, and that will involve an unknown (but positive) number of jobs and investments.
What about the students? It seems the economic return on college credentials is decreasing, but surely it has some value for some people. There are lots of colleges, public and private, looking for students. Some students will decide to put full-time formal education aside for a time, look for jobs or start businesses. And starting a business might be a good idea, with a labor force suddenly available.
And the faculty? Surely they’re employable, as consultants or teachers elsewhere, or doing something else. If they really can’t do anything but teach at a government school, what necessary skills do they lack?
Meanwhile, we also need to consider the benefit to taxpayers of no longer funding the University. How much would they save? Or, more likely, taxpayers would “save” nothing, but more funds would be available to cover other existing obligations, which does seem to result in some public benefit.
One more thing. This topic was raised by a link in an email I received, labeled “What’s a state university worth to the region in which it’s located?” That’s kind of meaningless; do we mean “to the people living in the region,” or “to the taxpayers of the region,” or “to the owners of land in the region,” or something else? And necessarily, the analysis needs to imagine what would happen in the absence of the university. Do there exist any examples of a significant state university shutting down? I know of none. Perhaps a test is needed. Maybe I shouldn’t be surprised that Cold Spring Shops hasn’t commented on this.
Over at New City, Tony Fitzpatrick tells us how he survived a heart attack. The good news, of course, is that he did, and it seems to have been due to an aware spouse, responsive ambulance, and nearby hospital with skilled and dedicated staff. Except for the first, those are advantages of living in a more-or-less functional and prosperous city, with pretty decent emergency services, all of which is reflected in the cost of land.
But somehow, because before “ObamaCare” Tony’s pre-existing condition prevented him from getting insurance for medical expenses, he credits O’Care with his survival. As if, five years ago, there were no ambulances, no hospitals, or no medical staff. In 2010 an ambulance still would have come, he still would have been taken to the closest available hospital, and the staff still would have done their best for him. The only difference is that, afterwards, he would have gotten a big bill, even bigger than the bill he probably did (or will) get. He might have paid the bill, or worked out some payment plan, or had to sign up for some kind of public assistance. And very possibly the hospital would have written off part of the bill. (Either way, before or after O’Care, the hospital would have a considerable staff who spent their time negotiating payments, filling out forms, etc.)
It wasn’t Obamacare, Tony. It was living in a city with helpful people and pretty good medical services. Either way, we’re all paying for it.
And, yeah, somebody ought to make this comment on Tony’s article, but I can’t seem to get thru New City’s spam protection. Maybe someone else can.
Yes, transit facilities should be comfortable. Investments to improve comfort can be a smart use of limited transit funds, attracting ridership and … oh, employee comfort. Well, sure, it’s good that we’re past the days when ‘L’ conductors had perch precariously between cars. And providing employees with comfortable facilities can be a cost-effective alternative to treating them with respect or paying them well — last I heard, some full-time journeyman CTA employees are paid less than $65,000 per year. But somebody forgot about the passengers.
Observant passengers already know that CTA has hundreds of public washrooms — owned by the public, tho not accessible to them. But in the short run [between elections] and for the most part, we are captive riders, and fares don’t provide the majority of CTA revenue anyway.