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Today’s number: 6.8 percent

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Illinois

Chicago has the lowest composite property tax rate (that’s combining all the tax rates within the city) in Cook County. The county clerk’s office, which annually publishes a chart of tax rates, reports that Chicago’s composite property tax rate in 2013 was 6.8 percent.

Ford Heights, one of the poorest suburbs in the nation, had a composite rate for that year of 39.9 percent, Park Forest was at 32 percent and Chicago Heights at 29.9 percent.

Those three suburbs had the highest property tax rates in Cook County, but you can look anywhere outside of Chicago and find higher property tax rates in the county.

The reason is quite simple. For decades, suburban schools have been financed on the backs of homeowners. But Chicago gets piles of money in education grants from state government and has such a large commercial and manufacturing base that it has been able to fund its schools without the eye-popping tax rates the rest of the state has been struggling with. […]

Editorial writers act like a 2 percent tax rate hike for public education in Chicago would result in a massive wave of newly homeless people hitting the streets.

Hey, the property tax system in Illinois is unfair. I’ve been screaming about that for 20 years. But Chicago politicians never seemed to care because the system worked for the city, and the rest of us ended up paying more in property tax than we did on our mortgages.

posted by Rich Miller
Thursday, May 7, 15 @ 10:13 am

Comments

WOW!! Eye-popping numbers for Chicago taxes. If that information was widely known, then the financial fix for the city is right there in front of you. Bump up the property taxes, and a lot of problems would be solved right away. Seems like that action is long overdue.

Comment by Big Joe Thursday, May 7, 15 @ 10:22 am
Rich… You are on it. School Finance reform dies because it is always a “carve out” for the city… When they raise property taxes and then adjust the grants that the city gets for education… We can see some movement… Until then, nothing will or should be done…

Comment by Walter Mitty Thursday, May 7, 15 @ 10:22 am
“For decades, suburban schools have been financed on the backs of homeowners. But Chicago … has such a large commercial and manufacturing base”

Well, duh. If you have a community that is 95% residential, then homeonwers will pay most of the taxes.

Also, Ford Heights has very high rates because of how property tax works here–the houses in Ford Heights have *extremely* low–and falling–market values, and the levies that they have to pay don’t go down because of that. If Ford Heights property were merely as cheap as it was 20 years ago, the rate would be much lower.

Comment by Chris Thursday, May 7, 15 @ 10:22 am
Pay my rate and your budget issues are solved…

Judged a science fair and there was a project from some middle school students from Ford Heights, even with that property tax rate you could tell their schools were underfunded…

Comment by OneMan Thursday, May 7, 15 @ 10:23 am
Keep in mind that a lot of that a lot of property tax money never makes it near the schools because of the TIF slush fund.

Comment by Carhartt Representative Thursday, May 7, 15 @ 10:33 am
How much of the difference in property tax rates is because of “education grants from state government” and how much is because Chicago has “such a large commercial and manufacturing base”?

The former is an issue, the latter just makes Chicago a more attractive to own a home, there’s nothing unfair about it…

Comment by chi Thursday, May 7, 15 @ 10:35 am
@Walter Mitty- What is really amazing to me is the PTELL adjustment given to Chicago and other districts under PTELL. The budgeted amount for FY 16 is $130 million. This money is given to districts as an offset for the effects of “tax caps” and CPS get the bulk.

What I don’t get is why the money is being given to districts where the local voters have voted for the tax cap to begin with. Isn’t this the essence of “local control”? If the funds were plugged into the GSA formula they would go a long way to helping schools.Or they could be used to restore other reductions. Either way the communities have spoken. It would have been low hanging fruit for the governor.

Comment by JS Mill Thursday, May 7, 15 @ 10:35 am
It sounds easy to simply raise property taxes in the city except that the real estate market has taken advantage of those low rates to increase their roi on leases, rents and sales on property. There is no way that the owners will take a reduction in returns if taxes are raised. It will be passed on to the renters and homebuyers effectively raising the cost to do business and live in the city. There is no doubt that rents are very high in the city. Neighborhoods struggle to fill empty commercial space because owners will not lower rents to attract tenents because they are incentivized to have an empty space for a lower tax assesment than if it was filled. If I am an owner of an apartment building and property taxes go up 2 percent, then I’ll raise rents to cover that because I like the return I’m getting now and I’m going to assume that demand to live in the city will remain high.

Comment by CLJ Thursday, May 7, 15 @ 10:37 am
It will be passed on to the renters and homebuyers effectively raising the cost to do business and live in the city

Just like all sorts of taxes, that is kind of how taxes work. Entities get taxes and those entities that can pass the costs along…

Comment by OneMan Thursday, May 7, 15 @ 10:46 am
CLJ - How much in rent or property taxes are the Chads and Trixies willing to spend to live in a 900 sqft condo in the big city? We may soon find out.

Comment by nixit71 Thursday, May 7, 15 @ 10:59 am
No real need for comments on this one.

You just can’t make it any clearer than RM just did.

Comment by A guy Thursday, May 7, 15 @ 11:02 am
No offense to Rich, but what exactly did RM make clear? Pretty sure even he gave all the credit to Kadner.

And to the post, while it is easy for people outside the city to complain about City of Chicago property taxes being too low, it was the State that imposed PTELL on CPS, not residents of the city or the city council. School districts account for over half of property taxes collected in the State, but unless someone is going to make CPS a home rule unit, or exempt it from PTELL, I really don’t see the rates changing all that much too soon. (Besides that fact that the city will definitely be raising levies to cover their pension payments.)

Comment by Juice Thursday, May 7, 15 @ 11:12 am
I live in the City and I have been complaining for years now that my property taxes are TOO LOW!!! I don’t want to have to move to the suburbs to get great city services and schools.

Comment by Anonymous Thursday, May 7, 15 @ 11:24 am
Kadner overlooks the fact that many Chicago parents are paying private tuition and property taxes to support a public school system that they do not utilize.

Arguably, it is a choice, but it is also a choice to live in the suburbs where many public school districts are better than the CPS.

Comment by Under Further Review Thursday, May 7, 15 @ 11:26 am
There was a study done recently regarding CPS funding in general. I forget where I saw it but it noted…

- 20% of CPS revenue comes from the Feds (my local school gets 2.5%)

- Despite having less than 20% of the total student enrollment in the state, CPS receives:
* 50% of the Poverty Grant and PTELL Adjustment Funds (as Juice noted above)
* 27% of Corp Personal Property Replacement Tax (double dipping from redirecting TIF funds?)
* double the amount of early childhood funding than the equivalent downstate community

So all non-Chicago residents seem to subsidize CPS more than the other way around. Chicago needs to raise the property taxes to a reasonable level and start re-directing TIF funds back into the general fund. It looks like Chicago residents have been insulated from the true cost of education for quite some time.

Comment by nixit71 Thursday, May 7, 15 @ 11:26 am
=== If I am an owner of an apartment building and property taxes go up 2 percent, then I’ll raise rents to cover that because I like the return I’m getting now and I’m going to assume that demand to live in the city will remain high. ===

And the renters will either be willing to pay that amount, or they will choose to live elsewhere. If it is the latter, you will have to make your rent more competitive. It’s not a reason to forego raising property taxes.

Comment by Anonymous Thursday, May 7, 15 @ 11:27 am
=== Under Further Review - Thursday, May 7, 15 @ 11:26 am:

Kadner overlooks the fact that many Chicago parents are paying private tuition and property taxes to support a public school system that they do not utilize.====

Respectfully UFR, so are suburban parents. Many.

Comment by A guy Thursday, May 7, 15 @ 11:28 am
If Rahm was ACTULLY a person who made the “tough decisions” he would have raised property taxes right after he was initially elected and used that money to shore up pension funds and other city finances. Then Chicago’s rating wouldn’t have plummeted and we wouldn’t be taking the financial hit for that now. In other words — do something unpopular in the short run that would make good financial sense in the long run. And he could take some of his gobs of campaign cash to EXPLAIN to people what he is doing and why so that.

Comment by Lakefront Liberal Thursday, May 7, 15 @ 11:45 am
It’s not just the grants and tax base that have kept rates low in Chicago. It’s also the fact that the City (where I live) has not paid its fair share to cover pensions, deferred needed capital investments, and used asset leases (meters, skyway) to plug budget holes. Raising property taxes is going to have to be part of the solution for the city.

Comment by pothole Thursday, May 7, 15 @ 11:49 am
Two points here.

The City Council can raise property taxes to cover its obligations to the fireman and police pension fund. That will be painful and annoying and lots of people will scream about it, but I think it can be done.

In and of itself … that has nothing to do with CPS, right? CPS takes its own separate share of the property tax. The problem is that the amount of revenue CPS is allowed to collect, the rate of increase, is capped (under _state_ law, right?). And that amount, is nowhere close to what CPS needs right now to pay its pension bills. CPS by law can annually raise taxes either the rate of inflation or 5%, whichever is less, which is kind of a disaster given how low inflation has been re how fast the pension bills are coming due.

Basically CPS has to levy taxes above its mandated cap. That requires either action from Springfield, or apparently there’s some way there could be a city-wide referenda (good luck getting that passed).

Either way, it’s nothing the City Council can fix directly, or that can be solved by abolishing TIFs (though you get a little cash if you declare a surplus).

What am I missing? I don’t pretend to be an expert here. The Trib did a not-bad breakdown of this recently (I wish their editorial board read their actual news reporters): http://www.chicagotribune.com/news/ct-cps-budget-crisis-met-20150422-story.html#page=1

Comment by ZC Thursday, May 7, 15 @ 11:57 am
Nixit, the PPRT revenues that are distributed are based off of a percentage of the PPRT that was collected when the tax was done away with in the 70s. It’s completely ridiculous, but if you look at who is really benefiting from that system, my guess is it’s downstate much more than the city, and the suburbs are getting hosed.

Comment by Juice Thursday, May 7, 15 @ 12:01 pm
The state doesn’t pick up the teacher pension cost for the city like they do the rest of the state. You can’t compare property tax rates unless you also factor in the pension costs that CPS pays. Otherwise it’s apples to oranges.

Comment by Been There Thursday, May 7, 15 @ 12:03 pm
==- Juice - Thursday, May 7, 15 @ 11:12 am:==

Read comprehension is a skill. Not everyone has that skill.

Comment by Precinct Captain Thursday, May 7, 15 @ 12:13 pm
Chicago rates are way lower then suburban Cook county? Suburban Cook county is way, way lower then the collar counties.

Comment by DuPage Thursday, May 7, 15 @ 12:15 pm
Chicago has lower property taxes because it didn’t pay it’s pension Bills and allowed retiree healthcare to further drain its pension funds. Rahm just admitted that prior administrations actively hid this debt from its residents. Chicago also has to deal with a very mediocre school system (at best) and a higher crime rate than most of the rest of Cook County. The chickens are finally coming home to roost on the City’s debt but if they choose to use property taxes as the sole means of paying down the debt they could cause a mass exodus of homeowners to flee to the suburbs where property taxes will be similar but the schools and crime will be better. It’s a real mess.

Comment by Darnell McAllister Thursday, May 7, 15 @ 12:18 pm
I think the “rate” is misleading. I would like to see the same summary, showing a $$ per square foot of house and land. Likely most chicago houses are smaller and on smaller property than suburban homes. HIgh “value” is a fiction, it doesn’t benefit us in any way except making us have larger mortgage payments.

Comment by NoGifts Thursday, May 7, 15 @ 12:32 pm
the root cause of most of the financial problems in Illinois was that pols used the taxpayers dollars to win union, contractor and public worker support while be unwilling to take the heat from the other 85% of Illinoisans by forcing them to pay for the excesses they were handing out like candy. Eventually the bill comes due. This is the time. Those decades of double dipping, overpaying, early retirements, overstaffing and hiring less than “the best and the brightest” who wanted the jobs now require more money, or ending the gravy train. It will be a painful lesson, but perhaps its time for Chicagoans to pay their fair share for what the people they elect through perpetuity spend. An equitable real estate tax is a reasonable start.

Comment by Arizona Bob Thursday, May 7, 15 @ 1:35 pm
Nixit: “Despite having less than 20% of the total student enrollment in the state, CPS receives:”

And ZERO percent of $3b of pension contributions.

If you total up all State (not federal–that doesn’t count) support, CPS gets about 20% of the money.

All the arguments both ways are just posturing.

Comment by Chris Thursday, May 7, 15 @ 2:06 pm
==And ZERO percent of $3b of pension contributions.==

I finally found that article I was referring to regarding Chicago’s share of overall state funding:

http://www.senategop.state.il.us/Portals/0/Docs/Cost-Shift-FINAL.pdf?timestamp=1409174250732

It implies that, while the state has indeed not been contributing its proper share of the state’s employer portion of the pension payment for CPS, that Chicago has been receiving a far greater share of state funding for education in general.

Comment by nixit71 Thursday, May 7, 15 @ 2:38 pm
So have the State pay the $700M/yr Chicago Teachers’ Pension contribution like it does for TRS, and then let’s talk about how to be equitable.

Comment by Harry Thursday, May 7, 15 @ 4:02 pm
Nixit, consider the source.

The certified TRS contribution is $3.7 billion. CPS gets 12 million of that. So even taking the $700 plus million at face value, the state is still subsidizing districts outside Chicago in a way they are not subsidizing Chicago.

On the mandated categorical block grants, fine, CPS does better. But the analysis ignores the fact that the poverty grant increases by design for districts with higher concentrations of poverty, which would include CPS. And there are mounds and mounds of data that suggests that it should work that way. It also ignores the fact that if you take out the PTELL adjustment and the poverty grants and just stuck those dollars back into the formula, CPS would get their cut of that too.

Comment by Juice Thursday, May 7, 15 @ 4:13 pm