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North-suburban assessments could mean for break homeowners, ‘straight-up terror’ for commercial owners

Monday, October 07, 2019

by Alex Nitkin

By Alex Nitkin

Most homeowners in Chicago’s north and northwest suburbs learned this year that Cook County Assessor Fritz Kaegi’s office determined the assessed value of their property spiked during the past year.

But the increases were a fraction of the potential tax hike faced by owners of office, apartment, retail and industrial buildings. And that likely means big changes for the way property taxes are collected while Kaegi is in charge.

In all 13 townships of Cook County’s so-called “North Triad,” Kaegi’s staff rejiggered assessments to shift the property tax burden away from homeowners and toward commercial property owners. Depending on how taxing authorities write their budgets, that could mean tax savings for owners of condos and single-family homes — and sticker shock for owners of all other kinds of real estate.

The proposed assessments, which were mailed to property owners between February and September, can still be reduced through multiple layers of appeals — first by the assessor’s office, then by the Cook County Board of Review, then by the Illinois Property Tax Appeal Board.

But the first round of mailings still threw a scare into the Chicago-area real estate industry, which is also bracing for a potential tax hike in Mayor Lori Lightfoot’s proposed budget later this month, according to David Bradley, regional manager for the brokerage Marcus & Millichap.

Investors’ reactions to the new assessments “range from disappointment and wondering, ‘Where do we go from here?’ to straight-up terror, and ‘How do we get out of Cook County?’” Bradley said. “There’s a general sense that we need to take this seriously and prepare to shift our thinking…including whether we want to be invested in Cook County at all.”

Property owners in Evanston saw the most dramatic spike in assessments, according to data released by the assessor’s office. The total assessed value of commercial properties in the suburb skyrocketed by more than 125 percent, and some high-end apartment buildings saw their assessments nearly triple, according to an April Crain’s article that sent shockwaves through local real estate circles.

At the same time, total residential assessments went up by about 25 percent as compared with last year, while the median homeowner only saw about a 9 percent spike.

That does not mean tax bills will more than double for Evanston property owners, according to Brandon Svec, director of Chicago market analytics for the real estate data firm Costar. But it matters for figuring out each taxpayer’s “respective portion” of each taxing body’s revenue stream.

“It’s homeowners and investors’ relative share of the total assessed value that everyone needs to be aware of,” Svec said. “And if my assessments go up 125 percent and yours go up by 25 percent, my share is going to get larger.”

In 2018, owners of commercial and industrial properties shouldered about 27 percent of Evanston’s total property tax burden, according to Costar data. Under Kaegi’s proposed assessments, their share would jump to more than 40 percent.

Kaegi has repeatedly said the shift is only dramatic because his predecessor, Joe Berrios, plugged inaccurate property data into his models.

“This is a radical shift from the historical legacy of assessments in Cook County, which is one of unpredictability and inaccuracy,” Kaegi said in a statement to The Daily Line on Friday. “Yes, the market is trying to figure out the implications of shifting from our old, failed system to a modern, transparent one. We have and will continue to meet with real estate participants in all areas of the county to shed light on our data and methodology.”

The change is consistent across all the suburbs being reassessed this year. In Maine Township, which includes Des Plaines and Park Ridge, commercial owners’ owed share of property taxes would jump from 28 percent to 38 percent under Kaegi’s model, according to Costar. In Northfield Township, it would rise from 29 percent to 40 percent.

Under Kaegi’s proposed assessments, if Evanston keeps its tax levy the same, the average commercial property owner would see her tax bill rise by nearly half, Svec said. Conversely, the average homeowner could see a nearly 18 percent cut in how much they owe next year.

“Assuming Evanston doesn’t need more money next year than it had this year, homeowners’ tax bills will go down,” Svec said. “That’s just math.”

It’s also assuming no radical changes resulting from the marathon appeals process that’s already underway. As of Friday, Kaegi’s office had closed on appeals for six townships, and the Board of Review was considering appeals in four townships.

Joe Roth, the Northbrook-based local government affairs director for the Illinois Association of Realtors, told The Daily Line that he has “not talked to a single person who isn’t appealing” their property tax bill.

And Ian Robinson, managing broker of Baird & Warner’s Glenview office, said he isn’t telling any homeowners to expect lower taxes next year — not as long as municipalities keep seeking out new revenue through levies.

“I’ve never seen a situation where groups of people get reductions in their taxes because of assessments changing,” Robinson said. “Because communities still need the money that they’re going to need, and that’s growing all the time.

For commercial property owners in the county, there’s likely no escaping the bite that sharply higher taxes will take from their buildings’ net income, according to Bradley. In many cases, landlords will have no choice but to pass on the extra cost to their tenants.

Properties could also see their market values sink as a result of higher taxes, Bradley said. For one medium-sized apartment building he was researching, Bradley estimated that each 10 percent hike in taxes could equate to 2 percent skimmed off its sales price.

But once the final rates are set and owners know how much they’ll have to pay, the broker expects some of the hysteria to subside, he said.

“Inevitably, the market will adjust to whatever ends up happening, and business will go on,” Bradley said. “And at the end of the day, if you’re still holding property and you’re able to sell it, you’re probably going to be OK.”

The first-round assessments released by Kaegi’s office show the following changes in each township:

  • In Norwood Park Township (Norridge, Harwood Heights), the total assessed value of commercial and industrial properties grew by 84.9 percent as compared with last year, and homes saw their assessed values collectively grow by 26.5 percent. The median home saw its assessed value grow by 23 percent since 2016.
  • In New Trier Township (Winnetka, Kenilworth, Glencoe), the total assessed value of commercial and industrial properties grew by 96.6 percent as compared with last year, and homes saw their assessed values collectively grow by 12.2 percent. The median home saw its assessed value decline by 11.4 percent since 2016.
  • In Elk Grove Township (Elk Grove Village, Mount Prospect), the total assessed value of commercial and industrial properties grew by 82.2 percent as compared with last year, and homes saw their assessed values collectively grow by 20.7 percent. The median home saw its assessed value grow by 6.5 percent since 2016.
  • In Maine Township (Des Plaines, Park Ridge), the total assessed value of commercial and industrial properties grew by 87.9 percent as compared with last year, and homes saw their assessed values collectively grow by 21.8 percent. The median home saw its assessed value grow by 6.2 percent since 2016.
  • In Northfield Township (Glenview, Northbrook), the total assessed value of commercial and industrial properties grew by 82.1 percent as compared with last year, and homes saw their assessed values collectively grow by 13.7 percent. The median home saw its assessed value grow by 1.6 percent since 2016.
  • In Barrington Township (Barrington Hills, South Barrington), the total assessed value of commercial and industrial properties grew by 116.1 percent as compared with last year, and homes saw their assessed values collectively grow by 5.3 percent. The median home saw its assessed value grow by 2.1 percent since 2016.
  • In Leyden Township (Franklin Park, Rosemont), the total assessed value of commercial and industrial properties grew by 84.1 percent as compared with last year, and homes saw their assessed values collectively grow by 14.9 percent. The median home saw its assessed value grow by 2.7 percent since 2016.
  • In Wheeling Township (Arlington Heights, Prospect Heights), the total assessed value of commercial and industrial properties grew by 74.8 percent as compared with last year, and homes saw their assessed values collectively grow by 14.9 percent. The median home saw its assessed value grow by 2.9 percent since 2016.
  • In Palatine Township (Rolling Meadows, Inverness), the total assessed value of commercial and industrial properties grew by 79.7 percent as compared with last year, and homes saw their assessed values collectively grow by 10 percent. The median home saw its assessed value decline by 3.9 percent since 2016.
  • In Schaumburg Township (Schaumburg, Hoffman Estates), the total assessed value of commercial and industrial properties grew by 67.1 percent as compared with last year, and homes saw their assessed values collectively grow by 17.3 percent. The median home saw its assessed value grow by 9.3 percent since 2016.
  • In Niles Township (Skokie, Morton Grove), the total assessed value of commercial and industrial properties grew by 67.9 percent as compared with last year, and homes saw their assessed values collectively grow by 15.6 percent. The median home saw its assessed value grow by 5.8 percent since 2016.
In Hanover Township (Bartlett, Streamwood), the total assessed value of commercial and industrial properties grew by 32.6 percent as compared with last year, and homes saw their assessed values collectively grow by 12.9 percent. The median home saw its assessed value grow by 7.1 percent since 2016


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