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Do the Math

If housing prices are in the tank, and property taxes are based on property values, why are my property taxes going up?



My property tax bill arrived in the mail the other day. I sent my check in right away—it was the least I could do to thank Mayor Daley and Todd Stroger for giving me so much to write about over the years.

The bill was for $4,243.59, which was $639 more than what I paid in the first installment in February. (Property tax bills are paid in two installments.) The total for the year for my house—an 1890s frame three-bedroom in North Center—was $7,847, up 19 percent from the $6,553 I paid last year.

I'm not complaining. A 19 percent hike is nothing compared with the shellacking I took back in 2004, when my bill jumped 67 percent. That angered me so much that I began looking into who pays what and how that money's distributed—which led to six years, and counting, of near weekly tax increment financing stories. So you see, Mayor Daley, you could have saved yourself a whole lot of trouble by telling the boys at the county to go easy on me.

What I really want to talk about is not that my taxes went up 19 percent, but why my taxes went up 19 percent, even though home sales in my neighborhood don't indicate the real market value of my home has been rising.

The hike can't be blamed on a rise in county or city spending, which stayed relatively flat this year.

No, the answer is mainly that other people are paying less of the tax burden—so I wind up paying more.

Every three years the Cook County assessor reassesses a given property by examining the sale prices of comparable properties—and across Chicago, 2009 was one of those years. In theory, the assessor is estimating what your property would fetch if you put it on the market.

According to my tax bill, my property is worth $562,620—but that's way off base, according to Barb Head, a real estate agent and a property-tax activist who helped found the community group Tax Reform Action Coalition. Head, who's seen my house, says, "You'd probably get around $400,000, tops, if you put it on the market."

Last year the county said my property was worth $327,481. So the county seems to think my property rose in value by roughly $235,000—or 72 percent. That kind of increase in value isn't happening in my neighborhood or elsewhere in Chicago. (Median sales prices in North Center started and ended 2009 at about $400,000, according to Home prices in Chicago are down 2.9 percent from a year ago, according to Forbes, and in the Tribune this week an analyst said the local market was "flatlining" and "stuck in the mud.") What gives with the big rise in my market value?

The next line on the tax bill, the "assessment level," points to a partial answer. Property owners aren't taxed at the full value of their property. The tax rate is applied to only a fraction of the home's value, or what tax experts call its assessable value. In Cook County, homeowners are now taxed on 10 percent of their home's value.

For years the county taxed residential property at 16 percent, commercial property at 38 percent, and industrial property at 36 percent. Taxing different classes of property at different assessment levels is called the classification system of taxation.

The Illinois constitution allows all large counties to use classification, but Cook is the only one that does—every other county taxes all classes of property at the same assessment level. Cook County has used classification in various forms since the 1920s. The idea was that homeowners shouldn't have to pay at the same assessed level as entities that make money off their property—an idea vehemently supported by Mayor Richard J. Daley, the father of the current mayor, who reasoned that homeowners were voters who lived in Chicago, whereas owners of commercial and industrial property often lived in the suburbs.

Last year Cook County assessor Jim Houlihan worked with county commissioners John Daley (the mayor's brother) and Forrest Claypool to get the board to pass the so-called 10/25 ordinance, which set the assessment level for all residential property at 10 percent and all commercial and industrial property at 25 percent. "We were trying to reduce the classifications to make it easier to understand how the market value relates to assessed value," says Dana Marberry, a spokesman for the assessor.

But to offset the cut in the assessable rate to 10 percent, the assessor had to increase the market value of homes. Hence the hike in the value of my home on my tax bill.

"I'd say don't look at the property value that's on the bill," says Marberry. "Concentrate on the assessed value."

OK, let's try that: My assessed value is $56,262—or 10 percent of $562,620. But now the "equalizer," also known as the multiplier, comes into play.

The state equalization factor is yet another key component of property tax math. The equalizer for Cook County this year is 3.3701—a record high. My assessed value, $56,262, gets multiplied by that.

The equalizer ensures that the aggregate total of assessments in all Illinois counties is a third of fair market value. This is designed to spread the tax burden equally among taxpayers throughout the state, and so that state grants to local jurisdictions for education, transportation, and public assistance can be fairly distributed. It's also a check against local assessors trying to score points with taxpayers by underassessing them.

Which brings us to tax appeals. As you probably know, property owners can appeal their assessments to the Cook County Board of Review. Shame, shame on me—I didn't file one.

Why? Well, I'd like to blame it on my wife. But truth be told I just never got around to it—I was too busy writing all those TIF stories. As a result, my wife and I, like all the other chumps in the county who didn't appeal their assessments, wind up subsidizing the tax breaks the county gave to all the taxpayers who did.

The increases in market value led to a record number of appeals this year and "unprecedented relief" awarded to taxpayers, the Board of Review noted in a press release in September. The more assessments the Board of Review reduces, the more the multiplier must be increased to offset them. That means my taxes go up even more to pay for the reductions others get. So you see, folks, it truly is play or be played.

Maybe there's another reason the county bothers to tax us at 10 percent when it knows that the state's going to jack it up to 33 percent with the equalization factor. As Barb Head says, "They make it complicated to keep you stupid so you shut up and just pay."

According to Houlihan, there's a little more to it than that. He gave me a long, entertaining discourse on the connection between property taxes and politics, going back to the days of the first Mayor Daley, the gist of which was: Chicago politicians have always insisted on the classification system regardless of whether it made sense.

"Ben, you're right," said Houlihan, saying the words I love to hear. "We have improved the understandability of the system, but it's still difficult to understand."

Houlihan's stepping down in a month and will be replaced by former Board of Review commissioner Joseph Berrios—the same Joe Berrios I recommended you not vote for in the November 2 election. The guy I didn't endorse is now in charge of assessing the value of my property.

So let me take a moment to say: I didn't mean it, Joe.

Now, back to the math. After we multiply my assessed value by the state equalization factor, we arrive at the Equalized Assessed Value, or EAV, which in my case is $189,609.

But we're still not done. From that $189,609 I get to subtract the $20,000 homeowners' exemption, a tax break that Houlihan fought for on the grounds that ordinary homeowners were shouldering too much of the county tax burden.

Several times over the last few years, Houlihan and tax activists like Head have traveled to Springfield to grovel at the feet of house speaker Mike Madigan, pleading with him to raise or preserve the homeowners' exemption. And each time Madigan allowed the exemption to pass the General Assembly after making Houlihan and his allies sweat a lot. Generally the passage is celebrated at a press conference held by a beaming governor in the bungalow of some grateful citizen on the northwest or southwest side.

Maybe next time they can have the party at my house. That is, if I can still afford the taxes by then.

Anyway, after subtracting the homeowners' exemption I'm left with an assessable value of $169,609. I multiply that by my tax rate—the total rate for all the local governments collecting taxes on my property, which for me is 4.627—and, voila, I pay $7,897.

And where does it go? According to my bill, the beneficiaries include the Board of Education ($4,012.95), the City of Chicago ($1,504.43), the Park District ($500.35), the Metropolitan Water Reclamation District ($442.68), and the Chicago Community Colleges ($254.41). The county takes $751.37 for its work, which includes running its health facilities, the forest preserves, and the jail.

I'm sure they'll all spend it wisely.

Ben Joravsky discusses his reporting weekly with journalist Dave Glowacz at

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