Homeowners To Shoulder Bulk Of This Year’s Property Tax Increase As Chicago CRE Gets A Breather
Property tax bills went out in the mail Thursday for the city of Chicago, and in a welcome about-face for landlords of commercial buildings, homeowners will be bearing more of the burden this year.
Overall, property taxes in the city rose 6.6%, according to an analysis from Cook County Treasurer Maria Pappas. But in a reversal of the assessments done in the Chicago suburbs over the past two years, which resulted in aggressive hikes in commercial assessments led by Cook County Assessor Fritz Kaegi, residential taxes will rise 8% this year to $3.83B, while commercial taxes will increase a more modest 5.2% to $3.82B.
In all, taxes rose about $468M, with homeowners footing about 60% of the bill, per Axios.
The main reason, according to the treasurer’s analysis, is reversals at the Cook County Board of Review, the three-member panel that considers property owner appeals. The report points to residential properties being assessed too low during the pandemic when home values were actually on the rise, spurring reassessments by the board.
In addition, taxpayers were on the hook for a $141M increase in tax increment finance funds. A new state “recapture law” allowing local governments to raise taxes to recover money refunded to property owners who won appeals accounted for about one-fifth, or $131M, of the increase, Crain’s reported.
There will now be an annual tax increase because of the law, Pappas said in a release.
Taxes spiked along the north lakefront and in some gentrifying Latino neighborhoods, including Avondale and Hermosa, which saw what the treasurer’s office called “eye-popping increases” of up to 46%. Meanwhile, a number of predominantly Black neighborhoods saw significant decreases, including West Garfield Park, where homeowner taxes dropped nearly 45%.
“There are still inequities in our property tax system and we need to straighten it out,” Pappas said.
The picture was similarly mixed for downtown commercial properties. The 1 North Wacker office tower got a 12% tax cut, Crain’s reports, while the troubled Water Tower Place on North Michigan Avenue had its tax bill slashed by 29.2% to $9.5M. At the Willis Tower, by contrast, taxes soared 29.4% to $50.2M.
The final bills follow months of worry in the CRE community that it would once again be asked to bear the brunt of historic underassessment of commercial properties and that tax uncertainty was hindering market growth and long-term investor interest.
Analysis by tax appeals firm O'Keefe Lyons & Hynes earlier this year indicated citywide commercial assessments could rise as much as 75% under Kaegi, who has long lamented the level of tax burden carried by homeowners and has been outspoken on the need to rebalance the scales.
This year’s taxes are based on 2021 assessments. Kaegi assesses the county on a three-year cycle, starting with the north and northwest suburbs in 2019, the south and southwest suburbs in 2020 and finally the city of Chicago in 2021.
According to the treasurer’s report, Kaegi did initially find city commercial properties would carry 52.8% of the tax burden, even after lowering his own commercial valuations by about $3.7B, or 13%, mostly as a result of anticipated property tax appeals.
“But the Board of Review, which hears appeals, lowered the commercial values by nearly $6.2 billion, or 24%,” the report says. “When its work was done, values of commercial properties accounted for 47.2% of the assessed value in the city, while residential properties accounted for 52.8% — or 0.7% more than they did before the city was reassessed.”
Total Cook County property taxes rose 3.8% to $16.72B this year. Taxes on residential properties rose 1.1% in the north and northwest suburbs and 0.6% in the south and southwest, compared to 3% and 2.5% for commercial properties, Crain’s reported.
