Judging from the outcry, the little envelopes mailed last month from the Cook County assessor to many north- and northwest-side residents may spark a revolution. They contained the results of the quadrennial reassessment, which show that the sales values of north- and northwest-side properties have soared by as much as 1,000 percent since 1984. That means property owners can expect a healthy rise in the amount of property tax they’ll have to pay when the bills are mailed next summer.
The reassessments are bad news for these property owners and their tenants, but the long-term consequences may be worse for the city. The residents are angry, and they’re starting to organize. Lowering property taxes would cut severely into one of the city’s few sources of revenue. But ready or not, city officials face the possibility of a property-tax revolt.
“December 16 happens to be a very important day to me,” Patrick Quinn told a recent meeting of the Old Town Chamber of Commerce. The former member of the Cook County Board of (Tax) Appeals told approximately 200 north-side property owners: “It’s my birthday; it’s my son’s birthday; it’s my father-in-law’s birthday. Most important, it’s the anniversary of the Boston Tea Party. That’s how the whole thing started.”
Clutching the dreaded reassessment statements, his listeners rose one by one to vent their rage. By meeting’s end, most had endorsed his call for a freeze on tax levies, which, if adopted, would send city and state officials madly scrambling for funds.
“We’re putting together an alliance of business and home owners in the area,” said chamber president Ferd Isserman. “That’s an alliance we’ve never really had in this area before. It’s a combination no politician can easily ignore.”
Despite the sincerity of Isserman and other chamber members, it’s hard to feel sorry for some of the protesters, particularly those who act as though the property tax is a burden they alone must bear. (In contrast, south-side property owners, whose reassessments last year provided enough new revenue to prevent a citywide rate hike, accepted their reassessments with a lot less bellyaching.) Some of the loudest blubberers are developers who, having made enormous profits as a result of local, state, and federal subsidies, complain that government doesn’t do enough for them. They’re also inconsistent. They brag about having transformed the north side from a slum, and then whine that their property’s been overassessed. Without a trace of shame, they argue that rising real estate prices may “drive them from the community”–a complaint the same people scorn when it’s advanced by factory owners or low-income housing activists. No doubt many of them voted for Ronald Reagan, whose federal tax policies have severely aggravated the city’s dependency on the property tax.
Nevertheless, there’s some merit to the argument against the property tax; it has its flaws. For starters, it’s regressive, which means that it’s not levied according to one’s ability to pay. Instead, it is calculated by a bewildering formula that leaves most people perplexed. There is, for instance, the property tax rate (the amount at which people are taxed), the property tax levy (the total pool of money the taxing body hopes to raise from the tax), the fair market value, the assessed value, and the equalization factor. An expert explains:
“The fair market value is what we think your property would command on the market,” says Dick Vanecko, director of community relations for the Cook County assessor. “That’s not a number we determine out of air. We study the real estate market. We analyze sales.
“The assessed value is the portion of your property on which you are taxed. Home owners, for instance, are taxed on 16 percent of their property’s fair market value. Large apartments are taxed on 33 percent, industrial properties 37 percent, and commercial ones on 38.5 percent. So, if you have a home that’s assessed at $100,000, you would pay taxes on 16 percent of that amount, or $16,000.”
And the equalization factor?
“That’s the result of multiplying the raw assessed value by the multiplier. The multiplier is the state’s attempt to equalize assessments throughout Illinois. The real concerns are the schools. The state distributes school aid based on a school district’s wealth. They measure wealth by property value. So a school district whose property is underassessed will get more state aid than it deserves. The state, in effect, double-checks assessments and then uses the multiplier to adjust for low assessments.”
Returning to our example, if you multiply the multiplier (which was 1.8916 last year) by your property’s taxable value ($16,000) you can determine its equalized assessed value (in this case $30,265.60). Multiply that number by the tax rate (which was 0.0966 last year) and you have a tax bill of $2,923.60.
“I’d like to add that the county assessor is not a taxing body,” says Vanecko. “Again, we simply act as appraisers, and we make our determination of value according to what the market tells us.”
For the last few years, north-side real estate has shouted one word: boom. It does not matter whether the boom is fueled by speculation or demand. Property is at a premium and demand–for the moment, anyway is brisk. Tawdry townhouses in Lincoln Park sell as high as $500,000. Across the Chicago River, crumbling mansions go for $350,000 in seedy sections of Wicker Park. New homes, built almost under the elevated tracks, fetch $300,000.
Of course, such prices do not reflect the income level of all residents in the neighborhood. Many old-timers bought their property years ago when it was much less expensive. They probably could not afford to buy their homes at the prices they would command today. In a sense, their property is an illusory source of wealth. It offers them no added income, and yet they are expected to pay higher taxes. If taxes go higher, they may have no choice but to sell.
“The assessed value on our single-family home was $6,200 in 1983,” proclaimed one woman at the chamber meeting. “Now it’s $26,960. That’s a 450 percent increase. How can I afford that? People read in the paper about some big million-dollar real estate deal on the north side and they think all our property is hot. Yeah, our homes are worth more now than when we paid for them. But the only way we benefit is if we sell. And we don’t want to sell. We want to stay. This neighborhood is desirable because people came in here and fixed it up to keep it from being a slum. We don’t want to sell our homes for a fortune. We want to live here. But we’re being taxed out of here. We’re being taxed out of our own neighborhood!”
Her lament was echoed by dozens of residents at the chamber meeting.
“The way I figure it, this reassessment will cost the same as if I hired another employee at $1,500 a month,” says Dan O’Donnell, owner of Armitage Hardware, at 925 W. Armitage. “Our assessment went up from $330,000 to $1.4 million. We have some tenants in there, but we can’t pass the increase on to them. They can’t afford it; that wouldn’t be fair.”
“Not all of the renters in this area have lots of money,” says Quinn. “A lot of them are old people on fixed incomes. They’ve lived there for years. They’re good tenants. Landlords don’t want to kick them out, yet they may be taxed out.”
Vanecko acknowledges that his office sometimes makes mistakes. But residents who feel overassessed can appeal to the assessor of the Cook County Board of (Tax) Appeals.
“The only fair system is one in which assessments are uniform,” says Quinn, who recently wrote a book called How to Appeal Your Property Taxes Without a Lawyer. “You have condo owners who bought at $100,000; they’re being assessed at $110,000 even though the property may only be now worth $90,000. They should see what’s the most recent sales prices for similar property, and make an appeal.”
A long-term solution, argues Quinn, is a cold-turkey freeze on the tax levy. “The property tax is out of control,” he says. “It’s not written in granite that property taxes have to rise with increases in property values. Government can always decrease the levy. That is, if assessments go up, they could reduce the tax rate. But they never do that. Instead, government has adopted a levy that’s based on what they can wring out of the property-tax system, not on what they need. They want to milk property taxes for all they can get. It’s a very manipulative system that hurts the middle class and drives people out of the city.”
Most city officials vehemently deny these accusations. At the very least, they note that Chicago is not alone. Property taxes are on the rise in towns and suburbs throughout the metropolitan area, including in Du Page County, where officials have a reputation for being tightfisted antigovernment zealots.
Like the city, the suburbs have to pave streets, collect garbage, run schools, fund pension plans, and pay teachers, fire fighters, and police. In other words, it costs money to operate local government. And as long as the federal government denies money to other programs in favor of the military, the burden of that finance falls more and more on local taxpayers.
In the past eight years, the Reagan administration has slashed federal housing, welfare, education, and revenue-sharing programs. Moreover, President Reagan, as well as president-elect George Bush, won the support of a majority of voters (including, no doubt, many on the north and northwest sides) by vowing to resist any hike in the income tax, which is the most progressive of all taxes because it is levied according to one’s ability to pay. Cities and towns have attempted to fill the void with a host of so-called user fees, like taxes on cigarettes. But more and more they must rely on the property tax. About $8 billion is raised in Illinois each year by the property tax, says Quinn, a greater yield than the sales and income taxes combined.
“The property tax is regressive and heartless, but it’s very dependable,” says Quinn. “About 98 percent of the property tax is collected. It’s a tax that’s always there. It’s stable. The bond houses in New York love it. So the city tends to say that instead of doing the hard job of collecting parking tickets, we’ll go after property taxes. It’s a lazy way of doing things.”
“The real issue with property taxes isn’t reassessment, it’s the spending levels of local government,” says Vanecko. “My boss [Cook County Assessor Thomas Hynes] proposed that any increase in property taxes of 15 percent or more would require voter approval through a referendum.”
Hynes’s proposal was ignored, in part because public officials do not want to stem a flourishing revenue stream. But Quinn may try to slip around the elected officials with another of the voter-led referenda for which he is known.
“I would like to see a law that would protect property owners from having to pay a tax rate of more than 2 percent of their assessed property value,” says Quinn. “That would force government officials to curb waste and live within their means.”
Quinn says he will circulate petitions to have what he calls “Proposition Two” placed on the ballot in 1990. For the moment, he has proposed an advisory referendum in which voters in north lakefront wards 42 and 43 would be asked whether Illinois should “reduce its reliance on the property tax by restricting the annual property-tax levy increases of local governments and by imposing reasonable limitations on the amount of annual property taxes that can be collected from taxpayers.”
“There’s a mayoral election next year,” says Quinn. “The lakefront will be a swing district. Voters there should put pressure on the mayoral candidates and force them to spell out their positions on stabilizing taxes.”
What Quinn does not say is that tax-levy limits often backfire. The tax relief won ten years ago by Californians, for instance, came at the expense of education, road repairs, and much-needed public-works projects.
Nevertheless, many residents at the chamber of commerce meeting vowed to circulate petitions so Quinn’s question could be on the ballot during April’s special mayoral election. Apparently, the game plan is to act now and worry about the consequences later.
“I have the feeling that this could be the start of something big,” says Isserman. “The politicians in this city should realize that we mean business.”
Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.