On November 5, Roy Jones got the bad news from the Cook County treasurer's office: the property taxes on his west-side condo have doubled. Shorenstein Properties, owner of the John Hancock building, is having a much better month: the tax bill for the iconic skyscraper is down 14.6 percent from last year.
Jones (who asked me not to use his real name) lives in Garfield Park; he's got drug dealers on the corners and vacant lots up and down his block. The Hancock is, of course, the linchpin of the Magnificent Mile. How is it that a wealthy real estate consortium gets a break while Jones, a night watchman, pays more? The short answer is that Shorenstein knows how to play the system and Jones doesn't.
Think of the property tax coffers as a giant tank of gas that must be filled for government to run. Who puts in how much is largely based on property assessments conducted by the Cook County assessor's office every three years. Your property taxes are determined by multiplying the assessment by the tax rate. Since the tax rate's the same for everyone, the key to lowering your property taxes is lowering your assessment.
The state allows residential property owners to claim a home owner's deduction of as much as $40,000 a year. It's a good deal for residents, provided they get around to filing for the exemption—thousands do not. But it's a source of vexation to the owners of commercial and industrial buildings and apartment complexes, because what the home owners get out of paying they have to pony up instead.
Still, they're not exactly defenseless. Both residential and commercial property owners can appeal their assessments to the assessor's office and/or the Cook County Board of Review.
The board is one of those obscure bottom-of-the-ballot bodies elected by voters who for the most part have no idea whom they're voting for, much less what these officeholders do. Politics have a lot to do with who gets those spots. One commissioner, Larry Rogers, won thanks largely to support from Congressman Jesse Jackson Jr. Another, Joe Berrios, who also chairs the Cook County Democratic Party, rose through the ranks of Tom Keane's legendary 31st Ward organization. The third commissioner, Brendan Houlihan, ran with strong support from Cook County assessor James Houlihan ( the two are not related).
And then there are the lawyers who come before this board. One of them is state Democratic Party chair and house speaker Michael Madigan, whose firm, Madigan & Getzendanner, specializes in large downtown commercial properties—including the Hancock.
This year, after hearing the appeal from Madigan's firm, the board lowered the Hancock's assessment from roughly $64.8 million to $53.5 million, a cut that will save Shorenstein about $4.8 million over the next three years. (Its last bill was for $3.5 million.) For another Madigan client, the 61-story AT&T Building at 227 W. Monroe, the board cut the assessment from $116.5 million to $105 million; its owners figure to save about $4.9 million over the next three years. Madigan's firm also represents the Citicorp Center at 500 W. Madison, which it saved $3.4 million, and the Prudential Plaza, which it saved about $6 million.
With his law practice, Madigan may have more influence on Cook County property taxes than any politician in the state. He's the legislative power people must court when they want the home owner's exemption extended or raised. When he does use his influence to hike the home owner's exemption, his commercial business booms as clients like the Hancock and Prudential hire him to appeal their assessments. Meanwhile, grateful home owners give him and his cohorts their votes. Any way you look at it, Madigan wins.
Madigan spokesman Steve Brown says there's no conflict of interest here. "What's the conflict? I don't understand the conflict," he says. "I believe these people [on the board] do their jobs and that it stands on its own research."
Berrios says the board's not swayed by Madigan's clout and that he's ruled against the house speaker. "We take it case by case," he says.
In the matter of the Hancock building, Berrios points to a voluminous file filled with the testimony of appraisers arguing that in the aftermath of 9/11 the 100-story building is a pretty white elephant:its vacancy rate is at 20 percent, yet its insurance and security costs are $2 million a year and rising.
"They made their case," says Berrios. "It has nothing to do with Madigan."
Obviously Madigan's not the only lawyer around making a good living on tax appeals. Every year at budget time, 14th Ward alderman and City Council finance committee chair Ed Burke can be counted on to speechify on behalf of Chicago's beleaguered bungalow-belt dwellers. But Burke's own firm, Klafter & Burke, has filed hundreds of appeals over the years, for both commercial and residential clients. Whenever he wins one for a commercial client, he's effectively jacking up those bungalow dwellers' bills—and vice versa. For every winner in this game, there's a loser. The tank doesn't shrink just because one party's pumping less into it.
So are west-side home owners like Jones bearing the burden of tax breaks won by the Hancock building and other downtown clients? In Jones's case there are several additional factors contributing to the big jump. He bought his property two years ago, meaning he's not eligible for the $40,000 home owner's exemption. As gentrification creeps west from the United Center, the vacant lots on his block are appreciating, raising the value of his land. (The same thing is happening in south-side neighborhoods like Washington Park, where speculation has sent taxes soaring by upwards of 200 percent.) And perhaps, most important, neither he nor his fellow condominium owners filed an appeal to the board of review.
"He should have," says Berrios. "If he has a case, he should make it. He doesn't even have to hire Burke or Madigan," he adds with a laugh.
Of course, there's no guarantee that an appeal will be successful. And appeals have no impact on the greater problem: the city and county's dependence on taxes its property owners can't afford. Last year the board heard roughly 250,000 appeals—double the number filed in 2005.
In Jones's case his taxes went up from $1,622 to $3,244. They'll go up even higher in the coming years, given the mayor's new rate increase. Jones's daughter says he'll have to sell if taxes keep going up.
His only real hope for relief is to take Berrios's advice and play the game. As more and more people catch on in our dog-eat-dog system, it's play or be played.v
For more on politics, see our blog Clout City at chicagoreader.com.