Kaegi and other local and state officials fielded questions and discussed potential solutions to the property tax crisis with an audience of about 70 people at South Suburban College.
Many homes in the region lost about half their worth during the economic downturn, and values have been slow to recover, Kaegi said. That caused property tax rates to increase to today’s high levels that are squeezing owners of homes and businesses.
“Many communities saw their housing values halved because of the crisis,” Kaegi said. “That can make rates double.”
That’s because the property tax system in Illinois starts with a tax levy, he said. The levy is an amount set by various taxing bodies. Once the amount to be collected is known, the assessor is supposed to determine how the tax burden should be distributed among property owners.
“Here, we do it backwards,” Kaegi said. “We start with the levy, then we do assessments to divide up the tax bill.”
There is less wealth in the south suburbs than in the city of Chicago or the northern suburbs, according to an annual report issued in June by the Cook County clerk’s office. The report listed tax rates for the county’s 130 municipalities.
“Tax rates have an inverse relationship with taxing district equalized assessed values,” the report said. Taxing districts throughout Cook County billed taxpayers a record $14.9 billion in total property taxes this year, the report said.
The highest tax rates in suburban Cook for 2018 were in Park Forest (34.55%), Ford Heights (30.76%) and Riverdale (30.72%), the report said.
The lowest rates were in Hinsdale (6.9%), Burr Ridge (7.2%) and Barrington (7.5%). Chicago’s tax rate was among the lowest, at 6.8%.
Tax rates matter for obvious reasons. A property with an assessed value of $100,000 would be billed $30,000 in property taxes in a community where the tax rate was 30%, but only $7,000 where the tax rate was 7%.
High tax rates in south Cook have driven many residents and business owners elsewhere, including to Will County and Indiana, officials said. A state legislative task force charged with proposing solutions to the property tax crisis is focused on providing relief for the south suburbs, Kaegi said.
“The Southland is particularly sensitive to reform,” Kaegi said. “It all comes together here … No place is more exposed than the Southland.”
Elected officials at the forum included state Sen. Michael Hastings, D-Tinley Park; state Reps. Will Davis, D-Homewood, Debbie Meyers-Martin, D-Olympia Fields and Nicholas Smith, D-Chicago; Cook County Board member Donna Miller, D-Lynwood; and mayors Vernard Alsberry, of Hazel Crest, and Riley Rogers, of Dolton.
“This conversation is long overdue,” Davis said. “We know we’ve got some challenges.”
The legislative task force is due to submit its recommended solutions to Gov. J.B. Pritzker by Dec. 31.
The Property Tax Reform Task Force is tied to a push by Pritzker to convince voters statewide in November 2020 to support the Fair Tax Amendment. If approved, the referendum would amend the Illinois Constitution to allow a graduated income tax structure where wealthier individuals and businesses would pay higher rates than the current flat rate charged to everyone.
The concept is that if the state collected more revenue from income taxes, it could get closer to fulfilling its constitutional obligation to be the primary source of funding for public education. Instead of funding at least half the cost of schools, states resources account for about one-fourth of school funding, Kaegi said.
“What’s missing (in the conversation) is how much we rely on property taxes to fund schools,” Kaegi said.
Local elementary and high schools typically account for about two-thirds of property tax bills, Kaegi said. Municipalities, townships, county government, park and library districts and other taxing bodies account for the rest.
“We’re caught in a trap now,” Kaegi said. “No area of the county or state has more riding on passage of the Fair Tax Amendment than the Southland.”
Increasing the state’s share of education funding is one of several steps that could be taken to address the property tax crisis, lawmakers said.
“Finally, we’ve got some order and strategy to the conversation we’ve been having for years in the south suburbs,” Meyers-Martin said.
As he has done at multiple forums since taking office in December, Kaegi described how he is implementing reforms to promote fairness, accuracy and transparency in the assessment process.
He urged lawmakers to approve a “data modernization” bill that would allow the assessor to consider rental income and other factors when calculating market values of some properties. Kaegi said he also wants to incorporate the effects of foreclosures into the market-value assessment process.
Property owners already introduce foreclosures, rental incomes and other data into the property assessment appeals process, Kaegi said.
“It’s data they give during the appeals process, it just comes to us too late,” Kaegi said. “What we want to do is get (the assessment) right the first time.”
In many other metropolitan areas around the country, typically only 2% to 3% of property owners appeal their assessments, Kaegi said.
“Here in Cook County we’re over 30%” of owners appealing assessments, he said.
Miller said county commissioners support Kaegi’s reforms, but also want to revise the system of property-tax breaks for economic development incentives. Currently, owners of vacant commercial properties can seek assessment reductions of up to 90%, Kaegi said.
“We need to make sure we’re not accidentally incentivizing vacancies,” Kaegi said.
A proposed change would give municipalities the ability to challenge a “perverse” assessment reduction for commercial and industrial properties that are vacant for two years, Kaegi said.
Vacant stores hurt a town’s ability to raise revenue through sales taxes, officials said. It is one of many examples of the complicated connections among income, property and sales taxes.
“When we talk about property taxes, mayors deal with the problem more than anyone else,” Alsberry said. “We’ve been dealing with the problem for so long, I think a lot of people gave up hope that anything would happen to fix the problem.”
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