There has been much discussion this political season about a major study which reviewed the quality of residential property assessments in Cook County. The Civic Consulting Alliance, a not-for-profit public-private collaborative consulting group, was retained by the Cook County Assessor’s office and the Cook County Board in October 2017 to review, evaluate and make recommendations regarding methodologies of assessing residential properties in Cook County (“the Study”). As far as this firm is aware, this article is the first substantive review of the Study by a law firm, and of how the implementation of the Study might affect the individual taxpayer.
The Study was limited to review of assessments of residential properties only and did not make any evaluations or recommendations related to commercial property assessments, industrial property assessments, or greater than 6 unit apartment building assessments. The Study also did not focus on exemptions or final tax bills. It focused on only four goals; a review of the uniformity of assessments of residential properties throughout Cook County, an evaluation of the timeliness of issuance of property tax bills, a determination of the compliance with statute governing assessments and a consideration of the transparency of the processes.
The Study found, in summary, that Cook County assessments as a whole are more regressive than industry standards; in-other-words, higher value homes in Cook County (valued approximately $200,000 or more) were assessed at lower amounts in relation to value than lower valued Cook County homes (valued lower than approximately $200,000). The Study recommended changes to correct the assessment imbalances and to more accurately assess all properties to “value.” The Study recommended policies to severely restrict the number of properties filing appeal. The Study also found timeliness in the issuance of tax bills saved taxpayers money, the assessments were in compliance with statutes, and the final evaluation of transparency was not concluded.
It is this writer’s belief that such “corrections” would result in the significant increase in assessments for the majority of Cook County properties worth $250,000 or more, and minimal reductions in assessments for lower valued properties. Because most township tax rates outside of Chicago are calculated at the local tax district level based on the property mix at that local level, and because most such local districts do not have widely varying qualities of property mixes, this writer does not believe there will be significant tax savings for lower valued non Chicago properties. The impact of the assessment increases on individual properties will be felt, but minimized, by the tax rate calculations. Because Chicago applies the same underlying tax rate to most of Chicago, and there is a wide variety of property mixes throughout Chicago, the corresponding changes in assessments will be directly felt by most Chicago properties (i.e.- the higher valued properties receiving significantly higher assessments will experience significantly higher taxes, while the lower valued propertied will receive minimal relief).
Why Assessments Matter
The Study explained the relationship of assessments to tax bills. Property tax bills are calculated by multiplying individual property assessments by the County wide multiplier (deducting exemptions, if any) and the taxing district rate. As the Study notes, on an individual property basis, “those with higher value properties pay more, those with lower value properties pay less…”
However, the Study focused on the systematic impact of property assessments to determine the “fairness” of the assessments. “[I]f properties are not assessed uniformily; some property owners pay more than their fair share of property taxes and some pay correspondingly less. If, for example, low-value homes are overvalued and high-value homes are undervalued, those with lower-value homes pay more than their fair share and those with higher-value homes pay less than their fair share… [A] regressive tax system.” The Study stated the goal of county wide assessments should be that “properties of different values be assessed at the same ratio with as little progressivity or regressively as possible.”
Summary of Findings as to Quality of Assessment Practice Only
The Study established a target range of variability of values among similar homes based on best industry standards, recommending proportionate increases in assessments when comparing proportionate increases in home values, and a comparison of assessments to value ratios. The Study considered each variable range within each of the three assessment districts (North – all suburban properties located north of North Avenue; South – all suburban properties located south of North Avenue; and Chicago – all properties located within the Chicago city limit boundaries).
As to variability of assessments among similar homes, the Study found the North and the South assessment districts were within the acceptable target range of value. The Chicago assessment district was clearly out of the range of acceptableness. Although two out of the assessment districts were within the acceptable target range, Chicago’s disproportionate amount of properties within the County, and its wide range of variability of homes, drove the County as a whole outside the acceptable limits.
A further review by the Study concluded that in all assessment districts, the lower valued homes had a greater assessment to value than higher valued homes. The Study found that lower valued homes in the North assessment district paid 6% more as an average for their taxes in relation to value than the higher priced homes; in the South assessment district, the lower valued homes paid 10% more to value; and in Chicago, the differential was 24%.
[Editorial note: It is this writer’s conclusion that a large part of the Chicago differential was driven by the inclusion of properties impacted by the rampant mortgage fraud and foreclosure crisis of the post 2008 period that inordinately affected the South and West sides of Chicago. Until the impact of same is finally normalized, which this writer asserts is still not finalized, price-related bias differential is expected and will remain.]
The Study also concluded that higher valued properties owners appealed their assessments more frequently than lower valued property owners. “There is a strong correlation between the value of the home and the propensity to appeal.” Between 2014 and 2016, over 25% of all residential PINs were appealed on. Owners of properties valued between $500,000 to $1,000,000 were 1.875 times more likely to file appeals than those less than $500,000; those with homes valued over $1,000,000 were 2.375 times more likely to file. Up to 64% of all properties appealed were granted reductions. This firm calculates approximately 85% of all residential properties filed by this office each year receive some assessment reduction as a result of the appeal. Higher valued properties are not denied relief on their individual appeals because the system as a whole is regressive.
Study recommendations and how they may affect you
The Study recommended adjusting and correcting the Assessor’s modeling methods to correct systematic errors. This writer estimates these “corrections” would result in 15%-25% higher than otherwise expected proposed assessments on properties valued from approximately $250,000 to $750,000, and assessments up to 40% higher than otherwise expected on properties valued greater than $750,000. This writer estimates minimal downward adjustment for properties between $100,000 and $250,000 in value, the taxable savings of less than $400 per year on average for properties valued $100,000 or less.
The Study recommends reducing the number of appeals in general, and specifically reducing the number of appeals granted uniformity relief at the Assessor’s office. However, uniformity is a constitutional standard and the right to appeal is statutorily granted. Appeals cannot be limited unless they are restricted by statue. The denial of uniformity appeals would violate the Illinois Constitution. It is this writer’s opinion that citizen grievances through appeals should never be limited by edict, and the determination by any agency to prepare to deny appeal relief based on a predetermined position of denial is always wrong.
The Study also proposes something this writer has advocated for consistently over the last 27 years; namely, the one-time county wide update of property characteristics, and the accurate on-going monitoring of data thereafter. This would require a significant outlay of up-front costs by the County, but should result in a correction of comparison property disparities that occur because of the County’s lack of knowledge and/or faulty records, and should significantly reduce the complaints about neighbors “getting away” with something because records are inaccurate. In any computer modeling method, you improve the quality of the output if you improve the quality of the input. There is no way to calculate the benefit of the improved faith of the citizenry with the system.
The Political Ramifications – Implementation Expectations
While both candidates in the 2018 Cook County Assessor’s race have stated they will implement the recommendations of the Study, the speed and methodologies of the implementations are expected to be completely different from the other.
Joseph Berrios is expected to correct errors found in his current model of assessment, and to implement the “high end” increases more gradually. He is also expected to resist efforts to severely limit the right to appeal.
Fritz Kaegi has indicated he intends to eliminate the current modeling methods in their entirety, and to institute the application of the counter proposed assessment model. This will cause an immediate increase in assessments to the “high end” properties. The restriction of appeal rights will take longer and may require legislation at the State level, but he is expected to reject most appeals based on the assumption that the proposed assessment is “right in the first place,” and that an appeal is unnecessary to check or correct initially proposed assessments.
Gary H. Smith
Gary H. Smith
Law Offices of Gary H. Smith, P.C.
205 W. Wacker Drive
Chicago, Il 60606