* The first round of assessments under new Cook County Assessor Fritz Kaegi has some Evanston businesses upset, but it’s what the people voted for last year…
The assessor’s estimated value of some apartment buildings in the northern suburb [of Evanston] have doubled or even tripled, fueling fears that a massive property tax increase is coming next year. […]
Landlords have been bracing for big hikes since Kaegi was elected assessor last year, promising to reform the office and improve the accuracy of its assessments. Kaegi replaced Joe Berrios, who was harshly criticized for undervaluing commercial properties and being too cozy with property tax appeals attorneys who represent some of the biggest landlords in town. The result: Cook County homeowners bear more of the tax burden than they should, and commercial landlords bear less, said Berrios’ critics.
As landlords in Evanston are learning, that is almost certain to change under Kaegi, who says Cook County has “the least accurate assessment system of any major jurisdiction of the U.S.” Fixing that is his top priority—not worrying about how the tax burden is distributed. […]
If there is a silver lining, at least in the near term, it’s that higher assessments on commercial properties in Cook County are likely to result in lower taxes for many homeowners. In Evanston, for instance, the assessed value of all residential property rose 25 percent from 2018 to 2019, while the assessed value of all commercial and industrial property rose 125 percent. The wide gap suggests that taxes will rise for commercial and industrial landlords in the suburb when property tax bills come out next year but drop for Evanston homeowners.
The math is complicated. While some property owners assume that their tax bill will double after their assessment doubles, it doesn’t work that way. A taxpayer’s final bill depends on the relative change in assessed values among properties and a process known as equalization that was created to ensure fairness in the system. It also hinges on the tax levy, or how much local governments decide to collect in property taxes in a given year.
It’s downplayed in the piece, but homeowners are the ones who benefit from this tax shift.
* Downtown will soon feel the sting…
Willis Tower illustrates the potential pain downtown. The 110-story tower sold for $1.3 billion in 2015, but its 2017 property tax bill shows the assessor valued it at only $579 million. Applying that year’s nearly 7.3 percent commercial property tax rate, which was calculated based on revenue needs for the dozen taxing bodies that pulled in money from Cook County property taxes, the tower’s tax bill was $31.2 million, county records show.
Based on a $1.05 billion valuation—the portion of the sale excluding personal property, which is not taxable—that tower’s tax bill would have been far higher. By applying a hypothetical 5.5 percent tax rate for the 2017 year using publicly available data that accounted for all commercial properties being assessed by Kaegi’s definition of market value, a study by tax property law firm O’Keefe Lyons & Hynes estimates Willis Tower’s tax bill would have been around $42.5 million, or 36 percent more than it actually was. […]
A report last year from tenant brokerage Savills comparing the average cost of rent, operating expenses, taxes and utilities for office users in major markets found that downtown Chicago in 2017 came in at a little more than $50 per square foot, lower than downtown Manhattan ($58), west Los Angeles ($63), Boston ($69), Washington ($71) and San Francisco ($80).
That makes Chicago a relative value play, especially for big corporations that can absorb a few extra dollars per square foot in property taxes. The bigger blow could be dealt to small and midsize, privately held companies already in the city that might endure a sudden, more painful hit to their bottom lines, says Savills Vice Chairman Robert Sevim.
I assume that human nature being what it is, building owners facing skyrocketing assessments will shovel big money at property tax appeals lawyers. Kaegi, in other words, could turn out to be fantastic for Mike Madigan’s law firm.