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 Cook County Assessor Fritz Kaegi ran against incumbent Joseph
Berrios in 2018 promising fair, accurate and transparent property assessments in
a property tax system exposed as regressive, plagued by inaccuracy, and opaque.
Kaegi vowed to fix the system where well-off property owners obtained tax
breaks, while homeowners with fewer resources shouldered an unfair portion of
the property tax burden. He said no longer would commercial and industrial
properties be undervalued, leaving homeowners picking up too much of the tab.
While many hailed the end of Berrios’ tenure in the assessor’s office, Kaegi’s
changes to the assessment process – and the resulting spikes in assessed value
for many business properties – have left some property owners panicking.
Overall increases in Cook County taxes aren’t the fault of the assessor, but the
sudden changes in assessed value have given property owners, who must now bear a
relatively higher tax burden, little time to adapt. On the heels of
pandemic-induced difficulties for businesses, the changes are even harder to
manage.
A gradual phasing in – over three years, for example – of the tax impact of
higher assessed values might alleviate sudden, steep increases stemming from the
assessor’s correcting for perceived past underassessment. But for meaningful,
broad tax relief, levies – the amounts charged by taxing bodies such as the city
of Chicago and Chicago Board of Education – must stop rising. And pension reform
is key to holding down levies and relieving the pain of property taxes in Cook
County and throughout Illinois.
Property tax assessment process
Properties are generally reassessed every three years in Cook and every four
years in other Illinois counties.
The Cook County assessor conducts a general reassessment for a different portion
of the county every year. For Chicago, the 2021 reassessments are the first
since 2018, when Kaegi took office. Property owners will pay taxes on the 2021
reassessed value in 2022 when new bills come out.
Unlike other Illinois counties, Cook County taxes residential and commercial
real estate differently. Residential properties are assessed at 10% of their
market value, while commercial properties are assessed at 25% of their market
value. Thus, while businesses and homeowners in the same taxing district pay the
same tax rate, businesses pay that rate on 25% of their market value, whereas
homeowners pay it on 10% of their market value. And homeowners also can apply
certain exemptions to reduce their taxes, which are not available to commercial
or industrial property owners.
Businesses in Cook County will bear an even higher proportion of tax burden
Suburban Cook County reassessments in 2019 and 2020 brought steep assessment
increases to nonresidential property owners. The head of the Chicagoland Chamber
of Commerce warned in January 2020 that higher property assessments for
commercial and industrial properties would make the Chicago area less attractive
to businesses, and the results would be higher prices for consumers.
 In 2021, owners of some of Chicago’s iconic skyscrapers received reassessment
notices with dramatically increased values. The assessor’s office raised the
assessed value of the Willis Tower by 78% from 2020, and Aon Center’s value shot
up to over twice its previous level, according to Crain’s Chicago Business. In
the South Chicago township, which encompasses downtown south of the Chicago
River, total residential property value rose 10.5% since the 2018 reassessment,
while nonresidential property values increased 82.6%.
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But the hikes in commercial and industrial property
assessments haven’t been limited to skyscrapers in the Loop. Much
smaller businesses have also been affected.
In West Chicago township, which covers the western
part of the city and includes neighborhoods such as Jefferson Park,
Little Village, Pilsen, Chatham and parts of the Loop, even small
family businesses have been shocked by their assessment notices.
Juan Giron, the owner of Spanish-language bookstore Giron Books in
Pilsen, was upset when the assessed value on his bookstore and the
adjacent storage building shot up by 225% and 125% respectively.
Giron is appealing his assessment, but regardless of how much the
assessed value might be reduced on appeal, his property taxes are
bound to rise. And those rising taxes are driving residents and
business owners to look elsewhere to settle down and set up shop.
“People can come into our bookstores and learn about their heritage,
the countries their parents are from and their culture. Yet, we may
have to leave the very communities which we exist to serve because
we’re being driven out,” Giron said.
Pension debt fuels property tax hikes
Chicago has seen dramatic upticks in property taxes during the past
several years, and the vast majority of those taxes have gone to
Chicago’s ailing pension funds.
Chicago Mayor Lori Lightfoot has included $47.9 million in
discretionary property tax hikes in her fiscal year 2022 budget
proposal, which comes on the heels of a $77.9 million increase in
property taxes in fiscal year 2021’s budget (excluding taxes for new
properties added to the rolls). And before Lightfoot took office,
former Mayor Rahm Emanuel introduced a record $543 million hike in
annual property taxes in 2015. Of course, Chicago city taxpayers
also pay hefty property tax levies for Chicago Public Schools and
other taxing districts within the city.
 The primary reason behind Chicago’s climbing property taxes is its
pension problem. The vast majority of the city’s property tax
collections go to city pension funds. Between 2011 and 2021,
Chicago’s spending on pensions has grown 239%, while spending for
city services increased just 18%.
Under Lightfoot’s proposed budget, all but $300 million – or roughly
82% – of the $1.7 billion city property tax levy would go to the
four city pension funds, according to the Chicago Sun-Times. Yet
those pension funds are still significantly underwater, with funding
levels ranging from 19% for firefighters to 44% for laborers,
according to a report by WTTW. Lightfoot has described the city’s
pension debt as the “biggest problem” for its fiscal situation and
the pension benefits structure as “unsustainable.”
If structural changes could be made to pension debt, city taxpayers
– homeowners and business owners alike – could see city finances
shored up and their taxes stabilized. Just as importantly, property
owners would have confidence their taxes wouldn’t continue to shoot
up every year.
Incorporating higher taxes because of steep increases in assessed
value gradually could temper some of the shocks from dramatic hikes
in assessed value for property owners. But to stop property taxes
from increasing year after year, residents, businesses and municipal
leaders in Chicago and across the state should urge the Illinois
General Assembly to pass a constitutional amendment to put pension
reform on the ballot. |
