P r o p e r t y T a x . c o m   b y    F I T Z G E R A L D   L A W   G R O U P

P R A C T I C E   L I M I T E D   T O   T H E   T A X A T I O N   O F   C O M M E R C I A L ,  I N D U S T R I A L  &  I N V E S T M E N T – G R A D E   R E A L   E S T A T E            

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Maricopa County lowers property taxes to stimulate economy

Carly Moran – The Center Square contributor 

(The Center Square) – Maricopa County’s final 2023 budget lowers the property tax rate to 1.25% in hopes of stimulating the increasingly unaffordable housing market.

“The Phoenix metro area has gone from one of the most affordable in the country to one of the hardest hit by inflation. Our goal with this budget is to provide some relief to individuals and families dealing with rising costs,” said Board of Supervisors Chairman Bill Gates. “To do that, we are cutting property tax rates across the board.”

The previous property tax rate was 1.35%. Though it may appear to be a minute change, the difference adds up on more expensive properties. For example, a home worth $100,000 will now be taxed for $1,250 rather than $1,350.

“I’ve always said that one of my primary jobs as a supervisor is to look out for taxpayers and to make sure they get a good return on their investment. Because we’ve been fiscally responsible in the past, we can lower the tax rate this year at a time when many families can use every extra penny they can get,” said Vice Chairman Clint Hickman.

The new property tax seeks to assist lower to middle-class residents looking to become homeowners. Since COVID-19, homelessness and foreclosures have increased dramatically. Maricopa County officials seek to end this dilemma by reducing egregious costs.

“Buying a home or renting an apartment has become increasingly difficult in Maricopa County. Additionally, the number of people experiencing homelessness has grown and includes people of all ages. This budget addresses housing insecurity issues through new and existing projects, including cutting the tax rate for all property owners,” said Supervisor Tom Galvin.

Alongside reductions in property taxes, Maricopa County received a $435 million package from the American Rescue Plan. $100 million was previously used towards a rental assistance program, and $65 million will now fund affordable housing throughout the area.

“What we’re doing is making legacy investments – in housing and other infrastructure – that will outlast all of us in office for the benefit of our growing community,” said Supervisor Steve Gallardo.

Affordable Housing

This presentation is so overdue! #propertytax

Liz Butler
Liz Butler(She/Her) • 1stReal Estate & Land Use Attorney | AICP Certified | Chicago Lawyer 40 Under Forty6 hours ago

I’m looking forward to a great conversation this Friday with Mary Kathleen Fitzgerald of Fitzgerald Law Group, P.C. about the game changing property tax incentive program for affordable housing.

Thank you to the Realty Club of Chicago for inviting us to present!

#affordablehousing #propertytaxes #incentives #multifamilyrealestate#commercialrealestatedevelopment #landuse

Feed post number 2

Mary Kathleen Fitzgerald
Mary Kathleen Fitzgerald• 1stAttorney at Fitzgerald Law Group, P.C.2 hours ago

I’m looking forward to tackling the new affordable housing incentives with Liz Butler on Friday. There has been a lot of mystery related to how the incentives will be implemented and even what they mean, but we’ve been following it very closely. Thanks to the Realty Club of Chicago for keeping up-to-date with new programs for your members!

Rising Taxes, Plummeting Service

The Illinois pension crisis means that residents must pay high property levies while getting little in return.

Hilary Gowins
April 7, 2022
Economy, finance, and budgets

Patricia Hill, who grew up in Chicago’s Hyde Park neighborhood, achieved her dream of homeownership in 2003, when her family moved to the quiet Chicago suburb of Matteson. She raised two daughters in a two-story home she bought for $315,000. But by 2013, her annual property tax bill was $11,500, nearly driving her into foreclosure. By 2020, Hill had seen her annual payments lowered to $8,900 with a senior exemption, but the burden remains significant. “Everyone is in shock when I tell them the property taxes. They say it must be an error,” Hill says. It’s no error—just a byproduct of the state’s ongoing pension crisis.

Taxes have outpaced earnings for many homeowners here. While property taxes in Cook County jumped 99 percent between 2000 and 2019, wages in Cook County rose 57 percent during that period. Hill saw an increase in her home value during Covid, but housing prices in Illinois grew 11.4 percent in 2021 compared with an 18.4 percent average in other states. And throughout the pandemic, tax collections continued to rise: Cook County billed an extra $534 million in property taxes in 2021 despite federal relief.

The increased tax burden yields underfunded pensions, not better government service. Illinois’ pension crisis both occupies a growing share of state and local budgets and represents a $75 billion debt hole for local governments—which officials often fill with property tax increases. Each Matteson household owes nearly $16,000 in local pension debt, a tab that jumps to over $45,000 per household with state pension debt. These costs mean less money for roads and schools while driving residents to leave the state. Last year, Illinois recorded its eighth consecutive year of population decline, losing a record 113,776 residentsfrom July 2020 to July 2021, according to Census Bureau estimates.

For a closer look at the relationship between public pensions and property-tax growth, consider Chicago. In 2022, Chicago’s pension costs make up more than $2.3 billion of the city’s budget, or 21.4 percent of the city’s own source revenue. That’s more than the city’s entire property-tax levy of $1.7 billion this year. Yet residents get little for their money. Chicago recently ranked 141 out of 150 citiesfor municipal service quality. That’s no surprise: over the past decade, pension spending in Chicago increased 239 percent, while spending for city services increased only18 percent.

Public pension reform received bipartisan support in the Illinois general assembly as recently as 2013, but because of a ruling by the state supreme court, the only way to achieve meaningful pension reform for state and local governments is through a constitutional amendment. Reforms could save roughly $2.4 billion in the first year and more than $50 billion through 2045, while eliminating the state’s pension debt (rather than the 90 percent reduction state leaders aim for). Indeed, a “hold harmless” plan would preserve every dollar of pension benefits promised to public workers for work already performed. Similar reforms to local pension systems could offer significant property tax relief to overburdened homeowners and free up resources for spending on current services.

Hill is not giving up and doesn’t plan to move. But she has spent many sleepless nights worrying over her massive property tax bill. “This is supposed to be the American Dream for me and my family,” she said. “I’m holding on to everything I can, but I’m losing because of this house.” She and other state residents shouldn’t have to pay for their government’s irresponsibility.

The Future of Malls

A hint of what’s to come for dying malls: Phoenix mall owner sells out as property is rezoned for other uses

KEY POINTS
  • Mall owner Macerich announced Thursday it’s sold a majority stake in Paradise Valley Mall in Phoenix to a mixed-use real estate developer.
  • The 92-acre site has been rezoned to create a new community with homes and offices.
  • Malls packed full of clothing and other retail shops are looking for a new life. Coresight Research has estimated that 25% of America’s roughly 1,000 malls will close by 2025.
Macerich's Paradise Valley Mall in Phoenix, AZ.
Macerich’s Paradise Valley Mall in Phoenix, AZ.
Google Earth

The future of the suburban shopping mall could look something like a mini community, with far fewer places to shop.

The U.S. mall owner Macerich announced Thursday it’s sold a majority stake in Paradise Valley Mall in Phoenix, for $100 million, to a joint venture with an affiliate of the Phoenix-based, mixed-use real estate company RED Development. The partners will convert the 92-acre site into a community with homes, offices and a grocery store.

The 1970s-era Paradise Valley Mall has been rezoned to allow the sprawling plot of land to include high-end grocery options, restaurants, 3.25 million square feet of residential space, office buildings and some retail shops.

“As the retail landscape continues to evolve here in Arizona and around the country, our decision to realize the market value of this non-core asset makes sense for Macerich,” Macerich President Ed Coppola said in a statement.

Malls packed full of clothing, footwear and other retail shops are looking for a new life, as more consumers buy online and skip trips to dated department stores and archaic food courts. This transition was only accelerated by the Covid pandemic, which has kept many Americans stuck at home, surfing the web.

Market share and shopper traffic has also increasingly shifted to off-mall retailers such as Target and Walmart. One consumer research firm, Coresight Research, has estimated that 25% of America’s roughly 1,000 malls will close by 2025. Often, as one or two department stores in a mall close, that triggers a wave of closures by other businesses within the mall, leaving the owner no choice but to look for new uses or get rid of the property entirely.

“America’s malls have reached the end of their useful life,” said Mark Toro, a managing partner in Atlanta of real estate developer North American Properties. “Communities across the U.S. have turned their backs on what was once their center.”

“These properties often occupy real estate that would best be repurposed to better serve the community,” he said.

A few malls are becoming e-commerce warehouses to meet retailers’ rising demand for industrial space. Amazon, for example, opened a distribution facility where Randall Park Mall used to sit in North Randall, Ohio. It’s also taken over Euclid Square Mall in Euclid, Ohio.

Inside a mall in Burlington, Vermont, meantime, kids are now attending high school in what used to be a Macy’s department store.

The future of each struggling mall will likely be case by case, dependent upon the surrounding town’s needs, experts say. It could entail demolishing the property entirely, and undergoing rezoning, for a new community. In some instances, developers will view the land that the mall sits on as worth more than the mall itself.

Macerich, which owns or has interests in 47 regional shopping centers, said the transaction with RED Development closed Monday and generated net proceeds of about $95 million. It will retain a 5% stake in the project through the venture.

Macerich shares were up less than 1% on Thursday, having risen about 10% year to date. The real estate owner has a market cap of $1.94 billion.

Assessor Kaegi addresses “Structural Racism” and other issues at the City Club

Cook County Assessor Fritz Kaegi addressed the City Club today. Below is a text version of his presentation. 
Thanks for starting us off here, Ed. Before I begin my comments, I wanted to take stock of where we all are today. This last weekend, I was at a memorial for a friend and mentor … done virtually, of course, and I reflected on what we’ve all been through. Not even one year has elapsed from Illinois’ first death from COVID-19. In the country we now have more than half a million dead from the virus. We have millions suffering from lingering effects, and millions of survivors who could not be together to comfort each other in mourning. Us survivors are coping but taking real hits—jobs lost and businesses shut, life disrupted, families living with complete exhaustion and ever-present risk.We need to express gratitude to those around us for stepping in to stop the virus, and for helping us to carry through. The County Board, President Preckwinkle, Mayor Lightfoot and her team, and so many others have delivered in this time of crisis.I wanted to thank you at the City Club, and you members out there, for sustaining this irreplaceable organization. I’m looking forward to the day when we’re back in person.Joining us today are many members of the Assessor’s Office, all of whom have performed admirably during an incredibly difficult time. The work they did in 2019 made it possible for everything we did in early 2020, just before the virus hit.
We launched online exemptions for the first time, expanded the types of appeals you could file online, and created a new call center system. With the relaunch of our website and the implementation of auto renewals of senior exemptions, we were able to handle the immense challenge of pivoting from in-person public service to remote public service just as the full effects of COVID-19 caused all of us to rethink how we worked and lived. As citizens of this County, you should know that the staff of the assessor’s office delivered under extreme circumstances, carrying on through a deadly pandemic and coping with epic economic disruption that touched directly on our work; all while switching our systems midstream. They kept the public and each other safe, showing patience and flexibility even as all of us felt pushed to our limits, and beyond. This year, our staff implemented yet another way to make things easier on vulnerable populations, by processing exemption auto-renewals for low income seniors, persons with disabilities, and veterans with disabilities. This was made possible through a bill passed by the general assembly to make life a little easier for the hundreds of thousands of people most vulnerable due to COVID-19.  As we faced down this pandemic, I’m proud of what we accomplished together and am grateful for the work they do, as dedicated public servants.I want to let everyone watching today know that we even as we accomplished all this, we were frugal. Every day, we try to show the public that we know the value of a dollar. Here’s how we’remaking good use of our resources.2
In Cook County, we serve more property owners per full-time employee than any of the other large jurisdictions, which you can see here. And we do it by spending less per parcel than any of those places.How did we do it? Not only with great effort, flexibility, and patience, but also the indispensable backing of Cook County Board President Preckwinkle, our County commissioners, and the Bureau of Technology. They funded and supported our technological transformation and our efforts to reinforce our staff with training, new talent, and data. Each day, we’re in the trenches together modernizing the office for our County’s betterment.
Today, & our equity frame
So, today we’ll talk about–A study of commercial assessments by the gold standard for our field–the results of our suburban reassessments–the impact of COVID-19–the upcoming reassessment of Chicago–closing the data gap that helps create some assessment disparities.But first,
I want to talk about why it’s so important to get this work right and what it means for theaverage property owner’s bottom line. Because that underlies each of these topics. In our property tax system, assessments are interconnected. Each property owner needs to care about how everyone is assessed, not just their own assessment, because otherwise that property owner may be picking up the tab for others through a higher tax rate. Because in Illinois, our property tax rates float, they’re not fixed. The rate you pay depends on how big the base of assessed value is. The bigger the base, the lower the rate.Let me show you here what happens if part of the system is off-kilter.3
Let’s say we’ve done our job correctly and perfectly mirrored market values in our assessments.In our example here, commercial buildings’ assessed value is a million, and homeowners’ values sum to a million. So the base is two million.Folks who own property here have a school district, town, and other local services funded by property taxes. Incidentally roughly two thirds of property taxes are for schools. In our state, this thing called a levy is the amount of money that will be collected for these bodies, regardless of the size of the assessment base over on the left.So what does this mean for a homeowner? Let’s say she owns a bungalow with $20k AV. She’sthen 1% of the base, $20k divided by $2m. If she’s 1% of the base, she has to pay 1% of the levy. So her property tax bill is $4000.But let’s say the system, perhaps through inadequate data and valuation practices, undershoots market values by 50% and only assessescommercial at 50% of where the market is. In that case, our base is now $1.5m, with homeowners now representing 2/3 of the base. Now remember, the levy over on the right does not change. In our state, levies are lump sums that must be collected regardless of how assessments are set; assessments just determine how the levy is distributed after the tax rate isset. 4
So in this case, our homeowner is still assessed just as she was before, at $20k. She’s still assessed accurately. But look what happens to her tax bill on the right. It’s gone up over $1000 to $5320. Why? Her home is now a bigger piece of the base. She’s picking up part of the tab for properties that are underassessed.This is why she has a stake in making sure the whole system is assessed fairly, because everyone’s assessment is interconnected, because we’re all dividing up the cost of government amongst ourselves based on the assessments.This is why our office is focused on accuracy, on eliminating assessment disparities, because accuracy in assessments has huge implications for equity. In each of the areas that follow, the changes we have made have focused on eliminating assessment inaccuracies and disparities that can make our system inequitable.
IAAO
These disparities are why I asked the International Association of Assessing Officers—which is the gold standard in this field–to examine the assessments in place as we found them and compare them to the prices paid in commercial property transactions in the County in 2018. They compared those commercial property sale prices with the system’s estimated market values. These market values were determined by the prior administration and the Cook County Board of Review, prior to our administration taking office. As I noted in the beginning, we need to consider residential and commercial assessments together. The Civic Consulting Alliance found problems in residential assessments in Chicago in5
2018, but they did find that in aggregate residential values were on target: homes were not, on average, over- or under-assessed. But the IAAO report found significant underassessment of most commercial properties. Overall, they found commercial properties were about 40% underassessed County-wide in 2018, and 50% underassessed in Chicago.The pattern was troubling in DEEPER ways, too. Larger commercial properties were assessed at lower rates than small businesses and the values showed a lack of uniformity in many cases, creating the potential for unfair tax disparities. Outlying neighborhood commercial properties also tended to be assessed at a higher rate. In short, some people were getting a break while others were making up the difference. As we saw in the earlier example, assessment disparities can mean that the annual financial impact of this underassessment can be really big for those who are assessed accurately.
Process improvements at the outset
This is why it was so important to focus on reducing distortions and eliminating these disparities as we reassessed the suburbs over the last two years. The first thing we did was to commit ourselves to transparency, by showing our work. No more black box valuations, which were a source of endless complaints in the commercial community. We also committed ourselves to eliminating sources of bias, favoritism, and conflicts of interest. This meant doing things like making commercial appeals anonymous to our analysts, implementing an ethics code forbidding campaign contributions from practitioners who practice before us, and requiring evidence to be based on professional standards. For example, an appraisal actually had to meet the federal standards that a bank would require. 6
For those of you who don’t know, there’s a small subset of the appraisal industry whose entire purpose is to argue that a double bacon cheeseburger is in fact a salad. If only it worked like that, all of us quarantined at home might be feeling a little slimmer. Unprofessional practices by appraisal mills hurt equity if they are taken at face value, because they can throw commercial assessments off kilter, injuring everyone else, not to mention bringing disrepute on honest appraisers who respect industry standards. Having high-quality standards and using better data are key to making assessments more accurate and fair.
Suburban reassessments
Now, I’m about to show you the results from the South Suburban reassessment, but I can’t help but plug our report of the North Suburban Reassessment. It provides lots of new data and graphics, where you can see how we took action to realign the system, and also calculate for yourselves the impact of changes to assessments on properties in your community.[show some of the beautiful graphics]The report has great data and charts showing you our sources, and the reasonable basis for thedata we use, which no one disputes in its accuracy or authoritativeness. Actually, we showed sources that institutional investors can look up for themselves and track each day. Here’s one example.7
 And I gotta say, it has some striking cover art contributed by world famous Chicago-area artist Chris Ware, with scenes and buildings from throughout the county.So, here are the results from our reassessment of the South Suburbs. Several things to note here.1.
 
Note that the base grew overall.
2.
 
The residential base grew, even after COVID-19 adjustments.
3.
 
The commercial base grew more, also after COVID-19 adjustments.
4.
 
With better modeling techniques, we dramatically improved regressivity in residentialassessments.
5.
 
 All these trends were a basic continuation of what we observed in the north suburbs, where we realigned the base with more accurate commercial assessments than the ones we inherited.
6. We’ll soon have a report on the south suburbs like we did for the north.
COVID-19 section
8
 As I mentioned, our assessments in the south suburbs took into account the devastating effects of COVID-19. And we’re proud that they did.We were just starting to send out assessments in February 2020 when the effects of COVID-19 began to be seen here in Illinois. [fan chart showing impacts of COVID-19 on different classes]The individual sales transactions we prefer to use are reported with a lag of several months, but real estate capital markets told the story in real time. By the end of February, publicly traded portfolios of real estate were already taking hits, led by hotels and retail. By the end of March, serious distress was clear. Bond markets were showing distress with hotel and retail mortgages going on watch lists. Some commercial mortgage delinquency rates blew out from low single digits into the teens. The equity capital markets were saying hotel values were down as much as 40%, with retail down 30%, single-family homes down, while the market was also saying some kinds of real estate were up, like data centers. Then, the Governor and the President declared natural disasters, meaning that property owners could get relief for COVID-19 impacts during the appeals process.9
Now as you look at this chart, think back to the discussions we opened with today. Imagine having assessments reflecting a by now-out-of-date state of the world. Some kinds of real estate devastated, others going up. But then add an additional element of distortion by imagining that only a portion of the assessments would be appealed. In that case, only some properties would reflect the market impacts of COVID-19, but the majority of assessments would likely be frozen in place with pre-COVID-19 assessments. If we did nothing and stood pat, we would not only NOT reflect current market conditions, but we’d also create a notably more inequitable assessment roll, with some carrying the burden for others.The more equitable thing to do was recalculate assessments with these effects included. It wouldn’t be perfect because no matter when we made our valuation decision, conditions would continue to change afterwards. But at least the overall assessment roll would have the initial effects of COVID-19 reflected, saving property owners some of the costs and troubles of appealing during a pandemic, while creating a more equitable and up-to-date assessment roll. We published our first valuation document last May, noting all the data sources and methods used in our residential assessments, then a follow-up on our commercial assessments. You canfind those reports, along with community specific maps of our residential adjustments on our website..10
Chicago
Now, 2021 is one of our biggest challenges yet, more challenging in some ways even than 2020.First, we’re reassessing the City of Chicago, which represents fifty-two percent of the parcels in Cook County. So we’re doing more than half of our triennial reassessment work this year. We’reconfident we’ll meet this challenge as we have improved the quality of our residential modeling and are regularly meeting the IAAO standards for high-quality assessments. We’re also launching the opening phase of replacing our office’s whole software and hardware system of record. This is the beginning of our County’s deployment of the integrated property tax system from Tyler Technologies. It’s a long-delayed upgrade that moves us away from the aging mainframe platform used to power four offices involved in the Cook County property tax system. This upgrade will get us off the kind of green screen technology used in the movie
WarGames
and onto a modern platform used by assessor’s offices nationwide. It’ll also mean the data and methodology will be more transparent and easier to access than ever.We expect the trends that we observed in our reassessment of the suburbs to continue in Chicago. That is, we expect the residential and commercial base to grow, to close the disparity gaps observed in commercial reassessments, and to reduce the regressivity of residential assessments. All of these things will address the disparities and inequity identified by the IAAO.11
RPIE
With the world turned upside by COVID-19, we’re trying to make sure we have an accurate picture of local conditions facing commercial properties. We’re meeting with commercial property owners, chambers of commerce, and others. We’re seeking to independently verify neighborhood commercial data. And we’re encouraging folks to use our real property income and expense tool, known as RPIE. Every commercial parcel owner in Chicago this year received RPIE instructions in the mail. This tool helps us close the data gap that may have contributed to the disparities where smaller commercial properties tended to be assessed more highly than larger ones, especially in the neighborhoods where third party data is scarce. It lets owners tell us what real, on the ground conditions are like.Now, you would think a tool that gets assessments right at the beginning of the process would be welcomed by most people. It saves property owners money on the appeal process and certainly gets their assessment at a more accurate initial position. But it seems not everyone shares our enthusiasm for better data. We’ve seen more than a few letters and statements like this one from property tax firms, who instructed their clients not to fill it out.Why would these groups be opposed to our efforts to get better data? Why wouldn’t they want us to create fairer assessments from the beginning instead of forcing taxpayers to go through a costly and time-consuming appeals process? Yes, there will always be a need for appeals to 12

City of Chicago has excess TIF funds

As pandemic blitzes city finances, an unexpected cash windfall for Chicago government

The city’s 140 tax-increment financing districts held $1.79 billion at 2019’s end, far above what officials had projected. Will Mayor Lori Lightfoot tap some of that to help balance a budget hit by lower tax revenues?

This office building is rising at Fulton Market and Sangamon Street. City officials have used projects funded by tax-increment financing to encourage development in the former meatpacking district.
This office building at Fulton Market and Sangamon Street is among several buildings rising in the former meatpacking district and West Loop. City officials have used tax-increment financing to pay for infrastructure improvements in those areas.
Pat Nabong/Sun-Times

While Chicago city government’s finances flail in the face of a pandemic liable to blast a billion-dollar hole in City Hall’s budget, one part of its treasury is flush with cash — specially designated money that Mayor Lori Lightfoot might see as tempting to tap as she tries to balance the budget.

According to reports filed with the state, at the close of 2019 the city’s 140 tax-increment financing districts, known as TIFs, held a combined $1.79 billion — far above what city officials had projected.

The districts are a quilt of zones across the city where some property tax revenue is set aside for public improvements or to subsidize private development benefiting a neighborhood.

Budget officials are working to determine how much of a TIF surplus Lightfoot can declare for 2021, when she’ll need all the help possible to avert tax hikes, service cuts and layoffs.

But how the surplus is calculated and how spending priorities are assigned for each TIF are cloaked in secrecy. That makes it hard to to know how much the city can draw from TIF accounts for general spending.

“This is somewhat of an insider’s game,” said Laurence Msall, president of the Civic Federation, a budget watchdog group. “Although they provide detailed information about the funds, unless you’re inside City Hall, you don’t really know what projects are moving forward.”

According to a former city official who dealt with TIFs, capital improvements — say, a new library, sewer work or streetscape beautification — or private development such as new housing or a company relocation often were scheduled based on priorities set by the mayor or aldermen, with no independent review.

“Even if we hadn’t announced the project, we’d earmark money for it,” said the ex-official, who spoke on the condition of anonymity.

Graph not displaying properly? Click here.

In an interview, Susie Park, the city’s budget director, wouldn’t discuss the current balance of all of the TIF accounts or how much might be declared surplus and be snagged for other uses but said the city is working to identify those funds.

“We really go in depth on every TIF, project by project, and when the projects are expected to be delivered,” she said.

“Everything is on the table,” Park said regarding ways to deal with the budget deficit.

Even more than the schools, city government is vulnerable to the financial fallout of the pandemic because so much revenue — from sources like taxes on gasoline, hotel stays, retail sales and tickets to events — has dried up.

Park said proposals for spending TIF money need to be more than a wish list.

“It’s got to be enough that we actually have some funding ideas on the process,” she said.

Asked whether she views TIFs as a possible bailout source for the city, Park said no.

“TIF is an important economic development tool,” she said, adding that the mayor plans to use the districts and other funding sources to direct $250 million toward improving commercial blocks in 10 South Side and West Side neighborhoods in the next three years.

It’s unclear whether bigger budgetary issues might upset those plans. But the year-end 2019 balance in the TIFs that the Chicago Sun-Times identified from reviewing annual reports for each district shows they are cash cows.

The Sun-Times compared the $1.79 billion balance with projected balances in data published last year.

In the “TIF Projection Reports, 2019-2023,” available on City Hall’s website, the estimated balance for all districts was $934.9 million — a difference of about $855 million. But the projection reports deduct lump sums for specific projects, including money that might really be paid in later years.

It’s like looking at a person’s checking account at two different times: once on payday and another time after bills are factored in.

With the city’s finances, any delay in big-ticket items would dramatically swell cash balances.

For example, the TIF for the Kinzie Industrial Corridor is slated to spend $65 million through 2021 for a new CTA Green Line station at Damen Avenue. And millions more is budgeted for street enhancements and school expansions.

Another key TIF, called La Salle Central, which covers the heart of downtown, lists $140 million in projected costs through 2023 for reconstructing the Lake and Washington street bridges.

Reconstruction of the Lake Street bridge downtown is one of the key projects planned for the La Salle Central tax-increment financing district, which covers the heart of downtown.
Reconstruction of the Lake Street bridge downtown is one of the key projects planned for the La Salle Central tax-increment financing district, which covers the heart of downtown.
Pat Nabong / Sun-Times

The Canal/Congress TIF has millions slated for infrastructure work that benefits redevelopment of the Old Main Post Office and Union Station.

Chicago’s richest, most active TIFs are downtown or in gentrified areas.

By recording expected costs sooner than when they might be incurred, city officials have been understating TIF balances, according to a business leader, an adviser to several mayors, who said: “Technically, it’s accurate what they’re doing. But, from a timing and cash-flow perspective, it’s b—s—.”

Cook County Clerk Karen Yarbrough’s office looks at TIFs through another lens. The office reported Thursday that Chicago TIFs collected $926 million in revenue last year, a record and 10% more than in 2018. Chicago TIFs absorb 13% of all property taxes generated in the city.

Last year, Lightfoot declared a TIF surplus of $300 million. The city has been grabbing a TIF surplus annually since 2009, though none that high.

Because the money goes to all taxing agencies, not just city government, City Hall gets only about 25% of any surplus. Most of the rest goes to the the Chicago Public Schools.

In June 2019, with Lightfoot newly in office, City Hall Inspector General Joe Ferguson faulted the city for not implementing TIF reforms a panel recommended in 2011. Those included providing a clear assessment of infrastructure needs and publishing easy-to-understand TIF performance data.

Tax-increment financing districts are used throughout the country. In Illinois, the law says they must be used to combat “blight.” But local governments have been creative in deciding which projects qualify. Chicago has established TIFs to help refurbish old buildings downtown and to speed investments that draw people and jobs to emerging neighborhoods near the city’s core.

They work by siphoning growth in property tax revenue. When a district is created, the current property taxes from the district are used as a base. Eventually, as the tax base grows and the amount of property taxes in the district go up, that growth in taxes is diverted to the TIF.

The growth can come from higher tax bills in general or from new development.

In Illinois, TIF districts are established to last 23 years, but the Legislature can extend their life 12 more years.

There’s been criticism that TIFs have gotten out of control, diverting needed revenue from local government, subsidizing development that would have happened anyway and deepening the chasm between “have” and “have-not” neighborhoods.

Lightfoot has agreed — to a point.

“The days of the TIF slush fund are over,” she said in her first budget address.

The mayor has promised tough oversight of all spending plans and reorganized a TIF Investment Committee of key city officials that must sign off on expenditures and posts its decisions regularly on the city website.

But she hasn’t done enough to satisfy some academics and community leaders who argue TIFs are inherently racist, diverting revenue that could benefit communities of color. Lightfoot has resisted calls to scrap two potentially lucrative TIFs driven by private development — Lincoln Yards on the North Side and a project called The 78 on the Near South Side. Former Mayor Rahm Emanuel pushed those deals through the Chicago City Council before leaving office.

Rachel Weber, an urban planning and policy professor at the University of Illinois at Chicago, said years ago TIF districts were the “wild, wild West.” Even with increased scrutiny in recent years, development is still pushed by market demand, according to Weber, who said the TIF concept “rewards neighborhoods with the capacity to attract market interest. That’s not a way to engage in public investment need.”

Weber said she doesn’t think the program should be abandoned without having something better to replace it. She said she thinks the best solution for more equitable distribution of funds across the city would be higher property taxes, though she said there’s no way elected officials would opt for that sure-to-be-unpopular move.

During a protest in Lawndale in June of George Floyd’s death at the hands of a white Minneapolis police officer, the Rev. Ira Acree of Greater St. John Bible Church spoke of racial inequities in Chicago, calling for change or a discontinuation of the TIF program.

“It was designed to help poor people,” Acree said. “It was designed to lift up distressed communities, creating more capital investment. But instead they have took tens of millions of dollars that belong to us and invested in the more affluent communities. It’s time that Chicago stop the reverse Robin Hood practices of the TIF system.”

Others argue that Chicago needs TIFs as a job creator and a way to fund public improvements, sometimes with developers picking up the cost upfront and taking the financial risks.

The Civic Federation’s Msall said that drawing cash from TIF surpluses could hinder growth.

“The money comes from somewhere,” he said. “It comes from the city’s main economic development tool.”

Others who support TIFs say it’s important to remember that cities, beneficiaries of many development trends in recent years, didn’t always have such luck. Going back 40 years, it looked like Chicago was losing ground because of suburban sprawl and major employers leaving downtown. And it was easier to build on a greenfield than assemble smaller big-city parcels.

TIFs came along when the federal government was withdrawing support for urban renewal. As a market-based solution, it might have helped turn the tide.

City of Chicago TIF Balances

Fund/Project 2019 Actual 2019 Estimate
Kinzie $124,495,431 $65,788,400
LaSalle Centrl $118,187,536 $82,354,900
Near North $104,925,148 $79,710,500
River (S) $86,803,226 $52,424,300
Red/Prp Transit $71,128,072 $3,448,000
Central West $63,966,180 $44,362,200
River (W) $52,791,189 $27,165,600
Pilsen Ind Cor $50,562,328 $34,304,700
Canal/Congrss $44,056,903 $21,956,300
N Branch (N) $42,147,655 $2,734,200
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In the table above, the 2019 actual balance is drawn from city reports filed with the state. The estimated balance is from the TIF Projection Reports 2019-2023 the city published last year.

Elvia Malagón’s reporting on social justice and income inequality is made possible by a grant from the Chicago Community Trust.

Chicago Tribune Editorial: Property tax failure another reason to vote against the tax referendum

July is sweat-and-fret month for many taxpayers in Illinois: How will households slammed by job disruptions and a public health contagion now pay their property tax bills? Those local taxes gouge virtually everyone: Employers and homeowners — or whoever services their mortgages — make most of these payments to the county treasurer; renters indirectly pay property taxes in rent to the landlord.

And after the pending property tax deadline, another threat looms. Voters this fall will decide whether to let their politicians raise state income taxes or instead force them to clamp down on state spending that just grows and grows.

What we call the proposed “Pritzker Tax” — named for Gov. J.B. Pritzker, who calls it a “fair tax” — would replace Illinois’ constitutionally protected flat-rate income tax with graduated rates. The change would make it easier for politicians in Springfield to raise income taxes. Currently, a tax hike requires more heft from politicians because it affects every taxpayer. Tinkering with a graduated structure is a softer lift.

Oh! We’re just raising this itty-bitty rate on this itty-bitty group of people. Those itty-bitties add up.

As a voter, you’re supposed to trust Illinois politicians. Trust that they’ll give you property tax relief. Trust that they’ll start passing smarter budgets. Trust that they’ll undo some of their past mistakes. Oh, and trust that they’ll only slap this top itty-bitty 3% of taxpayers with higher tax rates — as if higher earners are to blame for this state’s fiscal mess. You’ll see ads urging you to trust the pols, including the most influential pol, House Speaker Michael Madigan, and vote yes on the Pritzker Tax amendment. Pritzker dumped more than $50 million of his own money into the campaign to get it passed.

Which brings us right back to this latest round of property tax bills. The refusal of Democratic lawmakers to confront Illinois’ runaway property taxes speaks volumes about whether you should trust Springfield’s promises about the Pritzker Tax.

‘Trust us, we’ll fix property taxes.

Recall how, in the spring of 2019, the governor placated some Democratic legislators nervous about putting his Pritzker Tax amendment on the November 2020 ballot. How could they justify voting to enable even higher taxation?

Pritzker tossed them a bone: He’d offset a risky income tax grab with property tax reform. Here’s what the governor said on Aug. 2, 2019, when he announced formation of a legislative task force to help Illinois “reduce local reliance on property taxes”:

“Together, we’ll ensure our children receive the quality education they deserve even while we provide more property tax relief for our homeowners and make our system more fair for everyone.”

We wrote that because of that pledge, Pritzker would have to extract some action on property taxes from his task force and the legislature — even if the General Assembly merely sprayed eyewash that didn’t actually lower property tax bills. We expected, say, a nobly titled Illinois Property Taxpayers Relief Act. Maybe an appearance of reform would persuade voters that Democrats were working feverishly to lower local tax bills.

But nothing happened. The task force flopped. Democratic legislators paid lip service. Worse, falling home values throughout the Chicago area due in part to eye-popping property taxes have created a money-losing cycle that is pushing residents out of Illinois.

Democrats could blame the pandemic for the failure to reform, but that would be dishonest. They had no property tax plan before the contagion hit, and they developed no fix during their five session months.

Besides, Illinois property taxes have been studied interminably. Reform is a question of willingness, not of finding time. Madigan’s command staff could have fixed the property tax system decades ago — if that’s what Madigan wanted.

‘Trust us, we need more income tax’

The promise of property tax reform has always smacked of a shell game. Trim one tax while increasing another. The truth is that if state government, local governments and school districts don’t rein in their spending, taxpayers will get no net relief. Taxpayers will pay the same total amount of their income in taxes — less here but more there.

Yet cutting the cost of government isn’t part of the Pritzker Tax agenda. The Democrats offer no pension reform, no big cuts to other cost drivers, not even state furlough days or other economizing on personnel costs during the pandemic.

Instead opportunistic Democrats have adopted the pandemic as, yes, one more excuse for raising more income tax revenue. Look at all the money we have to spend on the coronavirus!

This stubborn refusal to aggressively enlist Illinois’ public sector in a statewide sacrifice attests to the clout of the public employee unions whose money and muscle keep Democrats in control here.

Pritzker, Madigan & Co. protect spending on union workers in state but also local governments. Given the pension crisis Illinois politicians have nurtured, that protection racket has exorbitant costs to taxpayers. The need to meet enormous and rising personnel costs is the real if unspoken rationale for the Pritzker Tax.

‘Trust us, we’ll fix Illinois’

That’s also why the promise of property tax reform relied on taxpayers’ gullibility. Maybe Pritzker himself was gullible in thinking he could make it happen.

But Madigan routinely passes the annual budget he wants. The governors are short-timers. The come and go. By contrast, 2020 is Madigan’s 50th year in Springfield.

So even if Joe Taxpayer wants to believe and trust in Pritzker, not even halfway through his first term, that taxpayer must contend with the levers that actually decide on spending in Springfield. That’s Madigan.

We’ll have more to say about these and many other broken promises to taxpayers — Illinois politicians’ fractured fairy tales — as the tax vote approaches.

So, do you trust Michael Madigan?

Whether because of his inexperience at government or just his generally affable manner, the governor may have already undercut his own push for the Pritzker Tax. He won support for graduated tax rates by voicing a promise of property tax reform. Didn’t happen.

In his first year, he signed a budget that increased spending both on the general revenue side and through a massive $45 billion infrastructure bill. There were no spending cuts, no efficiencies, no “shared sacrifice” from unionized employees. Only higher taxes and fees.

When the COVID pandemic hit, Illinois was, of course, ill-equipped to handle any sort of emergency. That led to Senate President Don Harmon’s infamous “ask” of Congress for a bailout that included pension help.

Is this the fiscally prudent, trustworthy state government deserving of more money through an income tax hike? Rhetorical question.

Voters should focus on this: The Democrats who run Illinois haven’t done the hard work of restructuring how this state collects, and spends, all the money it already gets from taxpayers.

And they won’t do that hard work unless voters reject the Pritzker Tax. It is one chance for voters to hold the upper hand. Remember that as you pay your property taxes. Another promise, broken.

Editorials reflect the opinion of the Chicago Tribune Editorial Board.

Significant tax increases are starting to hit nationwide

Major Tax Increases Are About To Slam America As Cities & States Want You To Pay For COVID Fallout

Authored by Isaac Davis via Waking Times,

Just prior to the global Coronavirus outbreak, serious signs of an emerging financial crisis began to emerge. As people were beginning to realize that yet another central bank engineered ‘bust’ was coming down on us, we were thrown into lockdown, shuttering millions of businesses and sending millions of people to the unemployment line.

Now, a few months later, we are starting to realize just how deep the economic fallout will be, and Americans are scrambling to adjust their lifestyles to a totally new world order. At the top of the food chain, though, is government. City, county, state and federal.

Assessor Kaegi to reduce market values

Assessor trying to ensure Cook County property values adjusted to reflect ‘coronavirus effect’

All property owners will get a notification from the Cook County assessor’s office. Assessor Fritz Kaegi said his staff will “have to bend over backwards to keep on schedule” but he’s optimistic they’ll be able to get things done on time.

Aerial photo from suburban Berwyn looking towards cloud covered Chicago Friday March 27, 2020.
Aerial photo from suburban Berwyn looking towards cloud covered Chicago Friday March 27, 2020.
Brian Ernst/Sun-Times file

Knowing many residents are facing economic uncertainty from the coronavirus pandemic, Cook County Assessor Fritz Kaegi said Friday that all homes, businesses and other real estate parcels could see their property values adjusted due to COVID-19’s effect on the market.

The first-term assessor said analysts in his office are looking for data from natural disasters and other economic crises to understand what could happen to property values in Cook County, but even with those comparisons the challenge coronavirus presents is unmatched.

“This is different because, for all of us to be safe and to get ahead of [coronavirus], we’ve had to shut down so many different sectors of the economy and economic activity,” Kaegi said.

“We’re trying to be mindful of all of that and try to reflect as best we can with the data that we have how the crisis is affecting different people’s lives,” Kaegi said. “We know that we won’t be perfect in that — the future is a little bit unknown, and how this crisis unfolds is uncertain, but we’re going to be doing the best we can. We figure it’s better to do that, rather than proceed as if nothing had happened.”

Fritz Kaegi
Fritz Kaegi, then Cook County Assessor Democratic primary candidate, in 2018
Rich Hein/Sun-Times file

All property owners will get a notification from the assessor’s office. Owners of west and south suburban properties already scheduled to be reassessed this year will receive a reassessment notice, while property owners in the northern suburbs and Chicago will receive a notice letting them know that the coronavirus may have affected their property values and what their new, adjusted value could be.

Property owners in Chicago and the northern suburbs can submit appeals of their latest assessments, which will be processed by analysts. Eventually, all property owners will receive a mailing with their property’s adjusted value.

Their current assessed values could be adjusted to either the appealed value or the “coronavirus effect” value, a spokesman said.

The appeals period will be shortened from the typical 40 days to 35 days in order to make sure the assessor’s office will be able to hand off their assessments to the county’s Board of Review on time.

Empty sidewalk in front of suburban bungalows on the in Berwyn Friday March 27, 2020.
Empty sidewalk in front of suburban bungalows on the in Berwyn Friday March 27, 2020.
Brian Ernst/Sun-Times file

The normal period for a re-review is being eliminated, but the office is encouraging people to submit requests online to meet with the assessor’s staff members to have their questions and concerns answered.

Kaegi said his staff will “have to bend over backwards to keep on schedule” but he’s optimistic they’ll be able to get things done on time. The team has been working hard the last few weeks to adjust to the circumstances and try to make sure they’re doing the best for homeowners and businesses.

When asked if he’d support potentially pushing back the due date for property tax bills, Kaegi said the focus should be on the federal government supporting state and local governments instead of potentially taking funding from the county’s hospitals, which are the “front line of defense.”

“The financial ability of our front line of defense depends on the property tax system but … the federal government can also backstop it,” Kaegi said. “So how do we pay for that frontline defense? That’s why focusing on the federal government and the support that it’s providing is paramount in all of this. It has unique fiscal ability, unique liquidity, to provide support to the front line of defense against [coronavirus], and they should be doing that. But if they’re not, if our federal government is failing on that, how do we support the front line of defense? The property tax system has to be there.”

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