Chicago Tribune Editorial: Why you might sit down for this bill

Chicago Tribune Editorial: Why you might sit down for this bill
Copyright © 2010, Chicago Tribune
April 29, 2010
http://www.chicagotribune.com/news/opinion/ct-oped-0429-property-20100429,0,2807766,full.story


Cook County homeowners, your property taxes are going up. When local officials openly squabble over whether the second installment of this year's property tax bills should be sent to you before — or after — the November election, you know bad news is on the way. What incumbent politicians fear most is a property tax rebellion, and with a large state income tax increase in the post-November forecast, a perfect tax storm is brewing.

How can your property tax bill rise when the value of your dwelling has declined by more than 20 percent since 2008? Welcome to the complexities of the property tax world. Don't feel lonely in your dismay. Most taxpayers don't understand how property is assessed, how the tax burden is spread among us and how local governments set tax rates. What taxpayers do know is that when property taxes rise in tough economic times, their collective wrath can easily turn against incumbents. Right now, the pols are nervous.

Tax bills will rise because:

The Illinois legislature failed to renew the 7 percent homeowner tax cap that helped ease the effects of market value growth and tax burden shift. You don't have to understand every phrase in that sentence to appreciate that when a tax cap lifts, many people wind up paying more.

Reassessment lags between a period of rising home values, as we experienced in the middle of this decade, and the market flop since 2008. Some of the rise in your tax bill this year can reflect the rise in your home's value yesteryear.

Revenue-starved governments and school districts have imposed higher tax rates. And not all of them have been calling your attention to their revenue hikes.

Changes in how Cook County classifies different properties have created shifts in the tax burden. Again, you don't want to know too much about this or your head will hurt.

The Cook County property tax system is unlike those of the other 101 Illinois counties. Cook exercised its authority under the state's 1970 constitution to adopt a system that assessed different classes (residential, commercial, industrial) at different rates as opposed to uniform assessments across all property classes. Residences became the lowest-taxed class, with the tax burden shifted to commercial and industrial property. This has been a good deal for more than a million Cook County homeowners — but not such a good deal for businesses whose competitors are located outside Cook County.

But that's not the end of the story. In April 2008, Cook County Assessor Jim Houlihan proposed to the Cook County Board that the classification ordinance be changed. He suggested changing the assessed valuation of each property to 10 percent of its fair market value from 16 percent. For commercial and industrial properties, valuations would change from 38 percent and 36 percent of market value to 25 percent. The proposed new levels were to be simpler and more transparent. Houlihan disclosed that the county's actual practices over the years had been to assess residential properties closer to 10 percent of fair market value and nonresidential well under 30 percent. Since actual assessment practices failed to comply with the law, the assessor proposed that the law be changed to conform to practice — ostensibly without shifting tax burdens among existing classes.

Cook's County's property tax classification law had been amended 31 times since 1974, with each major change preceded by a commission to review the proposed changes and issue a public report. Accordingly, Cook County Board President Todd Stroger established a task force in 2008 to review Houlihan's proposal and to determine whether the new "10/25" assessment levels would shift the tax burden from one property tax class to another or cause other disruptions.

I chaired the task force. We met eight times, heard testimony from experts and weighed the data presented to us. If I may speak for other members: We were satisfied that the proposed change in residential valuations — to 10 percent of fair market value from 16 percent — would work. But we received no data from the assessor or others to validate the proposed new 25 percent levels for commercial and industrial properties.

In fact, data provided by the Illinois Department of Revenue showed the median assessments on these property classes already fell well below the proposed 25 percent level. This raised a red flag. The math here gets very complex very fast. But we wondered whether adoption of the 10/25 amendment would shift more of the tax burden to the residential property class.

That would be unfortunate. If the assessor and the Cook County Board intended to shift more of the tax burden toward homeowners, they should have said so publicly.

That airing of an intended policy change didn't happen. Here's what did: Our task force never received the information we needed from the assessor's office. So we couldn't complete our study — and we didn't get to write a report before county pols took matters into their own hands:

In September 2008 the Cook County Board approved the "unvetted" 10/25 change following one hour of debate — and Stroger allowed it to become law. Game over. Our task force ceased its deliberations.

Your tax bill will be in the mail. And if you're a homeowner, you'll likely pay for this change.

Don Haider, a professor at Northwestern University's Kellogg School of Management, chaired the Cook County Board president's task force on property tax classification changes in 2008.