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Get Ready for Sticker Shock

While lawmakers fiddle, a huge property tax hike awaits home owners.

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When word got out that in the 11th hour, just before its June 1 adjournment deadline, the Illinois house had voted to extend the home owner's exemption, friends started calling me to ask if it meant their property tax bills were going down.

My first response, having read the 143-page bill (which, by the way, is back in committee and still hasn't been approved by the state senate), was that I didn't know: it might as well have been written in Sanskrit. Since then I've been talking to assorted tax geeks and gurus, including some in the Cook County assessor's office, who've helped me decipher it.

The short answer? Maybe, but more likely not. If it passes--as it's expected to, though thanks to the missed deadline it will now require a three-fifths vote--taxpayers will get something of a break. But it won't be enough to soften the blow that's coming with August's tax bill. And good luck understanding how things will work under the new law. House speaker Michael Madigan, with Mayor Daley's blessing, has cooked up a system that's almost incomprehensible.

The longer explanation? A property tax bill is based on two basic variables: a property's assessment and the tax rate applied by the county, city, parks, and schools. If assessments go up, taxpayers can still avoid an increase in taxes if the city and the county and the schools and all the other taxing districts drop their tax rates. But over the last few years the rise in assessments has outpaced the decline in tax rates.

Politicians, particularly the mayor, have been blaming Cook County assessor James Houlihan, but it's not really his fault. By state law the assessor is required to conduct property reassessments every three years. After the city's last assessment, in 2006, property values climbed dramatically in many neighborhoods.

Property owners pay their taxes in two installments. The first bill this year, based on the 2003 assessment and mailed in February and March, gave no clue that the hammer was about to drop. The next bill, based on the new assessment and set to come out in August, will be much higher. Get ready for what property tax lawyers call sticker shock.

Suppose my first installment was $500. If reassessment increases my total property tax bill from $1,000 a year to $2,000 a year, I'm looking at an increase of 200 percent on my second installment, which will come in at $1,500 to make up the difference.

"People get that bill and they freak," says a county official. "They call us, they call their alderman. They scream and yell--'What the fuck?' Then they go into shock."

According to Houlihan, the worst sticker shock will hit Woodlawn, Englewood, Lawndale, East Garfield Park, and other poor communities on the edge of gentrifying areas, where residents find it hard to afford even the current rates.

So far the state has attempted to shelter home owners from rising assessments by hiking their exemption, a tax break for residential property owners that effectively lowers their property assessment. In 2003 the general assembly raised the exemption from $4,500 to $20,000. That increase was set to expire this year, meaning home owners were looking to get whacked on another front. But for months Madigan, Daley, and senate president Emil Jones have been dickering over what to do about the problem. In February the senate passed Senate Bill 13, which raised the exemption to $60,000. Then it languished in the house until just before the June 1 adjournment deadline. Why? Good question. The state's most powerful politicians keep saying they want to pass a bill giving property taxpayers some relief but darn it, they just can't get it through the legislature--which Madigan controls with an iron fist.

They have their reasons for stifling the legislation. Daley probably doesn't want to decrease the flow of tax dollars feeding his pet development tool, tax increment financing districts. Madigan has close ties with the Chicagoland Chamber of Commerce, and business interests and commercial property owners are well aware that a hike in the home owner's exemption would shift more of the property tax burden onto them.

Over the last few weeks, according to statehouse sources, Madigan let legislators know he was opposed to raising the exemption to $60,000. He wanted a tiered approach: for home owners whose property has doubled in assessed value since 2002, the first-year exemption could rise to as much as $40,000; for most people it would be set at $30,000 in the first year, $24,000 in the second, and $18,000 in the third. "He was basically trying to wean us off the home owner's exemption," says one legislator who asked not to be identified.

When Houlihan and legislators pointed out that the lower exemptions would offer little relief to people in Woodlawn and other vulnerable areas, Madigan added a bigger break for people who make less than $75,000. But unlike the exemption, that wouldn't go into effect until next year. On May 31 Madigan introduced his version of the bill and had state rep John Fritchey and other allies spread the word that this was the best they were going to get. Daley signed on, and it sailed through the house by a vote of 101 to 9.

How much will it help? In many cases, not much. Take the case of Sarah, a resident of Woodlawn. The assessment on her two-flat on Indiana went up from about $11,000 in 2003 to $32,000 in 2006. She paid $700 in taxes last year, and her March bill was $345. Now she's looking at an August bill of more than $2,000, and that's after the heftiest exemption. She'll either have to sell or take out a loan to settle her bill.

Keep in mind that the legislation still has to pass the senate. If it doesn't, the home owner's exemption falls to $5,000, which means Sarah will be looking at a second installment of more than $4,500. "If that bill comes, I don't know how I'll pay it," she says.

What's the long-term solution? Obviously, it's time to attack the problem from the other end and cut the tax rates by cutting the budget. Let's start with TIFs, which divert about $400 million a year (and rising) in property taxes to slush funds controlled by the mayor and individual aldermen. Don't adopt any new ones, and cut off the flow of money to those that already exist once they've served their purpose.

And, while we're at it, kill the bid for the Olympics. Is it reasonable to take on hundreds of millions of dollars in obligations when city residents are at risk of losing their homes? v

For more on politics, see our blog Clout City at chicagoreader.com.

Art accompanying story in printed newspaper (not available in this archive): illustration by Paul Dolan.

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