This Cook County Tax Incentive Was An Economic Equalizer. So Why Is The County Board Changing It?

For more than 30 years, Cook County has offered a tax incentive program to commercial and industrial developers and property owners that has spurred economic development and leveled the playing field with the collar counties, northwest Indiana and southeast Wisconsin.

Last week, the County board of commissioners approved restrictions on this program which may slow suburban industrial investment to a crawl, and has real estate groups, business leaders and elected officials scrambling to determine their next move.

The incentive program lowers the tax burden on vacant and distressed commercial properties with the following zoning classifications: Class 6, 7a, 7b, 8, L (landmark) and C (environmental remediation). Cook County assesses commercial properties at 25% of their fair market value. The incentive caps how much owners are taxed on the a property by lowering the assessed value of the building. 

Owners and tenants who qualify for the incentive pay taxes equal to 10% of the full assessment for a 10-year period, 15% in the 11th year and 20% in the 12th year of the term. This allows the occupant to gradually absorb the full tax load, instead of immediately being hit with a tax bill based on the full assessment.

Transwestern Executive Vice President John Coleman, who is also vice president of the Association of Industrial Real Estate Brokers, said the incentive program has been a boon for smaller industrial properties across Cook County.

“The county said it would freeze the tax rate for a short term to encourage a buyer to move into [a] building. The recipients were cool with that,” Coleman said.

By gradually increasing the assessments without changing the tax rates, the incentive allows smaller employers to do business in Cook County, which is notorious for high taxes.

The new ordinance requires property owners and tenants receiving the tax incentives to only hire construction workers earning an Illinois “prevailing wage.” Those receiving tax incentives also have to participate in the Department of Labor's apprenticeship program.

The prevailing wage act applies to public projects. Coleman said the restrictions approved by the county board of commissioners now apply the prevailing wage rules to private projects. Coleman said the incentive program uses no public money. 

"If they want to participate in public projects, they need to know the county changed the rules on private investment," Coleman said.

Illinois Association of Realtors Director of Local Advocacy Mike Scobey said the new restrictions take the prevailing wage law and applies it to private projects, most of which involve some sort of renovation or expansion.

The median wage for a construction worker in Illinois is $23.43/hour, and the difference between the prevailing wage and union scale can be several dollars. This added cost, on top of rising prices for land and construction materials, would result in employers and investors seeking sites outside of Cook County where there are no such requirements.

Coleman said the prevailing wage may vary by trade, but is almost always significantly higher than what a small jobs contractor who is not unionized pays its workers.

The new legislation succeeded in uniting real estate brokers, economic development experts, law firms and suburban mayors calling for the board of commissioners to reconsider. The opposition is strongest in the south suburbs, where many villages are competing with northwest Indiana towns for economic investment.

Podolsky Circle CORFAC International Managing Principal Alissa Adler said the south suburbs have terrible taxation issues. The incentive program has allowed villages to attract investors. Homewood Mayor Richard Hofeld, who opposed the legislation, told the Homewood-Flossmoor Chronicle it was the most important economic development issue in his 21 years as mayor.

The County board added another wrinkle to the legislation during reconciliation. Property owners will be responsible for reporting their hires to the county, instead of the County Bureau of Economic Development, and provide records upon request.

“It’s interesting that the burden of compliance was shifted elsewhere,” Coleman said.

Scobey is hopeful the last-minute add-on will limit the legislation's applicability. As for next steps, he said the Illinois Association of Realtors is monitoring new incentive approvals moving forward and working on strategies to limit the scope of what the incentive covers.