Why homeowners might be losers in property tax fight
By Cass Cliattand Shruti Daté Daily Herald Staff Writers
Posted on October 01, 2001
Cook County, Illinois

Shocked by sky-high increases in property assessments and anxious about tax bills that won't come until next year, Cook County homeowners are clamoring for relief.

Don't hold your breath, say some county and school officials who fear that residents haven't seen anything yet.

The Property Tax Appeal Board, the newest piece in the county's complicated patchwork of tax procedures, has been slashing assessments for some commercial and industrial property owners.

If business properties pay less in taxes, officials say, that leaves only Joe(and Jane Taxpayer to make up the difference.

"Somebody's going to have to pick that up, and homeowners are going to have to eat it," one township assessor said.

Cook County Assessor James Houlihan said many people don't realize how much is at stake.

"If you follow PTAB's suggestion, we're seeing for homeowners upwards of over 40 percent additional increase in property taxes," Houlihan said. "That's right - on top of the triennial increases."

The state's attorney's office, fighting what some call a "cataclysmic" threat to the county's tax base, is seeking to overturn reductions granted by the appeal board.

If the courts back the appeal board, it could set the stage for a shift in the county's tax burden that would reach deep into the pockets of homeowners.

The state's attorney has cited representative cases where the Property Tax Appeal Board cut the 1997 property assessments for six industrial and commercial properties from a total of $8.5 million to $4.4(million, a reduction of almost 50(percent.

That's just six businesses among the thousands in the county - and the school districts and other taxing bodies that are home to those businesses already might have to refund to them almost $1 million.

"We're dealing with very significant dollars here," said Thomas Jaconetty, chief deputy commissioner for Cook County Board of Review. "It could reduce the income stream by nearly half on some of these large properties and at minimum about a third, so it has very serious fiscal implications."

If business properties contribute less to the pot, homeowners may be left holding the bag.

"Who stands to lose the most?" Jaconetty said. "Obviously a change in the revenue stream impacts the taxing bodies that rely on their revenue. ... And I think the consensus of opinion would be a shift onto the residential class."

The appeal board

The Property Tax Appeal Board is meant to serve as a "poor man's court," where homeowners without the means to hire lawyers can appeal their property assessments.

But since the appeal board took effect in Cook County about four years ago, more than two-thirds of its caseload here includes commercial and industrial appeals.

"It's become quite the thing to do ... because they know they will get some type of relief," said Donna Baiocchi, executive director of Education Research Development.

ED-RED represents more than 110 school districts in suburban Cook County and fiercely opposes the reductions the appeal board has granted to area businesses.

"What we don't have a handle on is at what levels they'll continue (to appeal)," said Robert Strande, Palatine Township Elementary District 15's assistant superintendent for business. "We would hope they would slow down, but there is no real indication that they will."

Businesses say their appeals are well-founded.

"The way taxes are done in Cook County, the businesses are paying two-thirds of what the residents are paying," said Janet Hansen, president of the Greater Palatine Chamber of Commerce.

"This is an issue where Cook County is losing businesses to the collar counties," Hansen said. "It's a good thing for businesses they can get their (Cook County) tax dollars reduced."

Baiocchi argues that the appeal board has lowered taxes for the six businesses by misapplying a state tax law, which could "throw the whole assessment process into chaos" and force such taxing bodies as schools, park districts and libraries to turn to residents to pick up the slack.

The county state's attorney apparently agrees with Baiocchi, and on Sept. 5 it filed suit to overturn six reductions approved by the appeal board. The lawsuit also claims the board is misinterpreting state law.

"I think the most important issue is the reliable financing of schools and local government," county assessor Houlihan said.

Lawyers will file briefs supporting the state's attorney's case on behalf of districts including Barrington Area Unit District 220, Elgin Area School District U-46, Maine Township High School District 207, Northwest Suburban High School District 214, Schaumburg Township Elementary District 54, Palatine-Schaumburg High School District 211 and District 15.

These districts support the state's attorney's office because they might have to refund millions of dollars if these appeals continue.

The state's attorney's office expects a resolution in the pending court case to take a year.

"Between now and that happening, taxpayers of any stripe, particularly the nonresidential, would be quite foolish not to appeal" to the appeal board, said Maureen Murphy, a commissioner with another part of the tax process, the Board of Review. "A reduction on any level is going to have a corresponding effect that will be felt by the taxing body, and have an effect by shifting it on the homeowner."

The case in court

At issue is a provision of the Illinois Constitution that says the highest assessment rate in a county can be no greater than 2¨ times the lowest rate.

In Cook County, commercial properties are supposed to be assessed at 36 percent of their market value, industrial properties at 38 percent and residential properties at 16 percent of market value.

The Property Tax Appeal Board, operating in most of Illinois since 1967 but only since 1997 in Cook County, has reduced some business property assessments to 25(percent from 36 percent, basing its decisions on figures and conclusions offered by the state revenue department.

The revenue department says that because Cook County undervalues property, the county's residential properties are, in practice, assessed at only 10 percent of their market value, instead of 16 percent.

Do the math using that rationale, and you'll find that 2æ¨ times the residential assessment level of 10(percent is 25 percent.

"We've used the department figures seeing that it would be uniform throughout the state," appeal board Executive Director James W. Chipman said.

The appeal board relies on revenue department figures to find assessment levels for all 101 of Illinois' other counties and therefore uses the same standard for Cook County.

The appeals board asserts that commercial and industrial property in Cook County should not be assessed at more than that level.

County officials claim this is a dangerous situation.

"There have been two big cataclysmic decisions made by the Property Tax Appeal Board," said the Board of Review's Murphy, citing the reduction of two property assessments based on the market value and the 2¨-times rule. The two appeals had earlier been denied by Murphy's board.

"If Cook County disagrees, then they should expedite (the case) and appeal it to the highest court because we have opened the Property Tax Appeal Board to review," she said.

The Cook County assessor's office maintains that it assesses residential properties at 16 percent.

"We take a conservative approach to assessing market value," said Adam Downing, spokesman for the Cook County assessor.

Assessor Houlihan himself said the appeal board "compares apples to oranges."

"If the PTAB decisions were followed, there would be a substantial shift on the homeowners," he said, "and I would say substantial and inappropriate."

But there is disagreement even within the county. Murphy balked at the idea the county assesses residential property at 16 percent of market value.

"That's not true," she said. "We oftentimes, both at the assessor's office and at the board of review, have brought new purchases to 10(percent. That was policy before I got here, and it's a policy now."

The Board of Review uses the figures from the revenue department to decide appeals, just as the appeal board does, Murphy said.

Burden still shifts

Whether the state's attorney wins or loses its court case, the tax burden is going to shift toward homeowners, Murphy said.

"It is already shifting and is continuing to shift as we erode our retention of businesses and as we continue to lose businesses in Cook County," Murphy said.

Despite receiving a reduced assessment, one of the businesses named in the pending court case complained that Cook County's property tax structure caters to homeowners.

"It is a terrible political thing that we all live with in that the businesses don't vote for politicians, the homeowners do," said Robert Klairmont, vice president of Imperial Realty Co.

"I don't think it's good for the long-term tax base or economics of Cook County in Illinois, because businesses don't want to locate here," Klairmont said.

The debate and potential fallout worries local taxing bodies, especially schools, because they need property taxes to pay their bills and run their programs, and in the short term they do not plan to lower their levies.

So, a school district would still get the same amount of money from its tax base but residents would pay a higher share.

"It just shifts the burden," said Dave Torres, Palatine-Schaumburg High School District 211 assistant superintendent for business services. "We simply want to make sure they (business properties) are paying their fair share."

Another factor for local taxing bodies is fear of the unknown and taxpayer anger.

Arlington Heights Elementary District 25's assistant superintendent for business says there will be ill feelings among voters.

"Unfortunately, because most of this (refund) money is going to commercial and industrial businesses, the homeowners won't understand," Mary Kalou said.

"Their bills will be going up, so even though we say we don't have enough money, they'll say, 'We're paying more,' and it's because of the commercial and the industrial."

ED-RED's Baiocchi warned that local children could end up suffering if these appeals continue.

"We need a consistent reliable source of funding. We do not have that anymore," Baiocchi said. "Programs will be cut, teaching staff will be cut because you won't have money to pay for them."

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