Chicago homeowners will pick up more of the local property tax tab than commercial landlords in the city when bills come out later this year, even though recent numbers from Cook County Assessor Fritz Kaegi suggested the opposite would happen.
In a familiar story that has played out annually since before the COVID-19 pandemic to the frustration of most local property owners, appeals to the assessor's most recent property valuations knocked down his commercial estimates by far more than residential ones, according to a report this week from Kaegi's office. The result: Chicago homeowners will be on the hook to cover about 54% of the total city tax burden this year, up from roughly 51% last year.
t's the same tale of disparity in the county's assessment process that has created headaches elsewhere in Cook County over the past few years, making it hard for local taxpayers to predict their property tax bills and chilling real estate investors' interest in owning local property. In the zero-sum world of Cook County's property tax system, assessed values play a key role in determining each property owner's share of the local tax burden.
But then came the appeals to the county's Board of Review, an elected three-member panel that serves as the final word on assessments. The board reduced commercial property values by 17% from the assessor's numbers and residential property values by 1%, ultimately shifting the tax burden in favor of landlords and against homeowners.
But then came the appeals to the county's Board of Review, an elected three-member panel that serves as the final word on assessments. The board reduced commercial property values by 17% from the assessor's numbers and residential property values by 1%, ultimately shifting the tax burden in favor of landlords and against homeowners.
The final city assessment figures resurface finger-pointing over who is to blame for the chasm between where assessments begin and end, a lingering dispute since Kaegi took office in 2018.
Commercial landlords have accused Kaegi of trying to curry favor with voters with his assessments and argued he's scaring real estate investors away from Chicago. Kaegi has repeatedly said his assessments made up for unfair or inaccurate valuations by his predecessor, Joe Berrios.
While homeowners wring their hands wondering how much their tax bills will spike, commercial landlords lament the costly appeals process they must go through to get what they deem to be more realistic valuations of their properties.
Another factor that has fueled the dramatic tax burden swings is that landlords contest their assessments more often than homeowners. A study published earlier this month by Cook County Treasurer Maria Pappas found that commercial property owners appealed their valuations nearly 64% of the time between 2021 and 2023, while homeowners appealed 27% of the time.
Cook County Board President Toni Preckwinkle recently commissioned a study to try to improve the system. Her office late last year issued a series of practices she expects to be implemented from an expert who found the Kaegi-Board of Review dynamic doesn't meet assessment industry standards and hurts property owners.
The assessor's office and the appeals board need to start sharing more data, consulting with each other about it and using a more uniform approach to deciding how much commercial buildings countywide are worth, among other recommendations laid out in the study.
The assessor's office, for example, initially estimates commercial valuations using a so-called mass appraisal approach, using broad, market data-based assumptions about property types. Appeals to the office provide information about a building's income and expenses, vacancy and other circumstances, though appeals under Kaegi generally haven't led to big valuation swings.
But the Board of Review has proven to be commercial landlords' savior. The panel uses a different valuation approach from Kaegi and sometimes receives even more property-level details. The board awarded so many big reductions in recent years that the tax burden has shifted in favor of commercial landlords, just as it did this year in the city.
It's a problem with the county's assessment process that all key stakeholders agree must be fixed, said Board of Review Commissioner George Cardenas.
"It's important for us to reflect the market, because we want other investors to feel confident that we're running our (property tax) system well," he said in an interview with Crain's about the final assessment figures. "We need more people paying into the system, not less."
The Building Owners & Managers Association of Chicago, an advocacy group for commercial landlords citywide, said in a statement to Crain's that the tax burden shift from commercial to residential properties is no surprise given new work patterns and the decimation of office property values.
BOMA/Chicago Executive Director Farzin Parang alleged in the statement that Kaegi's office "has a history of overassessing commercial properties" and that the Board of Review stepped in to correct the assessor's work, but stressed the flawed system overall must change to help the city recover from the public health crisis.
"Instead of pitting commercial and residential property owners against one another, we need to work together to revitalize our downtown, grow our tax base, and encourage investment in every neighborhood. These efforts will benefit both commercial and residential owners across the city and beyond," Parang said in the statement.
Kaegi's data on final assessments after appeals to the Board of Review shows the panel's largest reductions were in South Chicago Township, a predominantly commercial area that includes the Loop and other areas downtown south of the Chicago River. The Board of Review knocked down the total assessed property value in that swath of the city by 21% from Kaegi's estimate.
The gap between the final numbers from Kaegi and the Board of Review for all commercial property in the city was $4.3 billion, according to the assessor's office.
Property tax bills based on a previous year's assessments are normally scheduled to be sent out in early July. But the assessor's office confirmed earlier this month that they may be delayed this year, telling the Chicago Tribune it was grappling with issues related to one of its data vendors, Tyler Technologies.
