Property values are rebounding in the Chicago area, which is leading to higher property tax bills. Cook County taxes commercial and industrial property at a rate 2.5 times the residential rate. Therefore, businesses shoulder the brunt of the current tax burden and will continue to do so in the future.
Figures released by the Cook County Clerk show the equalized assessed valuation of real estate rose 1.82% in 2014 - the first increase reported in Cook County since 2009.
The amount of property taxes levied by local governments is going up even faster than property values. Overall, the county's local units of government levied a combined property tax of $12.37 billion in 2014, up 2.16%.
Simultaneously, the City of Chicago’ s credit rating received a further downgrade from Moody’s with a negative forecast, due in part to the severe budget pressures brought on by unfunded pension liabilities.
Chicago's four pension plans have a combined $20.1 billion unfunded liability. State law requires full funding of annual pension payments beginning in 2016. The magnitude of the pension liabilities makes a property tax increase inevitable.
Nuveen Asset Management analyzed the Cook County's 2013 property tax levies, pension payments, and annual pension costs in a recent report. Based on this review, Chicago would need to increase its portion of the property tax levy 155.6% to make a full pension contribution and Cook County would need to increase its portion by 60.8%.
Chicago has the authority to raise taxes without voter approval, but the magnitude of needed revenue to fund liabilities without crowding out other public service expenses would be politically difficult to implement, the report explains. Continuing to delay funding is an unsustainable maneuver, as it serves to increase the liability and elicit mounting budget pressures in future years.
As officials try to find ways to deal with the massive budget shortfall, ideas are being proposed to bring a casino to Chicago, raise fees, or expand the sales and income tax. However, an accompanying property tax will undoubtedly be necessary. With the tax increase falling primarily on businesses, there are concerns that it will make Chicago and Cook County less desirable for future business expansion and new development.
Assessment Appeals May Provide Needed Relief
Property owners cannot directly control how local and state officials will ultimately address these looming budget and unfunded pension liability challenges in Chicago and Cook County. However, they can work to keep their property's assessed value fair and equitable during the 2015 Chicago triennial reassessment program, which is being implemented by the Cook County Assessor this summer.
The assessment appeal success rate for the largest taxpayers in Cook County was over 77% last year. This percentage is strong indicator that working closely with a professional to proactively appeal an overstated tax assessment is the best way to deal with escalating property taxes and to control your real property costs.