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Tax cap politics

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Illinois

The Sun-Times has loads of property tax stories today.

If you own a home or property in Chicago, it’s probably worth more — maybe two or three times more — than it was three years ago, according to the Cook County assessor.

And you’ll be taxed accordingly.

The Civic Federation of Chicago calculates an average 36 percent increase in every property tax bill, or $829 more a year, unless state legislators renew a homeowners’ protection bill that would drop the average hike down to about $255.

The assessor’s office finished its triennial assessment of property in Chicago, and just about every corner of the city is seeing a whopping boost in housing value.

The 7 percent tax cap expires at the end of the year. According to the Civic Federation study, “The average Chicago apartment owner’s tax bill will drop $1,051 a year with the cap and $1,643 without it, the study says. It says that commercial property owners will see their bills drop $216 with the cap and $488 without.”

Speaker Madigan voted for the tax cap extension, but he wasn’t exactly a supporter. Assessor Houlihan has blamed Madigan for the delay. Other stuff is brewing, but that’s for subscribers only.

Also in today’s CS-T package, “Who wins, who loses under 7 percent cap” … “Figure out your taxes” … “Suburban homeowners not getting break, either”

Meanwhile, over at Illinoize, Rep. John Fritchey expressed support for the Houlihan bill.

Interestingly, what I find most telling about the issue has nothing to do with taxes. People, especially conservatives, are always talking about local control. Here we have a bill that is rooted in that very concept. There is nothing mandatory about the bill, it is opt-in legislation that allows a county to implement the provisions if it so chooses. Those county officials eventually have to stand before voters and answer for their actions.

And Greg Hinz has a fascinating column about how Houlihan flexed his political muscle to “effectively take control of both of the regulatory agencies with the power to overrule his decisions.”

posted by Rich Miller
Tuesday, Nov 28, 06 @ 8:11 am

Comments

Greg Hinz makes a specious case… Assessor Houlihan was against Murphy because she was publicly against the 7% tax cap and berated Assessor Houlihan wherever she went. Rogers was against Murphy because she is a nut and an obstacle to any reform and progress at the Board of Review. Murphy was controlled by machine Democrats because she protrected the status quo.

Comment by Just Observing Tuesday, Nov 28, 06 @ 9:34 am
“Just Observing,” the end result was the same.

Comment by Rich Miller Tuesday, Nov 28, 06 @ 9:45 am
Pay attention, Bill

The State statute permits Cook County only to use property classifications in setting assessment ratios. All other Counties are required to use Assessed Value (AV) at 33 1/3 % of Estimated Market Value. Cook was permitted to have a differential between the lowest and highest AV ratio of 250%. Its ordinance said that residences would be assessed at 17%, later 16%, and Commercial would be assessed at 38%. That is inside the established differentials.

Regulation of the system was left up to the two County review agencies.

In substance, that meant that commercial property was paying 2.5 times the taxes that residential property of equal value paid.

However, over time residential AV ratios dropped down to around 10%. That meant that commercial property had to pay 3.8 times the taxes.

Not much satisfaction could be obtained from the closed loop system, although well connected lawyers like Burke and Kotlarz were able to do amazing things for their clients. Ma and Pa stores did not have much recourse.

So appeals were made to the State and a Property Tax Appeal Board (SPTAB)was established. That provided necessary relief when it was pointed out that the 250% differential was being violated.

Refunds were ordered and taken out of the hide of current collections being sent by the Treasurer to the taxing bodies.

At the same time tax caps reared up and bit the locals as well. Refunds, not only for the year in contention but also for prior years blew the balanced budgets.

At the same time NEW commercial and industrial projects were taking advantage of the County’s ‘tax abatement’ — more properly reduced taxable valuation — programs. That did not help the bulk of the commercial and industrial property owners for whom the SPTAB could be a life saver

No property is being taxed against its AV anyway. The State, using its additional authority examines prior year sales in every County and then assigns a general multiplier to all property to bring the assessment ratios up to 33 1/3 percent — the Equalized Asssessed Valuation (EAV). In case you haven’t noticed, the multiplier for Cook County keeps increasing most every year. It is now up to 2.7320. All AV are multiplied by this. Like the dirty rain it falls on the good and the bad alike.

What this means is that Cook County is woefully off the mark in its assessment procedures. In some Counties the equalizer is 1.0.

Homeowners whose assessment ratio has dropped below 12.2% are now paying higher taxes than residential property owners in DuPage and Lake and Will County. And Commercial Property Owners whose AV ratio is actually 38% are paying taxes against an EAV ratio of 103.8% — the taxable value is greater than the Estimated Market Value.

(Is it any wonder that new projects demand all the bells and whistles of TIF, tax abatement and sales tax rebate?)

But back to the SPTAB, which issued reductions in AV to conform to the statutory spread. Given the 10% ratio on homes, that meant a reduction in AV to 25% for fortunate appealers.

To his credit Assessor Houlihan tried, two triennials ago, to restore order, mitigate the effect of tax appeals and lower the multiplier. He appears to have raised the target ratio on residential properties to somewhere around 14% from 10%.

This forty percent increase generally, plus the normal increase expected over a triennial raised the AV for Chicago residences on the order of sixty percent. It woke up Chicago taxpayers who equated proposed valuation increases with tax increases.

It would also have freed the Assessor’s hands with regard to commercial property, emasculated the SPTAB, and likely lowered the State’s equalization factor to a around more manageable 1.1x.

Unfortunately, it also affected too many political interests.

The County and other taxing bodies regularly announce that there has been no increase in taxes. What they mean is there has been no increase in tax rate. Increased valuation allows them this privilege, while they pocket additional dollars. The last thing the machines need is huge waves of dissatisfaction, even if it is misplaced. Politicians do not go against the tide.

In response to citizen misapprehension and the failure of the political system, the Assessor was forced to retreat. Thus came the 7% solution. He knew that at the end of the three year period the valuation would have to increase to its true level. And a second 7% solution which artfully used the EAV and increasing homeowner examption packages to avoid the charging court cases.

Now comes a third artful solution now being discussed in Springfield.

The failure of the County to correctly and legally apply assessment ratios at the outset — well prior to the Mr. Houlihan’s arrival — has resulted in the morass we now face. There is no attempt at rectifying that problem.

Some of you believe commercial and industrial properties should bear an ever higher percentage of the property tax burden. They do not understand that the burden is shifted in job loss and in lower levels of new development, in higher prices at stores, and eventually in pock marked vacancies in neighborhood strip centers to the homeowner and renter.

It is time to consider a new system.

What do we want from our politicians, bravery or knavery, leadership or followership?

Comment by Truthful James Tuesday, Nov 28, 06 @ 10:27 am
Rich, I beg to differ… Larry Rogers now controls the Board of Review and can institute better government practices that Berrios and Murphy tried to block.

Comment by Just Observing Tuesday, Nov 28, 06 @ 12:39 pm
I’ll ask my persistent question.

What percentage of what a home will sell for is the tax bill for folks in Chicago.

The last time I looked it was almost the lowest in the state.

Comment by Cal Skinner Tuesday, Nov 28, 06 @ 12:47 pm
Thanks for the skewed dissertation. Why is it so hard to realize that the people of Illinois are not buying into the conservative, Repub philosphy that businesses should actually pay less tax so that their success will eventually trickle down to the poor workers and homeowners.
Job loss, lack of development,higher prices and vacancies,are red herrings designed to obscure theh fact that businesses are assuming less and less of a portion of the tax burden while homeowners are paying a significantly larger portion. Before going off on another reactionary rant, check out the civic federation report.
Even you should be able to understand it.

Comment by Bill Tuesday, Nov 28, 06 @ 1:01 pm
Here is little Mike’s info in case anyone wants to drop a note to him about the tax cap bill:

Michael J. Madigan
(D-Chicago)
22nd District
District Office
6500 South Pulaski Road
Chicago, IL 60629
(773) 581-8000
(773) 581-9414 (fax)
Capitol Office
300 State House
Springfield, IL 62706
(217) 782-5350
E-mail: mmadigan@hds.ilga.gov

Comment by Niles Township Tuesday, Nov 28, 06 @ 1:01 pm
Dear Bill,

Since you obviously can not read dissertations, what part of the following do you not understand.

In every other County in the State each parcel is taxed at 33 1/3 percent of market value.

In Cook County (forget about the multiplier, which would confuse you) residential property is supposedly taxed at 16 percent (forget about the reality for you are not there yet) and commercial property at 38%.

That means that the commercial property owner for a parcel of identical value pays 173.5% more taxes.

People own commercial property but you choose to agglomerate them into a single derby hatted cigar chomping, children eating ogre.

Less total dollars matters not. How about demand for public services. I guess that matters not as well.

What we are seeing, Bill, is the result of years of violating the State Law and the County Ordinance for votes by lowering with a wink and a nod the assessment ratio for residences instead of controlling spending. In spite of the fact that, contrary to your belief, in Cook County corporations contribute much more to the Democrats.

So tell me, Bill, how did I skew the truth?

Comment by Truthful James Tuesday, Nov 28, 06 @ 1:20 pm
Rich, Hinz must read the blog. We figured this out for him in October.

Comment by Arthur Andersen Tuesday, Nov 28, 06 @ 1:31 pm
Truthful,

OK, Ill give it one more try. Here is one of your (many)sentences:

“That means that the commercial property owner for a parcel of identical value pays 173.5% more taxes.”
The key deceptive phrase is “of identical value”

Over the last decade or so residential property has appreciated much more than commercial. The portion of the total property tax burden has increased for the residential owner and decreased or remained stagnant for the commercial owner.
The commercial property that was equal in value a few assesment cycles ago is now worth much less in value than the residential today. So the residential owner pays a larger portion of the total burden than the commercial.
I think that you already know this and continue to argue based on philosophy rather than fact.
I am not opposed to elected officials cutting (or increasing)spending if they feel the need. They are answerable to the voters for their actions.
That really has nothing to do with the inequities inherent in the tax system.
The constant threat by conservatives that business will just leave the County (or the state) is ludicrous and has been proven false. Illinois is a low tax state even including the property tax. No significant business exodus has or will take place.
People are, however, being forced from their lifetime homes, that they struggled to pay for, for decades, due to the large increase in property taxes. You can blame the rate, assesment, multiplier, or the politicians, it really doesn’t matter.
A fair way to assess taxes on a primary residence is to freeze the assesment at the value at time of purchase.
Let business bear the brunt of the property tax increase for a change.

Comment by Bill Tuesday, Nov 28, 06 @ 3:08 pm
You and I are almost in agreement at the end. I am in favor of freezing all assessed valuations until sale or improvement of the real property and for dumping the multiplier, which adds nothing to the local scene. Let the State use the multiplier if it wants to determine tax effort and the distribution of state revenues to Counties. This whole concept of highest and best use hurts the elderly. High taxes (and too easy unscrupulou credit) turf them out and cause them to abandon their homes — look at the foreclosures and the rest of it.

However, now, for taxing purposes the shape or size or use of the property should make no difference. What I paid, no matter what classification determines its value for taxing purposes. In other Counties, some of them run by Democrats, some by Republicans, that’s the case.

But if you could buy something in Cook at the same price that I purchased my house for, you are going to have to make allowances for paying 173% more in annual property taxes.

You have three choices, lower your offer to purchase to reflect the expected increase in taxes over your holding period (a sound financial decision), or pass the taxes on to your store owners or buyers of your product and services or a combination of both. Your tenants have to pass it on as well. To whom? to the very people who occupy houses and apartments.

So one effect is to lower the value of the commercial property or at lest modify the rate of growth — which has happened. A second effect is to build warehouses in Will County and in Indiana and Wisconsin. Thats one reason why commercial/industrial growth has not kept pace. The other might be described as the rturen of the yuppies. Cashing in their suburban property windfall and moving upward in Chicago.

Boy it sure would have been nice to have had Toyota and Honda and BMW and Mercedes build plants in Illinois. When Inland Steel (with Nippon Steel looked to make what was eventually a $1 Billion dollar investment they did not even consider Cook County where we stood with shutdown plants (or Illinois for other taxing reasons.) Nope, they built ten miles west of South Bend. We have the skilled workers, the transportation centers. Shipping hot rolled steel from East Chicago to the old Wisconsin Steel plant or even to the dead facilities in Harvey would have been a snap.

Comment by Truthful James Tuesday, Nov 28, 06 @ 3:40 pm
Maybe too much power in the hands of Houlihan. Too many political connections for the reductions.

Cal, Property Taxes in Chicago are too high. Not sure what they are in other parts of the state but think your numbers are skewed only looking at assessments.

Comment by Reagan Democrat Tuesday, Nov 28, 06 @ 9:37 pm