{"id":3069,"date":"2021-09-21T09:31:35","date_gmt":"2021-09-21T14:31:35","guid":{"rendered":"https:\/\/illinoistax.org\/?p=3069"},"modified":"2022-01-19T14:47:59","modified_gmt":"2022-01-19T20:47:59","slug":"cook-county-property-taxation-the-shift-continues-maurice-scholten-mike-klemens","status":"publish","type":"post","link":"https:\/\/illinoistax.org\/?p=3069","title":{"rendered":"Cook County Property Taxation: The Shift Continues"},"content":{"rendered":"

Cook County Property Taxation: The Shift Continues<\/u><\/strong><\/h3>\n

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September 2021 (74.5)<\/strong><\/p>\n

by Maurice Scholten and Mike Klemens*<\/p>\n

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Cook County property taxes billed in 2021 rose by $534 million (3.4 percent), to $16.1 billion, as calculated by the Cook County Clerk\u2019s office.\u00a0 That does not mean every<\/em> property owner\u2019s tax bill went up, of course.\u00a0 An analysis done by the Cook County Treasurer found that 46 to 48 percent of residential properties actually saw their tax bills go down. In this article we will review what happened, and why, to different kinds of property in different areas of Cook County.<\/p>\n

There are two reasons that a property owner\u2019s tax bill can increase:<\/p>\n

1 \u2013 Taxing districts ask for more money and increase their levy, which they did to the tune of $534 million (3.4 percent) this year as noted above.
\n2 \u2013 A property\u2019s relative share (the property\u2019s assessed value compared to total assessed value) changes.\u00a0 An increased relative share will increase the property\u2019s tax bill even if the levy stays the same.<\/p>\n

For the past two assessment cycles (the North Triad for 2019 and the South Triad for 2020), Cook County Assessor Fritz Kaegi has increased non-residential assessments more than residential assessments, although overall those increases were rolled back significantly by the Cook County Board of Review.\u00a0 See Chart 1<\/strong>.\u00a0 Even after the Board of Review action, non-residential properties\u2019 relative share increased.\u00a0 The increase is small, but on a $16.1 billion base amounts to more than $350 million in taxes shifted off homeowners onto businesses.\u00a0 The question is:\u00a0 Will this pattern continue?<\/p>\n

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Reassessment for 2020
\n<\/strong>Cook County is divided into three triads for assessment purposes: (1) Chicago, (2) North (suburban Cook north of North Avenue), and (3) South (suburban Cook south of North Avenue).\u00a0 One triad is reassessed each year on a rotating basis while the other two are held constant, except for new construction.\u00a0 For 2020 taxes (payable in 2021) the South triad was reassessed.\u00a0 As illustrated in Chart 2<\/strong>, the South triad is the smallest of the three.<\/p>\n

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Reassessment is a two-step process.\u00a0 First the Assessor determines values using models, internal review, and an informal appeal process with the property owner.\u00a0 The property owner can then appeal the Assessor\u2019s determination of value to the Cook County Board of Review, which has rolled back much of the Assessor\u2019s increases for the last two years.<\/p>\n

The dominant factor in the 2020 reassessments was a judgement made by the Assessor in the spring of 2020 to reflect the anticipated effects of the COVID-19 pandemic on property values countywide, not just in the South Triad that was being reassessed.\u00a0 Assessments of residential properties were reduced approximately 10 percent across all three triads; the Assessor also made less substantial COVID-related reductions to some types of business properties. The COVID reductions for residential property had the effect of shifting relative share off residential properties and onto business properties, as shown in Chart 1<\/strong>.<\/p>\n

Note: Based on values he has published for the first three city townships to be reassessed so far this year, Rogers Park, West Chicago, and Jefferson, the Assessor\u2019s COVID adjustments reduced residential assessments in these three townships when property values were actually increasing.<\/em><\/strong><\/p>\n

Countywide, between 2019 and 2020 the Assessor reduced assessed value (AV) from $68.4 billion to $67.9 billion, primarily because of COVID adjustments.\u00a0 After the Board of Review action, Cook County\u2019s AV fell further to $64.6 billion.\u00a0 In terms of relative share, the key question in whether a property\u2019s tax bill increases or decreases, the trend of shifting tax burden off residential property and onto commercial, industrial, and apartments continued.\u00a0 That held true even after the Board of Review rolled back much of the Assessor\u2019s increases on non-residential properties.\u00a0 See Chart 3<\/strong>.<\/p>\n

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That same pattern was not true in the South Triad where properties saw both COVID adjustments that reduced assessments and reassessments that updated values since the last reassessment in 2017.\u00a0 In each township in the South Triad, AV increased, although less than the Assessor first proposed, after the Board of Review\u2019s reductions were taken into consideration.\u00a0 See Chart 4.<\/strong> The differences between the Assessor\u2019s and Board of Review\u2019s determinations are more pronounced when we look at only commercial and industrial properties.\u00a0 See Chart 5<\/strong>, looking at the difference in percentage increases proposed by Assessor (the blue bar) and finalized by the Board of Review (the orange bar).\u00a0 By contrast, the differences between the assessor and Board of Review changes are far less steep for Class 2 properties (single family homes and small apartment buildings), as illustrated in Chart 6<\/strong>.<\/p>\n

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Equalization
\n<\/strong>Cook County\u2019s overall assessed value (AV) assigned by the Assessor and modified by the Board of Review declined between taxes billed in 2020 and those billed in 2021. However state equalization which converts Assessed Value (AV) to Equalized Assessed Value (EAV) caused EAV to increase even though AV decreased.\u00a0\u00a0 The Department of Revenue is charged by statute with bringing the level of assessment to 33.3 percent in all counties to take care of taxing districts that cross county boundaries and to ensure the fair application of formulas (such as the school aid formula) that take property wealth into consideration.\u00a0 The Department does this by calculating an equalization factor (frequently called the \u201cmultiplier\u201d) that will be applied to the assessed value of each parcel to produce the equalized assessed value (EAV) against which property tax rates are applied after exemptions are taken.\u00a0\u00a0 The result was that for 2020 taxes billed in 2021 the countywide assessed value dropped 5.5 percent, the multiplier increased 10.5 percent (from 2.9160 to 3.2234) leaving the the Equalized Assessed Value 4.2 percent higher.<\/p>\n

As Illustrated in Chart 7 <\/strong>the Cook County multiplier is the third highest in history, only exceeded by the multipliers in 2009 and 2010 when property values were upset by the real estate crash.\u00a0 The long-range trendline (the dashed blue line on the chart) shows a continuing upward trend in the multiplier (and a declining level of assessment as measured by the multiplier calculations).<\/p>\n

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For a property owner looking at his or her tax bill, the multiplier was not the reason for an increase or decrease because it applies equally to all properties, keeping relative share unchanged.\u00a0 The higher EAV created by the increased multiplier resulted in a lower tax rate when the clerk calculated the tax rate by applying the formula:<\/p>\n

Tax Rate = Tax Levy\/EAV <\/strong><\/p>\n

For a longer discussion of the effects of the multiplier on Cook County tax bills, see Tax Facts<\/em>, February, 2021, \u201cCook County Property Tax D\u00e9j\u00e0 Vu.\u201d<\/p>\n

Major beneficiaries of the increased multiplier are Tax Increment Financing (\u201cTIF\u201d) districts, which accounted for 8.5 percent of Cook County taxes billed last year.\u00a0 Because a TIF district\u2019s revenue is based on growth in EAV over a base year, the districts would have seen less money but for the big jump in the state multiplier.<\/p>\n

Tax rates
\n<\/strong>The tax rates calculated by the clerk and reported in the 2020 Tax Rate Report <\/em>illustrate the inverse relationship between EAV and the rates.\u00a0 For the South Triad \u2013 which was reassessed \u2013 the EAV increased 16.8 percent, while the average tax rate fell 11.2 percent.\u00a0 The differences were less stark in the two triads that were not reassessed, reflecting the 3.4 percent levy increase and the 4.2 percent EAV growth.\u00a0 The North Triad saw its EAV increase 1.3 percent and its average tax rate increase 1.4 percent.\u00a0 The Chicago Triad saw its EAV increase 1.9 percent and its average tax rate increase 0.3 percent.<\/p>\n

The same 2020 Rate Report <\/em>points out differences within Cook County, and further divides the Chicago Triad into north, central, and south regions.\u00a0 See Chart 8<\/strong>.\u00a0 For single family dwellings, the lowest values are found in the South Chicago region while the highest are in Central Chicago.\u00a0 In terms of tax bills, the highest are in the North Suburban Triad while the lowest are in the South Chicago region.\u00a0 The largest increase in tax bills was in the South Suburban Triad (which was reassessed).\u00a0 And the tax bill on a $306,500 average residence in Central Chicago region is about the same as that on an average $188,000 residence in the South Suburban Triad.<\/p>\n

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Outside View
\n<\/strong>An outside view of Cook County assessments comes from the studies that the Department of Revenue conducts to determine the multiplier.\u00a0 Each year the Department compares sales of properties to the previous year\u2019s assessed value in a sales ratio study, computes for arms-length sales the ratio of assessed value to sales price, arrays those ratios from high to low and picks the middle (median) ratio.\u00a0 The Department\u2019s studies look backwards so that no assessor can get a lower multiplier by reassessing only property that has sold.\u00a0 For Cook County, the only county that classifies property, the department does the studies by major class of property.<\/p>\n

To calculate the multiplier the Department takes the median levels of assessment, adjusts for reassessments since the original study, computes a three-year average of the median levels of assessment, and divides that number into 33.3.<\/p>\n

For the 2020 multiplier the three-year median average levels of assessment calculated by the Department showed underassessments of:<\/p>\n