State tiff delays tax bills in Cook
Schools gird for shortfalls as governor revises plan
Friday, September 21, 2007
by Mickey Ciokajlo ,Whitney Woodward, Amber Ellis
Cook County property tax bills will be further delayed after Gov. Rod Blagojevich on Thursday overhauled legislation designed to extend relief on rapidly increasing home values.
The governor's action would make permanent the so-called 7 percent assessment cap and it also increases the amount of exemption granted to homeowners.
The move is yet another round in the bitter feud between Blagojevich and Illinois House Speaker Michael Madigan (D-Chicago), who had won passage of a compromise version of the bill.
The measure now goes back to the House, where Madigan's spokesman Thursday questioned whether the governor had overreached in his authority to alter legislation.
The uncertainty over the measure's future means taxpayers from Lincolnwood to the Loop don't know when they will get their bills, school districts don't know when they'll get their money and homeowners don't know whether their breaks will continue.
Cook County's complicated property tax system nearly guarantees that every year second-installment tax payments will be due later than the Aug. 1 date mandated by state law. Last year payments were due Sept. 1, which was the earliest in more than a decade, and in 2004 they were due Nov. 15, the latest in at least 20 years.
The first installment, which is always simply half of the prior year's amount, is due annually on March 1. But tax increases or decreases caused by assessment changes and other factors are reflected in the second installment.
Cook County Assessor James Houlihan, who stood with Blagojevich on Thursday in support of the changes, said that if the General Assembly acts quickly, tax bills could be due by Nov. 15, causing no great harm to taxing bodies.
But at this stage, that due date is anything but guaranteed.
Pedro Martinez, chief financial officer for Chicago Public Schools, said there are funds available to make it to Dec. 1 without borrowing money. But he said the delay in receiving $900 million in tax revenue could cost the district as much as $10 million in interest.
As a result of the delay, many suburban school districts will be forced to dip into their reserves to make payroll.
"If it were not for strong ... reserves, we would be really against the wall," said Roger Thornton, superintendent of Palatine-based District 211.
Laurence Msall, president of the Civic Federation, a budget watchdog group, said taxpayers should be concerned about the delay in payments to local districts because it will ultimately drive up costs for those taxing bodies.
"They'll have to borrow or make other arrangements," Msall said.
"There are real costs associated with that."
At the core of the fight that spilled over Thursday is which version of the so-called 7 percent tax cap should take effect.
Houlihan conceived the tax cap in 2003 as a way to buffer the impact to homeowners of rapidly increasing real-estate values. In Cook County, properties are reassessed every three years and Chicago homeowners were bracing for a significant increase in their 2004 tax bills as a result of the run-up in values.
The law, passed in 2004 as a result of the concern, granted homeowners an exemption of up to $20,000 in an attempt to limit the annual growth of their taxable assessed value to 7 percent. The result in the first year was that 80 percent of Chicago homeowners saw their tax bills drop -- despite the increase in their property's value -- as the tax burden was shifted to businesses, apartment buildings and other taxpayers.
With the cap law about to expire and new assessments of city property in hand, Houlihan saw that homeowners of high-value properties and those that have seen exceptional increases in value would need more than a $20,000 exemption to keep the growth of their taxable assessed values at 7 percent a year.
The assessor sought a new version of the law that would raise the exemption to $60,000, but Madigan and his chief lieutenant, House Majority Leader Barbara Flynn Currie (D-Chicago) pushed through more modest legislation. It provided targeted relief for low-income homeowners along with exemptions that decreased each year before ending in three years.
Blagojevich rejected that legislation Thursday as "phony-baloney property tax relief."
But Currie has "some serious reservations about the governor's approach."
"I think it's far too generous to affluent homeowners," she said.
Lawmakers return to Springfield on Oct. 2, and Madigan spokesman Steve Brown suggested the House will try to override Blagojevich's changes. But Senate President Emil Jones (D-Chicago), the governor's ally, said he won't do the same.
That would mean the legislation is dead and a new deal would have to be reached between lawmakers and Blagojevich.
If the legislature fails to act, tax bills with no version of the 7 percent cap sent this fall would show whopping tax increases for most Chicago homeowners. But the political volatility of the tax issue makes it unlikely that state politicians will drop the ball.
"I'm sure we'll find some way to protect [homeowners], and I'm hopeful that we'll figure it out," Currie said.
In taking action, the governor stood in front of a bungalow in Lincoln Square that saw its property value increase 75 percent between 2002 and 2006. But as a result of the 7 percent cap, the house's tax bills between 2002 and 2005 have increased less than 1 percent, or $27.
Blagojevich pointed out that under the Madigan version the 2006 tax bill due this fall would have increased 4.8 percent, and an additional 22 percent over the following two years.
Under the governor's version, that house's taxes will drop 1.8 percent this fall and increase 9 percent over the next two years.
Business groups, say the 7 percent legislation has gone far beyond its original intent of acting as a shock absorber against rapid assessment increases and instead has unfairly shifted burden away from homeowners who are benefiting from rising values.
Jerry Roper, president of the Chicagoland Chamber of Commerce, and other business leaders issued a statement late Thursday saying the governor had made "bad legislation even worse."
"With this action, he is once again picking political expediency over sound public policy," they wrote. "It's time to stop pitting businesses against homeowners in the fight over property taxes."
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OCT. 2: Date lawmakers are due to return to Springfield, when they will decide how to respond to the governor's proposal.