'Real' Chicago home property taxes climb 50 percent - in five years
Wednesday, October 01, 2014
Crain's Chicago Business
by Greg Hinz
If you think the property tax bill on your house has been become increasingly painful, it has, a revealing new study shows. But it's even worse for those who own commercial property, especially in Chicago.
The new study comes from the Civic Federation, a fiscal watchdog group that takes an annual look at effective property tax rates in Chicago and nearby suburbs. (I'll explain in a minute what the federation means by "effective tax rate.")
With property values only now beginning to tick up after the great subprime recession and governments asking for more tax revenue every year, the result is pain, big pain, with an average Chicago homeowner paying 50 percent more than five years ago as the federation counts. Homeowners in communities such as Arlington Heights, Oak Park and Orland Park have been whacked nearly as badly or even worse. Commercial property owners in Chicago proper have been hit with bills twice what they were.
No wonder that GOP gubernatorial hopeful Bruce Rauner is talking about a property tax freeze, however unlikely he is to actually implement one. And no wonder that Chicago aldermen went into collective hysteria when Mayor Rahm Emanuel moved to raise property taxes to pay for a pension reform deal with city unions. Mr. Emanuel since has partially backed off, using receipts from a telephone tax instead.
Here are the details.
What the federation does in the report is try to determine how much you pay each year relative to the market value of your property. Getting the number is no easy task, since the local property tax system is filled with complicating factors: different tax levels for different kinds of properties (e.g., factories versus condos), a state-imposed equalization multiplier and various exemptions for the elderly and other groups. The new federation report takes a shot at it by backing out all of the just-mentioned factors and using state data to determine how much you have to pay relative to how much your property is worth.
In Chicago, for instance, the average homeowner last year had to pay 1.84 percent of what their house would sell for on the market, based on recent sales data compiled by the state. That's up from 1.76 percent from the prior tax year, 2011, a 4.3 percent change.
That may not sound too bad, but the total amount that local governments ask in taxes keeps going north every year, even if the value of your home is way south of its peak. Thus, between tax years 2003 and 2012 — remember, the 2012 tax bills were not paid until 2013 — the effective tax rate on Chicago homeowners went up nearly a third, 32.4 percent, moving from 1.39 percent of a home's market value to 1.84 percent. And if you look just at the last five years, it has gone up by half, moving from 1.25 percent to 1.84 percent.
SUBURBS HIT HARDER
The same applies in Cook County suburbs. They're up across the board, with only the amount changing. In the 10-year period 2003-12, the increase for homes is a stiff 61 percent in Glenview, 97.2 percent in Chicago Heights, 111.4 percent in Schaumburg and a whopping 137.5 percent in Harvey. In comparison, Chicago's hike of "only" 32.4 percent during that period doesn't look too bad, which is why some government leaders talk sometimes about how Chicago homeowners are relatively undertaxed.
Bad as all of that is, commercial property owners have been hit harder, at least in Chicago, with a 61.7 percent hike over 10 years, with the figure more than doubling between 2007 and 2012. Most Cook County suburbs were a bit below the city figure — especially in Evanston — but still up considerably.
In the five collar counties — DuPage, Lake, Will, Kane and McHenry — every kind of property all gets taxed at the same level. So, whether you own a house, a factory or a shopping center, the pain is spread evenly.
There's a lot to go around. Over the 10-year period, the effective property tax rate has risen 45.7 percent in Wheaton, 56.0 percent in Joliet, 72.6 percent in Elgin, 93.4 percent in Woodstock and a mind-boggling 169.4 percent in Waukegan.
Now, local government leaders passed all of these hikes through their various boards and councils. But hikes of this level do pose a reasonable question of how effective property tax caps are in a deflationary era and whether a better method of financing government needs to be found.
And, while the results are not yet available for tax year 2013, federation President Laurence Msall says he believes the trend is continuing, because tax levies are rising faster than property values.
Better yet, the bills haven't come in yet for pension reform, which cuts benefits but generally requires local governments to come up with more money, too. I'll save that one for another day.