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A national group studied commercial property tax assessments in Cook County under the last assessor, Joe Berrios. The results were not pretty.

Monday, September 21, 2020
Chicago Tribune
by Hal Dardick

Under Fritz Kaegi’s predecessor as Cook County assessor, commercial properties as a group were valued far too low, valuations varied widely among similar properties, and the property tax burden was unfairly shifted onto the owners of less expensive properties, according to a new study Kaegi commissioned from an international nonprofit organization.

The broad undervaluation of commercial properties under former Assessor Joseph Berrios meant residential property taxpayers paid more than their fair share of the county’s tax levy while many higher-end commercial property owners got an unauthorized break, Kaegi said in an interview.

 

A property’s assessed value determines its tax bill. Generally speaking, the higher the assessment, the higher the bill.

The conclusions of the new study, released Monday but provided to the Tribune in advance, are nearly identical to the findings of a 2017 investigation by the Tribune and ProPublica Illinois but are based on more recent data. The International Association of Assessing Officers, whose standards are widely accepted across the United States, looked at assessments of commercial properties throughout Cook County after Berrios completed his 2018 round of assessments, which affected the 2019 tax year.

The study, which cost $6,000 and was funded with a grant from the MacArthur Foundation, is one of several Kaegi has commissioned since taking office in late 2018, after he defeated Berrios in the Democratic primary while running as a reformer. The earlier studies concluded that Berrios' residential assessments also were often inaccurate and tended to overvalue lower-priced properties and undervalue more expensive ones.

The 2017 investigation, “The Tax Divide,” had already documented how assessments conducted under Berrios shifted more of the tax burden onto less affluent homeowners.

After the Tribune published the first installments of that series, Berrios tweaked his residential assessment process. But he did not change the way he was valuing commercial properties before voters removed him from office.

Kaegi called the most recent study “an acid test of where the system is.” Kaegi added that he plans to commission further analysis of his own work, noting that some states mandate studies that compare assessed values with market values.

Since taking office, Kaegi has dramatically revamped the assessment process, particularly the way business properties are valued. He started from the ground up, reworking the assessment formula and drawing on publicly available information about sales prices and loan deals.

He first applied those techniques last year in the north and northwest Cook County suburbs — and encountered a good deal of pushback from many people who owned business properties whose assessed value increased substantially.

When Kaegi reassessed the north suburban region — defined as all suburbs north of North Avenue — the assessed value of commercial properties in the region rose by 77%. The Board of Review, an elected three-member panel that handles assessment appeals, later scaled that overall increase back to 25% by overruling some of Kaegi’s valuations.

Business organizations and property owners also formed Renew Cook County, a nonprofit with undisclosed funding that has hired Resolute Consulting, the same public relations firm that helped opponents kill off Cook County Board President Toni Preckwinkle’s penny-an-ounce soda pop tax. That effort was funded by the American Beverage Association.

Renew Cook County contends Kaegi’s assessment “approach discourages growth, stability and investment in Cook County," according to its website.

Many critics have long decried the assessment appeal process in Cook County as an insiders' game that supports a large cadre of property tax attorneys and consultants who in turn kept Berrios' campaign coffers full. Kaegi has sworn off such campaign contributions.

For the new study, the international assessors' group looked at 1,643 business property sales throughout Cook County in 2018 and compared the sales prices with the assessed values. It found that in the county as a whole, properties were assessed at a median of 61% of their actual sales price, far from the group’s acceptable range of 90% to 110%.

The comparison was even worse in Chicago, where the median valuation of commercial properties was found to be just 52%of sales prices. For Evanston, the figure was 39%; for Oak Park, 43%.

Compounding the underassessment problem was the fact that commercial assessments were not consistent, varying widely among similar properties.

The study also also found that overall assessments were regressive, meaning less expensive properties were overvalued and more expensive ones were undervalued, which unfairly burdens less wealthy property owners. The problem was worst in Chicago’s central business district and on the Near South Side and the Northwest Side, according to the group’s analysis.

Taken together, the problems with commercial assessments were less severe — but still problematic — in the south suburbs and worst in the city, the study found. “Commercial assessments in the city are indicated to be more consistently undervalued, less uniform and more regressive than assessments in the north or south (suburbs),” it stated.

Preckwinkle, who was a close Berrios ally, said in a statement that she “appreciated” Kaegi’s efforts to make the system fair and accurate.

“The IAAO is an internationally recognized expert in evaluating assessment practices,” she wrote. “We look forward to their continued evaluation of whether or not Cook County’s assessments meet industry standards.”



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