Chicago Mayor Rahm Emanuel is proposing the largest property tax increase in the city's history. Under the mayor's budget proposal, property taxes would increase $543 million over the next four years, $318 million of it next year alone, to pay for police and fire pensions. A separate $45 million property tax hike would go toward construction projects at Chicago Public Schools to alleviate overcrowding in some neighborhoods.
Commercial property owners may have to shoulder a huge proportion of the tax hike if a plan to exempt low and middle-income homeowners is approved.
Mayor Emanuel wants to exempt all Chicago residential homeowners whose properties are worth $250,000 or less from paying any of the proposed $588 million combined property tax increase. Rental property would not be exempt. As a result, higher-valued homes and commercial properties would have to make up the difference. Business real estate is already taxed at 2 1/2 times the residential rate.
An analysis by Crains's Chicago Business concluded that commercial properties would wind up paying nearly four-fifths of the tax increase if the exemption goes through.
Recipe for Disaster
Michael Cornicelli, executive vice president of BOMA/Chicago says he believes the exemption plan is a recipe for disaster.
"Exempting residential homeowners and shifting the tax burden to commercial taxpayers is not an equitable solution. It's a short-sighted view of the city's future," Cornicelli told the Chicago Tribune.
Cornicelli said he believes building owners would have to pass the higher costs on to tenants, who would absorb the costs by cutting jobs or moving out of the city altogether. This situation is an added hardship on commercial tax payers that could impact Chicago’s competitiveness and continued economic recovery.
It has been reported in a recent publication by the International Association of Assessing Officers that the Cook County Clerk’s Office estimates an approximate $500 million property tax hike would result in additional annual payments of the following:
$470 for the owner of a $250,000 home
$995 for the owner of a $500,000 home
$1,300 for the owner of $250,000 commercial property
$3,500 for the owner of $1 million commercial property
Part of a Bigger Problem
Chicago's budget concerns are dwarfed by the financial problems facing the State of Illinois. The General Assembly has been locked in a budget stalemate over fiscal year 2016, which started July 1.
Illinois is already $6 billion behind on its bills. Without a balanced budget, the backlog will exceed $8.5 billion by year's end at the current rate of spending.
Lawsuits have forced the state to continue Medicaid payments to Cook County hospitals and other medical facilities. Court rulings also ordered that state employees be paid in full until a budget can be approved.
Chicagoans have always believed in the adage, "wait until next year.” However, when it comes to property tax, it appears there are no more next years.