By State Rep. Jeanne Ives and Assessor Warren Dixon -
As Chicago plummeted to junk bond status, the political circus played on in Springfield. The House voted on a bill to freeze property taxes that, unsurprisingly, won’t actually do so – the sponsor admitted such in debate. In a pitiful display of insincerity, though, the Democrats ran with the bill so their suburban legislators could claim they voted to freeze taxes. In fact, freezing property taxes is the last thing these union-backed legislators wanted to do.
Furthermore, freezing Chicago property taxes could plunge the city into deeper trouble with the bond market and threaten the immediate recall of millions of dollars by creditors. This bill was meant to fail and it did. But, the convoluted property tax system needs at least a bit of discussion. Property taxes are a liberal’s dream as they are both progressive and out of control in Illinois.
Illinois has the second highest property tax burden in the United States. Assessors across the state are confronted daily with seniors who can no longer afford to stay in their homes due to the escalation of taxes on their property. In DuPage County, average property taxes have increased 21% in the last decade even when the value of the property dropped by 17% during the same period. Freezing property taxes is an important goal and lowering them would be even better. However, simply freezing the amount that local governments ask for each year, the tax levy, will not guarantee a freeze for your individual property tax.
Even if your district’s levy and total value of property stays the same, your taxes will rise if any of your taxing districts has increasing debt costs that are levied outside the tax cap. Bondholders require that the debt is guaranteed with specific property tax revenues. The security of those payments are so important that they typically flow straight from the county treasurer to bondholders, bypassing even the local government responsible for them.
Additionally, your property taxes will continue to rise even under a frozen levy if the value of your property rises in comparison to other properties in that taxing district. Six years ago in Naperville Township, commercial property accounted for over 40% of total property value, now it only accounts for 33%. Under this reality, even if government had asked for the same levy amount, residents picked up more of the burden as commercial values declined. Here is yet another reason we need to become business friendly.
The resident/commercial burden is especially skewed in Cook County and Chicago. This year on March 15, the Willis Tower sold for $1.3 billion. At that time, the Cook County Assessor, however, valued it at only $534 million. The next highest sale was a building that sold for $850 million and was valued at only $360 million - 42% of the sales price. Within the top 12 sales in Chicago last year, one building was on the books with a fair market value of only 11 percent of its sales price. Additionally, it is interesting to note that Speaker of the House, Michael Madigan's law firm – according to the Cook County Assessor’s website – represented, for tax appeal purposes, 7 of those top 12 buildings that were woefully undervalued for assessment purposes.
101 counties in the state of Illinois have the same property tax laws. But Cook County is the only county allowed to operate under different rules. Their under valuation of property for both residential and commercial makes them seem to have less local resources and results in them receiving more state education dollars than they deserve. The bureaucrats and politicians have known this for years, but the political class, headquartered in Chicago that have run this state for decades, wants the rest of the state to play the game they rigged.
Meanwhile, the best way to reign in individual property taxes is through economic growth and local government cost control. Wheatland Township levied zero dollars last year. They consolidated assets, sold assets they didn’t need, and used that money instead of levying any tax. The City of Wheaton has not raised property taxes in 5 years. New development and new stores generated new taxes through normal economic growth. Local government leaders have openly stated that what they need for budget control are prevailing wage reform, pension reform, worker’s compensation reform, and collective bargaining and arbitration reform. All of those ideas have gotten lip service in Springfield.
Finally, just in case there was any lingering doubt about the true motives behind this fake property freeze bill, Illinoisans should consider the fact that the bill was passed on Friday. On Monday morning, before the ink on the legislation had dried, direct mail pieces blasting Republican legislators who voted present on a sham bill were stuffed into mailboxes in their districts.
Governor Rauner’s pro-growth reform agenda, along with other business reform initiatives, is the answer. If he doesn’t get it through, we should all be worried. Illinois can only defy the market for so long before economic reality hits.
