Cook County plan boosts home taxes
Wednesday, January 18, 2006
by Mckey Ciokajlo
With an eye toward encouraging rental housing development, the Cook County Board on Wednesday will consider slashing property taxes for apartment buildings through lower assessments.
To make up for it, however, the total tax bills for homeowners in the county would rise about 2 percent.
The measure is part of a complicated tax picture in Illinois. It is relatively rare for the County Board to shift the tax burden from one group to another, although it approved a similar measure four years ago that cut taxes for rental buildings and boosted them for other taxpayers, including homeowners.
The proposal, backed by affordable housing advocates and pushed by Chicago Mayor Richard Daley and Assessor James Houlihan, hasn't generated significant opposition, although some question the fast track the measure is on.
"It has all the earmarks of a gift to apartment complex owners," said County Commissioner Carl Hansen (R-Mt. Prospect), who wants a public hearing on the issue.
Proponents say the tax cut for landlords would help the apartment sector while building owners are facing higher costs from utilities and property taxes, and units are being lost to condominium conversions.
But help for one class of property owners means the others, most notably homeowners and commercial property owners, pick up the tab. A 2 percent increase on a $4,000 tax bill, for example, would be $80.
The measure going before the County Board calls for reducing assessments on apartment buildings of seven units or more from 26 percent of market value to 20 percent over three years.
In 2002, the County Board approved a similar reduction for apartments from 33 percent to 26 percent.
Affordable housing advocates hope reducing the tax burden will spur the creation of more units for poor and moderate income families.
But the tax cut will benefit all ap artment buildings, whether they're in Lincoln Park or Calumet Park, and there's no guarantee tax relief would be passed on to tenants.
Houlihan said market conditions would determine rents and that a reduction in costs through lower taxes should keep them in check.
The reduction, which would be phased in over three years, would cut the taxes on the typical apartment building in Chicago by 27.5 percent by 2009, according to projections from Houlihan's office. The corresponding tax increase on homeowners and commercial property owners in the city would be 1.9 percent.
The impact in the north suburbs in 2010 shows apartment taxes declining by 20.5 percent and residential taxes increasing 2.2 percent, the assessor's report shows. The analysis does not show tax figures for the south suburbs after the new apartment assessments are fully implemented.
The shift in burden would come through tax rates, which would rise slightly to generate the revenue requested by local schools and other governments.
The wide gulf between the large tax cut for apartments and the modest increase for other classes of property is because apartments account for only 5.4 percent of the county's tax base.
Houlihan said the projections were based upon conservative estimates.
The tax increase on other properties could be even less if the move spurs the creation of new apartments faster than projected, he said.
"Any increase (in tax base) that this stimulates will temper that shift," Houlihan said.
Judy Roettig, executive vice president of the Chicagoland Apartment Association, said she's pleased Houlihan is pursuing the assessment reduction. However, she said Cook County's entire property tax system needs to be retooled.
Rising property values essentially negated the last assessment reduction for apartments approved by the county, Roettig said.
"It was a wash because values went up," she said.
Still, she calle d the current proposal "a good thing. It's a step in the right direction. It's not the total solution."
Despite the shift to residential, Barb Head of the homeowners advocacy group Tax Reform Action Coalition said she doesn't object to the new proposal for apartments, calling it "tinkering around the edges."
"The assessor is doing his darnedest to plug holes," said Head, who agrees the tax system needs to be changed.
Although it has not studied the latest proposal in detail, the Civic Federation said the impact of the tax shift would depend on the mix of properties in each community, said Laurence Msall, its president.
The organization is tentatively supporting the measure pending a more thorough analysis, Msall said.
With residential reassessment notices in Chicago set to start going out in March, the mayor and the assessor are pushing again for the 7 percent cap law, which limits in many cases the annual increase in a homeowner's taxable assess ed value.