The bad news arrived in the mail the other day: my property taxes went up.
Between this second installment of my 2008 tax bill and the one I received in March I’m on the hook for almost $7,000 in property taxes this year, about $850 more than I paid for 2007. Over the last five years the annual tax bill on my north side home has gone up 101 percent.
Just so you know, my income hasn’t kept pace.
And of course I’m not the only one being asked to pay more. Folks on the west and south sides are facing even steeper increases. It’s what the Cook County bean counters call “tax-scream time” again. That’s when folks all over the city get their tax bills and start screaming.”
It’s easy to see why they might. For the last two years, Mayor Daley has been telling them that the city isn’t raising property taxes. Or as he put it in this year’s budget speech: “With so many people struggling, this isn’t the time to ask them to pay more.”
So why do our tax bills keep going up?
Ah, great question. And the answer, my fellow Chicagoans, is that the mayor you keep reelecting is not telling you the whole truth about property taxes. I know, I know—I’m shocked too.
In essence, the mayor is claiming that the city is receiving less of your property tax money than it actually is. Each October the mayor and his staff propose a budget to the City Council, which passes it more or less intact the next month. This budget includes an estimate of how much in property taxes the city will spend in the coming year. Last November it projected that the city would spend $796.9 million in property taxes in 2009: $345.5 million for pensions for police officers and firefighters, $367.9 to pay down long-term debt, and $83.4 million on the libraries. This figure—the total amount of property tax money a government body requires—is known as its levy.
The following year, usually in the late summer or fall, the county officially tallies the “extension,” or the amount of property tax dollars that the city has spent in reality. In 2009 the city’s extension was $833.9 million—the money for pensions, debt, and libraries the city asked for last fall, plus another chunk of change the mayor didn’t talk about, $37 million collected and then turned over to the City Colleges. It’s true that, as the mayor said, the city ended up with $796.9 million in property tax money; it’s not true that taxpayers only had to cough up that much. In fact, they paid out 5 percent more than the mayor had promised a year earlier.
The mayor and his administration are able to obscure portions of the city’s taxing and spending policies because no one except a few cloutless geeks ever bothers to compare the city’s 600-page line-item budget proposal (available in unwieldy PDF format at an unwieldy URL on the city’s Web site) with the county’s official extension over at county clerk David Orr’s site (cookctyclerk.com).
But those records are only part of the story. The real budget buster, which most people still don’t know anything about, is the tax increment financing program, which was designed to fight blight in poor communities but winds up subsidizing, among other things, corporate tenants and their landlords in the Loop. In 2007, the last annual accounting we had, the TIFs took in $550 million. That’s all property tax money, every cent, even if it doesn’t go into the city’s general coffers.
The mayor’s official line—which you can read for yourself in “The ABCs of TIF” on the Department of Community Development Web site—is that TIFs don’t affect property taxes. But they do. When the council creates a TIF district, for the next 24 years any new tax revenue generated in that district gets diverted into a special fund, controlled largely by the mayor and subject to little public oversight. The control he exercises over these funds increases his sway over aldermen, who want to pay for projects in their wards but can’t find the money in the city’s regular budget. (For more on how this works, see my recent cover story with Mick Dumke, “The Shadow Budget.”)
Then any time the schools, parks, county, and other taxing bodies need more money—and they always do, since their budgets continue to grow—they must raise their levies to compensate for their inability to generate more revenue out of these districts.
Here’s another way to look at it: On top of the money taxpayers are already sending to the city, schools, parks, and county, TIFs ensure they have to kick in another half a billion bucks a year. Mayor Daley gets the extra money while the other bodies do the taxing.
We won’t know for another year how many TIF dollars the city collected in 2009. But if $550 million is in the ballpark—and if anything, it’s probably on the low side, since the TIF take historically goes up each year—then Mayor Daley will have compelled taxpayers to send a total of nearly $1.4 billion in property taxes into the accounts of the city and the TIF districts combined in 2009. In short, citizens will fork over almost twice as much as he said they’d have to when he presented the city’s official budget with promises of holding the line on taxes.
Sooner or later all of this is going to crash, because the taxing bodies depend on taxes that citizens are having a harder and harder time figuring out how to pay. But if the mayor’s lucky, that won’t happen till he’s out of office.
Part of the reason he gets away with this is that he keeps the TIF take a secret. It’s not included in the budget that the City Council approves in November, and it’s not itemized on property tax bills, which lie, even if you’re in a TIF district, by telling you that TIFs get nothing at all.
As we revealed in “The Shadow Budget,” the city has a separate itemized budget for the hundreds of millions of dollars it spends each year out of the TIFs. Aldermen get to look at the portion of that budget that’s planned for projects in their wards, but none gets to see the whole picture, and the public isn’t privy to it at all: when we filed a Freedom of Information Act request last month asking Daley administration officials to provide the complete document for 2009, they refused.
Back in 2006, county board commissioner Mike Quigley got the TIF bug. He assigned two bright young staffers, Jeremy Thompson and Jason Liechty, to study the program. They wrote a report, “A Tale of Two Cities” (PDF), that among other things urged the county to include details on tax bills about how much money the TIFs were receiving.
On September 28, 2006, the day the county board was scheduled to vote on Quigley’s proposal, Mayor Daley sent over aldermen Walter Burnett, Helen Shiller, and Patrick O’Connor as well as representatives from the schools, parks, and city to lobby against it. Presiding over the meeting was county board finance chair John Daley, the mayor’s brother. Quigley’s erstwhile reformer allies on the board deserted him: Larry Suffredin, the commissioner from Evanston, said too much information would only confuse voters. Forrest Claypool and Tony Peraica had been at the meeting, but they managed to be gone by the time the TIF vote came up.
Quigley vowed to bring the proposal back, but he never did. Earlier this year he got elected to Congress and went off to Washington, and in his absence no one on the county board is talking, at least not publicly, about reviving his idea.
And the property tax hit for home owners is probably going to get worse next year, because a new round of reassessments is likely to hike the tax burdens on neighborhoods where people are already struggling. At the same time the homeowner exemption is dropping, meaning residential property owners across the county will be asked to pay more.
This gets a little complicated, so bear with me. Your tax bill is roughly based on the assessment—which is linked to but not the same thing as the market value of your house—times the tax rate. The tax rate is what county officials determine everyone has to pay based on the levies local governments have requested. In other words, if they need $1,000, the county then figures out what tax rate will produce that amount.
Of course your property’s value doesn’t stay the same forever. So every three years the number crunchers with the Cook County assessor’s office reassess property values in the city. They completed the latest round in the city this year, and these assessments will come into play at this time in 2010.
So how can reassessments cause our taxes to go up if property values all over the city are falling? Because the key factor in all of this is how much government spends. The more it spends, the more taxes it consumes. Assessments may fall because the housing market is in the tank, but that doesn’t mean our local government entities will cut the amount of money they’re asking for. So the tax rates end up climbing. Your contribution to the total may rise or fall in relation to everyone else’s, but the bottom line is that somebody’s still got to pay for the government.
To shift the burden from home owners, the county has a tax break called the homeowner exemption. It doesn’t lessen government’s appetite for tax revenue; it just means that people who own properties they don’t live in, including commercial and industrial property, are responsible for more of the burden.
There’s a political ritual we play with the homeowner exemption in this state. Every few years, when it’s about to expire, activists go to Springfield to beg House speaker Michael Madigan for an extension. Madigan grudgingly goes along, and sometimes even claims to be a big supporter, but he never makes the exemption permanent.
And why is the speaker so tough on the homeowner exemption? Because Madigan loves it when people—any people—have to keep coming back to Springfield to bow and scrape and plead with him to pass some legislation.
Plus Madigan’s got a flourishing property-tax-appeal law practice on the side, and most of his clients are downtown commercial property owners—like the folks who own the John Hancock building, whose taxes actually fell this time around. The higher the homeowner exemption, the more Madigan’s commercial clients have to pay. The more they have to pay, the more they need the tax-appeal services Madigan’s firm offers.
And what is our fearless leader Mayor Daley doing while home owners are begging and pleading with Madigan? Usually he’s hiding under the table, pretending he doesn’t know what’s going on. Most legislators will tell you—on condition of anonymity, of course—that Daley is nowhere to be found when it comes to lobbying to extend or expand the homeowner exemption. That’s because property taxes are the oil that keeps his city running. No matter what he actually says, the last thing the mayor wants to do is turn off that spigot.
The exemption is set to drop next year, which means home owners are likely to get whacked. Somebody’s got to fund those TIFs.
Ben Joravsky discusses his column weekly with Dave Glowacz at mrradio.org/theworks.