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Is a Wink as Good as a Nod?

It's hard to tell, but Mayor Daley may support a change in the property tax system.

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At the September 1 annual city budget hearing, held at Falconer Elementary on the northwest side, Mayor Daley was doing what he does best: telling people what they want to hear while promising nothing. To the activist who asked for more money to alleviate overcrowding at a local school, Daley said, "You got my ear." To the woman who complained about a rude city employee, he said, frowning, "Is he in this room?"

Then Barbara Head pleaded with him to support her group's proposal to change the property tax system, and he said, "I'm working with you." It wasn't clear whether he was actually endorsing a revolutionary plan that would cost the city tens of millions or simply offering one more platitude.

Head, a Lincoln Park real estate agent, and several of her allies from the north and northwest sides have been pushing the proposal since 2000, when they founded the Tax Reform Action Coalition (TRAC). As they see it, the current property tax system is so confusing it's easily manipulated by politicians looking to avoid accountability for rising taxes. In very basic terms, the property tax is determined by multiplying a property's assessed value by the tax rate. But since property values are rising, the county and city keep collecting more in taxes even if the rate stays the same. And Daley and the aldermen can claim they're holding the line on property taxes because they haven't raised the rate.

For example, last year on my north-side house I paid $5,761.33, up from $3,456.58 in 2003--an increase of almost 67 percent that's entirely the result of the rise in my house's assessed value. Yet in a recent press release heralding this year's proposed budget, Daley claims, "City property tax increases have been kept below the rate of inflation."

How can Daley make such a preposterous claim? "It's easy--the city hides behind the assessment," says Head. "The rising assessments do the dirty work of increasing taxes. People get upset at the assessor. They're not looking at the whole picture."

This system is becoming increasingly unstable because it leaves the city dependent on a tax fewer and fewer people can afford to pay. As Head points out, the average home price in the city has tripled over the last decade--which is great if you want to sell your property but not if you want to stay there. "Every time someone sells their property for a big price," she says, "the assessment of their neighbor's property goes up, no matter whether your income goes up or not." Moreover, she says, "Your rising bill doesn't reflect your ability to pay it."

In short, Head says, the property tax is becoming more regressive. "I see it happening all over the city," she says. "People can't afford to pay the taxes on property they've owned for years. Our property tax system is forcing people to leave the city. It's out-of-date, and it needs to be changed."

Last year Governor Blagojevich signed a bill that, in very simplified terms (the complicated version is in my October 29, 2004, column), temporarily caps increases in property tax assessments in Cook County at 7 percent, so that, for example, a house assessed at $100,000 one year could be assessed at no more than $107,000 during the next cycle. At first TRAC endorsed the bill, but Head and her allies now concede they made a mistake. For one thing, the cap applies only to residential property owners, leaving commercial owners exposed to huge hikes to make up the inevitable shortfall. For another, Blagojevich's bill--which was supported by Daley, house speaker Michael Madigan, and senate president Emil Jones--also includes a cap on the cap, essentially a loophole that allows assessments for many taxpayers to go up way more than 7 percent. About 20 percent of taxpayers have seen their tax bills double since the bill was signed, even though Cook County assessor James Houlihan sent out a separate cheery note telling them the new law was "good news for Cook County homeowners."

Over the past few months Head and her allies have been pleading for relief before the next assessment, which is in 2006. In the short term, they want to eliminate the cap on the cap, extend the 7 percent cap to commercial property owners, and make that cap permanent. "If the city thinks they will need more money, they can raise the tax rate," says Head. "It's time they stop hiding behind the assessment."

TRAC's long-term goal is to persuade the state to adopt an "acquisition-based" assessment. "That would freeze assessments at the level they were when people bought their properties," says Head. "You wouldn't be penalized because your neighbor sold his house." Obviously this would create a huge drop in revenues, so TRAC proposes to base future assessments on property bought before 2000 on the 2000 assessment.

City Hall officials say the TRAC proposals put Daley in a difficult position. On the one hand, he doesn't want hordes of angry taxpayers to think he isn't sensitive to their concerns. On the other hand, he knows what the city could lose if TRAC's proposals were adopted without more money from sources such as the state income tax to fill the gap. So lots of behind-the-scenes wheeling and dealing has been going on among Daley, Blagojevich, Madigan, and Jones. According to City Hall officials, Daley wants Blagojevich and the legislative leaders to increase the state income tax--and send more money for the city's schools--before he agrees to endorse TRAC's proposals.

Publicly Daley has had little to say on the matter, which is why Head confronted him at last week's budget hearing, one of three the city holds every year in the early fall. "It's one of the few times you can directly ask the mayor a question and hear what he has to say," says Head.

During the three-hour meeting Daley sat at the front of the auditorium at the center of a long row of tables, flanked by commissioners from every city department. Along the wall in the rear of the room stood a long line of bureaucrats. Daley opened with a short speech in which he reminded people of all the good things the city has done--built police stations, planted trees, repaved sidewalks and streets. He also apologized for the recent slew of scandals. "I take full responsibility for these problems," he said. "I am not afraid to say that."

Head spoke relatively early on. When she pointed out that soaring property taxes force people to sell, Daley said, "You're right--it will chase people out of the city." When she called for extending the 7 percent cap to commercial owners, he said, "We're trying to get a compromise on that." He even nodded sympathetically when she called for acquisition-based assessments. "I'm working with you on long-term assessment," he said.

Afterward officials told me privately that Daley wasn't officially endorsing any of TRAC's proposals. Instead he was merely offering sympathy to taxpayers and reaffirming his intention to press for more state money.

Head and her allies say they plan to hold Daley to the substance of his statements, even though he made no concrete promises. "I think the mayor realizes he has to take action," she says. "Sitting on the sidelines is not an option."

Art accompanying story in printed newspaper (not available in this archive): photos/Paul L. Merideth.

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