Cook County property tax assessments may rise again this year – Crain's Chicago Business
In his first three years as Cook County assessor, Fritz Kaegi angered commercial landlords by hiking their assessments—a lot. They’re not going to be much happier with him in year four.
Kaegi’s office has been delivering unwelcome news to owners of many commercial properties in the northern and northwestern suburbs this year. He’s raising their assessments again, fueling fears of more property tax hikes in 2023 and preserving his persona non grata status among many in the Chicago business community who say he’s driving away investors and killing the local economy.
Kaegi has reassessed nine of the 13 townships in northern Cook County this year. The total assessed value of all nonresidential properties in the nine townships rose 43.4% from 2021, versus a 32.4% increase for homeowners, according to a preliminary analysis of data from the assessor’s office.
Critics of Kaegi, who was elected in 2018, accuse him of playing favorites, deliberately trying to shift the property tax burden from homeowners to commercial landlords, a cynical ploy to get re-elected this year. Kaegi won the Democratic primary in June and is expected to sail to a second term in the November general election.
But Kaegi says he’s just calling it as he sees it, valuing properties accurately based on real market data and valid methods, unlike his predecessor, Joe Berrios, who was widely accused of lowballing commercial property values.
“Our numbers are consistent and they’re well justified with the evidence; if anything, they’re a little bit conservative,” Kaegi says.
He’s been saying that ever since he started assessing county properties more than three years ago. It takes the assessor three years to value all 1.8 million parcels in the county, and Kaegi started with the northern suburbs in 2019, followed by western and southern Cook County in 2020 and the city of Chicago last year.
Kaegi walloped commercial landlords with big increases in his first three years, especially in Chicago, hiking the total assessed value of all nonresidential property there by 77%. The assessor raised residential values, too, but not as much, so the disparity effectively shifted more of the property tax burden onto landlords and away from homeowners.
Brokers and landlords say Kaegi is a big reason many real estate investors are avoiding Cook County for now. They don’t want to buy a property or finance a new development in the county, worried that their taxes will jump, according to Kaegi’s critics.
“I’ve got to tell you if I see a (development) site in suburban Cook, I just stay away from it,” says apartment developer Tony Rossi, president of Itasca-based M&R Development. “It’s just too damn hard to get an equity partner. I’d rather step over into DuPage County. The market is just as good, and there’s more predictability on real estate taxes.”
If investors are avoiding Cook County, you won’t find much evidence in commercial property sales and prices, which have mostly held up in the county since Kaegi took office. But owners of office, industrial and retail properties typically pass along their property taxes to tenants, so rising taxes don’t hit those landlords directly, like they do with apartment owners. Taxes can, however, factor into a company’s decision to expand in Cook County or move somewhere else.
It’s a fact that commercial landlords in Chicago and Illinois pay some of the highest property taxes in the nation, largely because the state relies so heavily on the real estate tax to fund public schools. A recent study by the Lincoln Institute of Land Policy and the Minnesota Center for Fiscal Excellence found that Chicago had the second-highest effective property tax rate among the largest cities in the 50 states last year. Only Detroit was higher.
Cook County uses assessments to calculate property taxes, but the math is complicated, and final tax bills depend on other variables, including the levy, or the amount of revenue school districts, municipalities and other bodies need to collect through property taxes. A rising assessment doesn’t always presage a tax increase.
A key factor is how much your assessment changes relative to everyone else’s. If your assessment rises, but not as much as it does for other property owners, your taxes could actually decline. So even though the total residential assessed value in the nine north suburban townships increased 32.4%, homeowners could come out ahead because nonresidential assessments rose by even more.
The big jump in north suburban residential assessments makes sense given the strength of the local housing market since the beginning of the pandemic. The S&P CoreLogic Case-Shiller home price index for the Chicago area has risen about 28% since the beginning of 2020.
Moreover, Kaegi’s office incorrectly assumed the COVID-19 pandemic would depress home values, so it cut residential assessments across the board by 8% to 12% in 2020. It was a controversial move that backfired. The increase this year corrects that mistake.
The market for commercial real estate is “a mixed bag,” Kaegi says. Offices, hotels and many retail properties have suffered since the pandemic.
Fritz Kaegi’s office valued this 175-unit apartment building in Evanston—known as the 1717—at $56.5 million, up 68% from 2021.
But industrial and apartment landlords have made out well the past few years, setting themselves up some for big assessment hikes. The assessor valued a 308,000-square-foot industrial building in Elk Grove Village, just west of O’Hare International Airport—an especially hot market—at $35.9 million, more than triple its 2021 value.
Kaegi’s office valued 1717, a 175-unit apartment building in Evanston, at $56.5 million, up 68%.
But that estimate may still be low: An investment fund managed by CBRE paid $71.3 million for the property last November.
As much as they view Kaegi as the enemy, commercial landlords have a friend in the Board of Review, a three-person panel where property owners can appeal their assessments if they think the assessor has overshot. The board has consistently cut Kaegi’s assessed values on commercial properties over the past three years, providing some relief to landlords.
“Right now,” the Board of Review is “the only hope that a lot of us folks have,” says Rossi, the apartment developer.
Yet landlords might not get the same results in the future: Two of the board’s three commissioners lost their primary election in June, and one of their challengers, Samantha Steele, is a Kaegi ally. If landlords want a break, they might not get it from her.
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