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October Surprise

Why your property taxes may be going up even as your property loses value.

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A few hours after my property tax bill arrived in the mail last week, I took the dog for a walk and bumped into a neighbor. "My taxes went up again," he complained. "I thought they were going down."

Why in the world would you think that? I asked.

Because, he replied, Mayor Daley said he was holding the line on property taxes, the state increased the home owner's exemption, and the papers are filled with stories about the failing housing market. If my property's worth less, I'll pay less in taxes—right?

Wrong.

I'll take this one point at a time. Yes, Mayor Daley pledged to hold the line on property taxes—he's been saying that for the last several months. But this year's tax bill is paying for last year's budget, which raised property taxes by about $83 million, so your benefit from his recent pledge will come next year, if it comes at all. And it probably won't, because the mayor's not really freezing taxes as long as he keeps creating new tax increment financing districts—and, with the City Council's consent, he's averaging a new one each month. Every time the mayor creates another TIF district, the net effect is an increase in property taxes—funds collected in the district that would have gone to the schools, parks, and other public bodies instead end up in a TIF account, and these bodies have to raise their tax rates to make up the difference.

Let's move on to my neighbor's second point. Yes, in 2007, after months of wrangling, the state legislature passed a bill that hiked the home owner's exemption, and Governor Blagojevich signed it into law. The law was a big deal because the property tax you pay is essentially determined by multiplying the tax rate by the assessed value of your home and then subtracting the home owner's exemption. In other words, the higher the exemption the less you pay.

But at the insistence of House speaker Michael Madigan, the relief provided in the law was watered down. Cook County assessor James Houlihan and Senate president Emil Jones wanted to raise the exemption to $40,000. Madigan successfully insisted that it only be bumped up to $33,000, which is what was applied to your last tax bill. It fell to $26,000 for this tax bill, and next year it'll drop to $20,000, the same as it was four years ago.

Madigan said he limited the exemption to make sure rich people in north-side mansions don't get too much of a property tax break. Of course, by limiting the home owner's exemption he essentially gave a tax break to commercial property owners, including the big boys and girls downtown. That's because you have to think of our property tax levy—that is, all the money our governments spend—as a big barrel the city and county fill with cash. The more the home owners put in, the less the commercial property owners have to put in. The government doesn't really care who pays what so much as the money fills the barrel. But if it makes you feel any better, the commercial property owners are complaining about their recent tax bills too.

So that brings us to the last point: the issue of your home's value. Yes, housing values have certainly fallen in the last several months—and they'll probably continue to drop into next year at least.

But your 2007 property taxes—the ones you're paying now—are based on an assessment done in 2006, when the housing market was still strong. The impact of the current bust won't be felt on tax bills until the next assessment, in 2009.

Besides, the value of your house doesn't have nearly as big an impact on your tax bill as people have been led to believe. Here's why: the most important part of the equation is how much government spends—that good old levy. The higher the levy, the higher the tax bill. If the city and county want to spend, oh, $2 million, and they have $20 million worth of property to tax, then the tax rate will be set at 10 percent. If the property falls in value to $10 million, government will just raise the rate to 20 percent. The bottom line: by hook or by crook they're still collecting their $2 million. You'll only pay lower taxes if the city and county slash their budgets drastically while also creating new ways to raise cash. And I'm guessing that's not going to happen anytime soon.

The Beginning and End of My Independent Political Career

Property tax activist Andrea Raila called me the other day with an interesting suggestion: how about a new career in politics?

Specifically, she thinks I should consider running as a delegate for the state's constitutional convention. That way I could help rewrite the state's TIF legislation. "You know it needs to be reformed," she said.

That's true, but quite a few things would have to happen for me to get elected.

First, of course, the state would actually have to decide to hold a convention to rewrite its constitution—which will only happen if voters approve a referendum on the November 4 ballot.

Then I'd have to put together nominating petitions with signatures from voters in my district, probably by knocking on doors. But I'm not sure I'm that interested in meeting that many people.

Still, let's say I got my friends and family to gather the signatures. Undoubtedly the regulars in my district—the feudal lords who report to Mayor Daley—would challenge the validity of my petitions. They'd file complaints with the board of elections, claiming to have found some kind of violation of our immensely complicated election code, which, as best as I can figure, was created precisely to keep reformer types from running.

If I were stubborn—not that I am—and hired a good lawyer to fight the charges, we'd have to go before an election hearing officer who typically has ties to Mayor Daley or one of his allies, and chances are good that I, like dozens of local candidates in recent election cycles, would be bounced from the ballot, ending my campaign.

If, by some turn of events, I won the right to stay on the ballot, I'd end up spending so much in legal fees that I wouldn't have much money left to send out flyers. In the meantime, my opponent, backed by Daley and deep-pocketed incumbents, would be able to pay for glossy literature promoting him as a caring environmentalist who hates taxes.

But maybe I'd ignore the flyers and walk all over the district, shaking hands and hammering at the misuse of TIFs. My opponent would go negative, hitting me with a second mailing blaming me for Todd Stroger, even though his ally Mayor Daley is largely to blame for Stroger's installation as county board president. And then I'd be through, because as everyone on the north side apparently believes, Stroger is responsible for all that's wrong with local politics.

There is, of course, one other option. I could strike a deal with some quasi-independent alderman, commissioner, or legislator who talks like a reformer but rarely crosses the mayor. He could have his folks circulate my petitions and his lawyers fend off the election board challenge. Maybe he could even pay for glossy flyers showing me bashing Stroger.... My God—I could win this thing!

The only problem there is that once in office I'd secretly owe my soul to the Machine—or at least my sponsor—and so there would be no way I'd push for TIF reform. Because as we all know, Chicago ain't ready for reform. Especially on TIFs.v

Care to comment? Find this column at chicagoreader.com. And for more on politics, see our blog Clout City.

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