Cook County Assessor – The Menace of Privilege

Tax favors for owners of “farmland”

Continuing our exploration of land values and real estate taxes in Cook County …

parcel #06364020270000, at 1830 Lake St in Hanover Park — Parcel #06364020270000, at 1830 Lake St in Hanover Park. 7.36 acres, adjacent to a residential area and virtually across the street from a Metra station. Due to favors done for class 239 farmland owners, it pays less than $200/year in property tax.

The County contains 813 parcels coded as class 239 “non-equalized land under agricultural use, valued at farm pricing.” An explanation of how farms are supposedly assessed is included in this document, page 12 of which states:

The assessor notes each of the farm’s land use categories and uses the equalized assessed value for each soil productivity index to determine the assessed value. The assessor may make some subtractions for things like slope, drainage, ponding, flooding, and field shape and size before calculating the final value.
• The portion on which crops are planted is assessed at the state-certified equalized assessed value certified by the Department for the corresponding soil productivity index.
• Permanent pasture is assessed at one-third of what would be assigned if it was planted in crops.
• Other farmland (e.g., forestland, grass waterways) is assessed at one-sixth of what would be assigned if it was planted in crops.
• Wasteland has no assessed value unless it contributes to the productivity of the farm.

For Cook County, the Assessor provides specifics here.

The total assessed value of these 813 parcels is $2.25 million. To calculate their acreage it seems I would have to retrieve the records manually and individually, but the 2022 Census of Agriculture says the County contains 154 farms totaling 10,281 acres. (A farm might comprise several parcels). This implies an assessed value of $218/acre. Reviewing a small sample of parcels, it appears that the Assessor values most class 239 parcels at $2250/acre, and assesses them at 10% of that, or $225/acre.

One might compare this to the Illinois Society of Farm Managers and Rural Appraisers’ report, which includes but doesn’t break out Cook County, and indicates sales prices in Northeastern Illinois range from $5500 to $40,000 per acre.

There’s no minimum parcel size for a “farm” under class 239. Thus, we have a series of 18 small vacant lots in Matteson: 31-20-218-001-0000 thru 31-20-218-018-0000. All of these appear to be empty lots, awaiting the construction of houses. Eight of them are classified as vacant land, with assessed values ranging from $5392 to $7953 (differences apparently due to differing sizes). Taxes due on these in 2024 range from $2351 to $3467 (excluding overdue taxes from the prior year, but including interest charged). But ten of these similar lots are class 239, farmland, assessed at $50 to $84. The County issues tax bills of zero for these parcels. This is claimed to be due to 35 ILCS 200/18-40, which states

If the equalized assessed value of any property is less than $150 for an assessment year, the county clerk may declare the imposition and collection of all tax for that year to be extended on the parcel to be unfeasible and cancelled. No tax shall be extended or collected on the parcel for that year and the parcel shall not be sold for delinquent taxes.

However, these parcels are assessed at $50 to $84. Applying the equalization factor of 3.0163 results in EAV greater than $150. In response to my inquiry, the Cook County Treasurer explained that, even tho equalized assessed valuation is printed on the tax bill, it isn’t used for taxation of farm properties. Here are the 18 parcels:

table of data — 18 vacant lots in Matteson

I don’t know why 10 of these properties are assessed as farmland while 8 are not.

Countywide, the 813 class 239 parcels have a total assessed value of $2,251,552. While the Assessor’s records are imperfect (there being, for example, no “Dundee” municipality in Cook County), it appears that only 37 of the County’s municipalities (plus a few unincorporated areas) contain class 239 parcels. The tally is shown in the following table. Keep in mind that these are assessed value, 1/10th or less of the actual market value.

table showing class 239 parcels in Cook County — Summary of Class 239 parcels by place

While class 239 is a great bargain for owners of “farmland,” the inequity doesn’t seem, by itself, to have a major effect on the financial condition of the taxing bodies. For example, Ford Heights has the largest number of class 239 parcels, 114. Total class 239 assessed value in Ford Heights is $35,496. If this land was subject to equalization like other parcels, the equalized assessed value would be $107,067. As noted above, the Assessor seems to undervalue class 239 parcels, but even if we assume undervaluation of 75%, the total EAV of these parcels would be $428,268, for a net increase of at least $392,772. (I say “at least” because some or all of the class 239 parcels may be assessed at less than $150 and therefore completely untaxed.) The latest report I can find for Ford Heights total EAV, from 2022, is $14,201,062. Thus, if my assumptions are correct, and tax levies don’t change, then the typical property owner would save just 2.76%, Longer-term, landowners might be encouraged to develop their parcels, with housing or other improvements, so the benefit over time might be greater and might not only be financial. There would be no expense to the Village or other taxing bodies.

And of course the captioned illustration at the top of this post, 7+ acres in desirable Hanover Park, easy walk to Metra, adjacent to residential areas (or suitable for retail/commercial use), takes advantage of class 239 to pay taxes of less than $200/year.

[Still more to come.]

Property tax can’t be equitable, Kaegi asserts

former Schulze bakery — Disused Chicago bread factory to become data center. Image credit: Emily CC BY-NC 2.0

In a new article (archived copy, also included in this pdf) for the Chicago Council on Global Affairs, Cook County Assessor Fritz Kaegi asks “In a digital economy, how can cities create a more equitable property tax system?” Of course he does not try to define “equitable,” but one infers from the article that it means “funded more by those benefiting from the digitalization of the economy, and less by those who actually perform useful work.” A desirable result, to be sure, but how does he propose to accomplish it? He also seems to assume that government-funded schools are a good thing, or at least that parents shouldn’t be held individually responsible for arranging their own children’s education.

He proposes to get more revenue from the big infotech companies, specifying Apple, Microsoft, Alphabet/Google, Amazon, and Facebook, but by implication the numerous other organizations who have prospered by taking advantage of the internet (as well as their lobbying capabilities to stifle competitors). He doesn’t think that local or state government is equipped to collect much of this revenue. Further, he assumes that a real estate tax to fund “education” can only be implemented at the school district level, and couldn’t be countywide, regionwide, statewide, or in any respect subnational. He concludes that the U S government needs to send large quantities of money to America’s cities, particularly including Chicago and the rest of Cook County.

“The federal government … is best situated to tax incomes generated by activity like digital commerce, virtual meetings, and footloose service providers [and]…will need to build fiscal mechanisms for a digital world that separates economic activity from physical space. ” (Presumably these wealthy and influential companies won’t use their influence to deflect the tax burden to others. )

OK, so Cook County local governments don’t get revenue from this digital economy? What about the 11 (soon to be 12) data centers in Elk Grove Village (archived copy), paying real estate taxes and utility taxes, as well as taxes imposed on persons working to construct and operate them. This report (archived copy) counts 52 data centers regionwide as of February 2021. Both reports note that several kinds of tax favors are provided, without indicating that they’re necessary since the digital economy requires facilities in appropriate locations.

And Amazon and other on-line retailers don’t generate taxes? Those of us who’ve bought something on line in the past couple years have noticed that the e-commerce giants collect and remit state and local sales taxes, typically in excess of 10% here. Last year the BGA counted (archived copy) 36 warehouses in the Chicago area built for Amazon since 2015 (and noted “at least $741 million in taxpayer-funded incentives”). This of course doesn’t count warehouses used by non-Amazon sellers such as Walmart and Target. Again, it’s likely that most or all of these facilities would have been built without subsidies, since warehouses have to be located appropriately with respect to markets, labor supply, transportation, etc.

Kaegi is legitimately concerned about the fragmentation of Cook County’s tax base, noting that “The lower the value of real estate in a community, the higher the effective rate to provide a comparable level of school services. This results in
great disparities.” But that problem isn’t inherent in the real estate tax; it’s inherent in the fragmentary structure of finance, funded largely by local real estate tax. A statewide real estate tax, such as Illinois had until it was replaced by a sales tax in 1933, could reduce or eliminate the disparities. A number of states retain statewide real estate taxes, but the problem of disparities can also be addressed by a tax-base sharing arrangement, as has operated for half a century in Minnesota.

“[W]e must continue to push for local-school funding that is not rooted in local land values,” writes Kaegi. Actually, if an effective disparity-reduction arrangement is in place, the opposite might be true. I have previously posted a table and map illustrating that, if taxes were based on land value rather than land+improvement value, the burden on homeowners in communities of low income and color would be lessened. And of course if the burden of sales taxes could be replaced by a tax on land value, the benefit to moderate-income households would be enhanced.

So we have an Assessor, running for re-election, who doesn’t believe the taxes he helps calculate are a good way to fund local services. I had hoped for better (but didn’t really expect it), as the quality of assessment seems to have improved during his tenure. He does have one announced primary opponent.

Sun-Times report inadvertently helps show the benefits of simple LVT as a revenue source

Image credit: Purple Wyrm CC BY-NC-SA 2.0

According to a Sun-Times report, Cook County Assessor Fritz Kaegi acknowledges that his “Senior Freeze” program, under which old property owners claiming household income under $65,000 can get a big break on property taxes, is “riddled with errors.” Highlighted is a multi-million dollar condo in Water Tower Place, whose owners pay only $2502/year. While it’s certainly possible that these folks might have income under $65,000/year, that seems unlikely, as they also own a Florida condo valued at over $1 million. Their Chicago property apparently also benefits from the temporary removal of toilets during a 2017 remodeling. It seems that the Assessor never noted that the toilets were replaced (or perhaps they were not?)

While the WTP property is clearly an extreme case, the senior freeze program transferred $250 million from owners of 144,904 properties who participate in it to the remainder of the 1.77 million taxable properties (of which 1.6 million are residential) in the County. With the total property tax revenue at $15.6 billion, this amounts to about 1.6 % of total taxes collected. The Sun-Times article provides several other examples of affluent old people who benefit from the program.

Clearly this is a problem of bad policies ((discriminating against renters, the nonelderly, and people who find it difficult to complete simple bureaucratic forms), and taxing improvements), combined with governmental malfunction (Kaegi hasn’t been able to get the program under control, partly because there is no mechanism for the County to verify incomes).

It should not be necessary to mention, but I will mention anyway, that the Sun-Times report relied on property tax data being, for the most part, publicly available. While far worse scandals likely could be found regarding income tax, many of these can’t be documented unless taxpayers “voluntarily” release their information, or it is (probably unlawfully) liberated.

Clobbering fairness more accurately

Where fairness comes from: Cook County Board Pres. Toni Preckwinkle; Illinois House Speaker Michael Madigan (credit: WBEZ CC BY-NC 2.0 and Wikipedia)

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. Continue reading Clobbering fairness more accurately

Tribune clarifies how TIF’s work

Great story by Hal Dardick in today’s Tribune explaining the real reason the Lincoln Yards TIF had to be Rahm’d thru the City Council before the new Mayor took office. The area just barely qualified as a TIF, and pending new assessments were going to rise enough that it would no longer be eligible. According to the story, it’s uncertain whether the new Mayor could have stopped the project, but she settled for what appear to be minor concessions.

Of course, the whole idea behind TIF’s is that money can be pulled from general revenue into giant slush funds, which the Mayor (and others) can manipulate with little oversight. Meanwhile, there’s little left for routine maintenance, replacement of infrastructure and funding of government schools and other services. Which increases the “need” for TIF’s.

Dardick’s article goes into considerable detail, includes a link to a recent report by Lincoln Institute (no relation to Lincoln Yards, afaik). He does say “land” when I think he means “land + improvements.”

One counterfactual that Dardick doesn’t bother with: What would have happened if Joe Berrios was still Assessor? Would he have nudged down some values to keep the area eligible? Or, to look at it the other way, suppose the current Assessor, who appears to be more conscientious, had been in office since 2013. Perhaps the earlier figures would have been higher, so the increase would be less?

We’ll never know, and it shouldn’t matter. In a well-run city, TIF’s wouldn’t be needed, and a well-informed electorate wouldn’t tolerate them.

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:

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.

Continue reading Tribune exposes one scandal and misses a bigger one

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)

Outrageous assessments

Gary Lucido writes of a small parcel at 3710 N. Kenmore, offered at $9.9 million ($4950/sq ft) after failing to sell when offered at lower prices. While the price seems outrageous, the property is very close to Wrigley Field and could be used for a billboard or rooftop viewing platform. We know that the former use has commanded $350,000/year on a nearby building, which seems to justify a multi-million-dollar asking price.

So we have a parcel worth, let us say, five million dollars. What are the taxes? Continue reading Outrageous assessments

Going to the candidates’ debate

Cook County Assessor candidates, that is. Five folks will be on the ballot, 3 Dems (one of whom will emerge from next Tuesday’s primary), one Green and one Repub. Can you say “pandering to real estate homeowners?” Of course people hate to pay taxes, but whose burden is hardest to bear, those who own real estate or those who must rent their abodes? What it comes down to, of course, is that homeowners vote, and real estate tax bills have big black numbers. Whereas renters are much less likely to vote, and are nickled and dimed (make that $5 and $10) by sales tax and income tax that are harder to see.

Anyhow, the debate is this Thursday, at the Union League Club (65 W Jackson), 4:30 PM. It is open to the public without charge, but you must register in advance (by calling 312 435-5946) and you must dress in nothing less than business casual attire. A bit more detail here.

Extra help for idlers, from Jim Houlihan

New data shows, once again in 2007, that Cook County Assessor Jim Houlihan doesn’t think our tax laws give enough subsidy to land speculators, so he’s doing something extra to underassess vacant land.

By law and ordinance, he is supposed to put assessments at a specific proportion of what he estimates the actual value of real estate to be. These ratios have been adjusted over the years, and documentation is sparse, but for 2007 it appears that parcels containing single family or apartment buildings up to six units are to be assessed at 16% of value, and vacant land at 22%.

Annually, the Illinois Department of Revenue calculates the ratio between value assessed by Mr. Houlihan’s staff, and actual sales prices. The results for 2007(pdf)? Residential 8.34%, vacant 7.81%. (Not quite as bad as some previous years, however.)

The County is not ignoring this problem. Since the Assessor seems unable to assess vacant land at a higher percentage of value than land people use, they have changed the assessment policy so that, beginning wtih 2009, both residential and vacant land are to be assessed at 10% of value. We shall see how this proceeds.