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Berrios tweaks formula; home assessments rise on North Side, fall on South Side

Sunday, July 08, 2018
Chicago Tribune
by Hal Dardick

Berrios tweaks formula; home assessments rise on North Side, fall on South Side

Edgewater’s Sue Henning got quite a shock when she opened her property tax reassessment. Her five-bedroom Victorian home, which hasn’t undergone a major upgrade in decades, was valued at more than $1.13 million. That’s up 46 percent from the $769,000 estimate the last time, and it left her fearful a big tax hike is in store.

About 20 miles south in Chatham, Chasiti Lawrence was also surprised when she looked at her tax notice. The assessment on her one-story brick home had dropped by 12 percent, to $126,100 from $143,500. Despite the good news, the change left her wondering if the figure had been too high in the past.


The greatly varying results are playing out in city neighborhoods as Cook County Assessor Joe Berrios’ office revalues Chicago homes for property tax purposes. For homeowners looking to figure out what’s going on, two factors are at play: The new home values are based on three years of changing home sales prices since the last major reassessment, and Berrios’ office says it is using a new model in an attempt to make the system more fair.

The changes to the assessment formula come in the wake of “The Tax Divide,” a Chicago Tribune series that found the assessor’s home values in affluent neighborhoods often were too low, and those in economically struggling areas often were too high, creating a regressive system that unfairly shifted the property tax burden from the wealthy to the less affluent.

Read the Chicago Tribune's "Tax Divide" series »

It’s tough to tell if the system is now treating people more fairly, as Berrios claimed in a pair of press releases. Although home sales prices are public and easy to evaluate, Berrios’ new assessment model remains under wraps.

Neither Berrios nor the consultants who are helping him revise the model would comment. When the Tribune asked for the new model that’s being used and the actual numbers the assessor’s office crunched, a Berrios aide said he would have to check with the consultants whether the information is proprietary.

While Berrios spokesman Tom Shaer did not provide specifics, he said the latest reassessments used “a variety of factors with improvements in the assessment model.” He said the assessments done so far are well within industry standards that the Tribune found were not always met previously.

Count Christopher Berry as skeptical about Berrios’ new claims of accuracy. The professor at University of Chicago’s Harris School for Public Policy noted the assessor said a few years ago that the office was moving to a new, more accurate, less regressive model Berry helped design but Berrios never fully implemented.

“Berrios issued a virtually identical press release in 2015, and it turned out to be completely false,” said Berry, a longtime critic of Berrios’ assessment methods. “Why would anyone believe him this time? If they really have done what they claim, they should immediately release all their data and code for the public to see.”

Still, Berry said, dramatically higher assessments in booming areas of the city like Edgewater “could be an indication that the model could be getting more accurate. ... It’s virtually impossible not to improve their model.”

Greater transparency could be on the way for a complex property tax system that Chicagoans have long distrusted. Fritz Kaegi, who defeated Berrios in the March Democratic primary, said he’s asked Berrios to show him how the new model works. The methodology, Kaegi said, should be made public.

“They ought to be able to do this, but there is a culture of not showing how you’ve arrived at these numbers,” he said. “Part of our plan for transparency is showing how these numbers have been calculated.”

Late last month, an Illinois appeals court ruled that Berrios must turn over documents used to set values of residential and business properties that he fought for years to keep out of the public eye. The Tribune had sued after Berrios declined open records requests for the information.

Kaegi also said he’s concerned the new model Berrios is using only addresses problems with assessments of residential properties, although further “Tax Divide” reporting done in collaboration with ProPublica Illinois showed significant problems with assessments of business properties. Many high-priced commercial parcels were under-assessed, pushing more of the tax burden onto smaller businesses and homeowners, the series concluded.

Berrios’ office disputes that there are problems with commercial property assessments, the consultants haven’t been asked to work on the issue, and County Board President Toni Preckwinkle has said it would have to be addressed later.

Kaegi, who is poised to take office in early December, said the issue “is something that we’re going to take a very close look at from the outset.”

Tax hike coming?

The assessor’s office conducts a major reassessment of all properties in the county over a three-year period, dividing up the geography by the north suburbs, south suburbs and the city. This year, the city is under review.

The real-world impact of the reassessments — including whether property taxes will go up or down for individual homeowners next year — won’t be known until around October, when the assessor is scheduled to finish calculating how much every home in the city is worth.

That’s because deciding who pays what in property taxes is a zero-sum game. Chicago Public Schools, City Hall, the county, the forest preserve district and other governments decide how much money they want. Each property owner pays a slice of the total tax pie based on how much their property is worth in comparison to all others.

An increase in a home’s assessed value won’t necessarily lead to a higher property tax bill. It will, however, if a home’s value rises by a larger percentage than others in the city, in effect making the homeowner’s slice of the pie bigger.

That’s where the new formula Berrios’ office says it’s using could play a big role in determining whether the property tax system is becoming fairer. If home values end up about the same or go down in economically struggling areas on the South and West sides, more of the overall tax burden will be shifted to areas where home values are rising.

Flawed assessments under Assessor Berrios caused $2 billion shift in Chicago property taxes, study finds »

Once all of Chicago is reassessed, it will be easier to determine whether the tax burden has shifted in a city where angst-ridden homeowners in recent years already have faced substantial property tax increases engineered by Mayor Rahm Emanuel to boost contributions to pension funds for city cops, firefighters and teachers.

For folks who see increases well above the median in fast-rising neighborhoods, a higher tax bill is all but certain barring a successful assessment appeal.

So far, Berrios has finished three of Chicago’s eight townships and is working on a fourth. The work done so far offers a partial picture. In Lakeview Township, where the housing market is robust, the median increase in assessments was 31.2 percent, according to the assessor’s office. That figure is 18.2 percent in Rogers Park Township, where homes have been selling at higher prices in recent years.

Contrast that with Hyde Park Township, which encompasses a large swath of the South Side, where home sales prices have varied significantly in a mix of differing neighborhoods. Overall, the median home assessment was down by about a third of 1 percent, but with great fluctuations that ranged from a nearly 19 percent increase in the Hyde Park neighborhood to a nearly 19 percent decrease in the 7th Ward’s East Side neighborhood.

In middle-class Chatham, the median assessment is down nearly 10 percent. The reassessment notice on Lawrence’s home showed a 12-percent drop. The 37-year-old mother of a young girl said she believes her new $126,000 assessment is in keeping with what her 1,100-square-foot house is truly worth, though she paid tens of thousands dollars more for it less than three years ago.

“My mortgage (payment) jumped when they did the last assessment because the taxes were going up,” said Lawrence, who works as a Tribune finance manager. She called the new assessment a “disappointment, because I think during the prior years I was being over-taxed.”

In areas where reassessments have gone up, many a taxpayer is nervous about what will come in 2019, when tax bills will be based on the new assessments. Given the assessor’s track record, many homeowners aren’t convinced Berrios got it right.

Henning, the 72-year-old owner of the Edgewater home valued at more than $1.13 million, said she hasn’t replaced her stove since 1977, a year after she moved in with her husband, Robert. There’s no air conditioning, and she says the interior of the 2,700-square-foot house can best be described as a “Victorian rabbit warren.”

The Hennings know property values have risen in their neighborhood — after all, they paid just $19,000 for their home back in the ’70s. Still, the size of the spike in the recent assessment notice caught Sue Henning off guard. She predicted a new owner would have to gut her house and spend hundreds of thousands of dollars in improvements to make it worth as much as the assessor says it is, so she plans to file an assessment appeal.

“I am fortunate in that I do have a pension and I’ve been frugal,” said Henning, a retired accountant who’s concerned about what next year’s tax bill will bring, given that this year’s was already about $14,500. “But I’m getting to the point where it doesn’t make any sense. We’re not in a position to throw away any money. We’re comfortable, but gee, it sure would be nice to travel rather than paying taxes on a house.”

In Rogers Park, Maria Kirkmanbey saw the assessment on her two-flat go up by 54 percent to $323,000.

“This isn’t Wicker Park,” said the 55-year-old personal banker whose 21-year-old daughter lives with her while attending school. “This area, the rents are not that expensive.”

Assessment appeals

Kirkmanbey said she’s appealed her new assessment at Berrios’ office and also signed up for a homeowner’s exemption — a tax break to which she’s long been entitled but wasn’t getting. That step will offset part of any increase in her final assessment amount and keep her tax bill from rising as much as it could.

Whether the assessment appeals of Henning and Kirkmanbey will succeed is uncertain. Henning’s home falls about in the middle of the pack when it comes to how Berrios’ office valued properties in her neighborhood of similar size and characteristics. A Tribune review of assessor’s records show Kirkmanbey’s home was valued at similar levels to other nearby two-flats in Rogers Park, although her building has slightly less square footage than its neighbors.

One expert said there appears to be some rationale at work for the reassessments, even if it’s impossible to fully evaluate given the limited information Berrios has released about the new model. Market values are up significantly in certain parts of the city, and the new formula so far is resulting in closer groupings of assessment values for comparable homes, said Myer Blank, senior tax manager for Fisk Kart Katz and Regan, a law firm that handles property tax appeals.

The overall higher values in some neighborhoods are “going to create a situation in the summer of 2019 when the tax bills come out, where there’s going to be question as to whether or not people can pay for these increases in valuation,” he predicted. “And the common expression that was put forward a number of years ago was that you can be brick rich and cash poor — which is that the value of your home can go up, but that doesn’t necessarily mean that you have the ability to pay those taxes, which then leads to the question of, ‘Does the tax policy make sense?’”

Realtor David Hanna, past president of the Chicago Association of Realtors, said the higher assessments in Lakeview Township reflect a “consistent rise in property values,” but he also suggested “everyone appeal” their assessment, given that not all homes that have similar characteristics are the same.

“I think there will be some adjustments, because there could be some differences in the age of the structure and what is perceived as real market value,” Hanna said. “After all, it’s just a computer algorithm that’s just spitting all this out to begin with, based on so-called comparable sales.”

Hanna also said that the shock some North Side homeowners experienced may be coming in other parts of the city, like the booming West Loop and South Loop townships. “I know people in Lakeview are feeling like they’re a target right now, but my guess is that you’re going to hear a lot of that from a lot of places,” Hanna said.

Property owners have 30 days from receiving their notice to appeal their assessment directly to Berrios’ office. If they don’t make that window, they then have to wait until the county Board of Review opens up its appeals process for new reassessments. A pre-appeal filing period starts this month , but the 30-day formal appeal window isn’t expected to open until late summer or early fall.

Ald. Harry Osterman, whose 48th Ward includes Lakeview, said he’s particularly worried about longtime homeowners like Henning. “There are people who have worked very hard to improve our neighborhood, make it safer, help volunteer at schools, open businesses, and now they are getting priced out of the community,” the alderman said. “It’s a very bitter pill to swallow.”

Calling the level of the recent assessment increases “outrageous,” Osterman said part of the problem is not knowing precisely how the assessor’s office did its work.

“People don’t understand how the assessment works,” he said. “The new formula, and the lack of transparency in that, I think has a lot of other people concerned as well.”

Osterman, Cook County Board Commissioner Bridget Gainer and 49th Ward Ald. Joe Moore have held forums to show residents how to appeal their assessments — a process that “The Tax Divide” found makes the system even more regressive, in part because people living in pricier homes are more likely to file appeals. If the new formula were to work, however, it’s possible successful appeals would diminish over time because of greater accuracy in the first place.

Moore said the assessment increases in Rogers Park “freaked out a lot of people,” but he also said they “weren’t surprising” given a healthier local housing economy in recent years.

“We just want to make sure they are fair,” he said.

Henning said she understands that homeowners in economically struggling areas were being over-assessed and a fix is needed, but she’s not confident in how Berrios does it today.

“I don’t think the math is honest,” she said. “What is it? ‘Figures don’t lie, but liars figure.’”

Twitter @ReporterHal


Under Joseph Berrios, assessments of commercial and industrial properties defy logic, punish taxpayers and enrich lawyers »

Embattled incumbent Joseph Berrios concedes to Fritz Kaegi in Cook County assessor's race »

Zorn: Why it's foolish not to appeal your property tax assessment »

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