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.
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
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.
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.
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)
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.
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.
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.
Last month I used Illinois Department of Revenue data to blog about the Cook County Assessor’s failure to properly value vacant land. Our good buddies at the Civic Federation took that data a couple of steps further to estimate the effective tax rates (pdf) paid by homeowners in a dozen suburban Cook County communities. The effective tax rate is the percentage of actual property value that is paid in taxes. And, no surprise, the rates in Chicago Heights and Harvey are more than double the rates in Glenview and Barrington.
This discrepancy isn’t due to any inherent problem with the real estate tax, but may have something to do with the fragmentation of taxing units, particularly school districts. Areas with relatively little taxable real estate need to collect a greater percentage of its value than do areas with a larger tax base, other things being equal. But there’s no reason we couldn’t have an equalization system under which the strong-tax-base communities share revenue with the others, as has been done since 1971 in Minnesota.
It is said that lower-income neighborhoods have a greater share of their real estate value in improvements rather than land, in which case exemption of improvements from the tax would also tend to equalize the burden.
…and undertaxing those who just sit on land, waiting for its value to rise.
The 2006 data are now published, and once again the Cook County Assessor has overassessed houses (and the lots they occupy) in Chicago relative to vacant land. As in the previous year, data from actual sales show that, as a percentage of sales price, assessments on houses (including land) average 50% higher than assessments on vacant land. This is the reverse of the legal requirement, under which real estate which includes houses is supposed to be assessed at a 1/3 lower percentage of value than vacant land.
This amounts to is a further penalty on homeowners (and owners of condo’s, and 2-4 flats, too), as owners of vacant land aren’t carrying their legal (let alone fair) share of the tax burden.
Is Cook County uniquely corrupt or incompetent in this regard? Other Illinois counties do not even pretend to assess residential parcels at a lower percentage of value than vacant parcels. Rather, they are obligated to assess everything at the same percentage of value. In most cases where data are reported, however, the assessment as a percentage of sales price is considerably lower for vacant parcels than for improved real estate.
Source: Data compiled by the Illinois Department of Revenue, which can be seen here (look at the “ratio” links under “property tax.”