One step toward fairer property assessments - Metropolitan Planning Council

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One step toward fairer property assessments

Current assessments rely on market assumptions, not realities. But a new bill promises a fairer system

Flickr user Daniel X. O’Neil (CC)

Cook County's Chief Information Officer Lydia Murray holds a Cook County Property Tax Bill

Imagine watching The Price Is Right. Several people are given a description of an item, and based on that description, they guess the item's value. Commercial property tax assessment works the same way, with County Assessors guessing real estate's value without the full picture, market data. Unsurprisingly, assessments can vary widely—just like contestant's guesses on The Price Is Right.

A new bill introduced by Sen. Toi Hutchinson hopes to change that.

Today, Assessors in each of Illinois’ 102 counties are forced to determine the value of income-producing properties without access to actual market data.

Today, Assessors in each of Illinois’ 102 counties are forced to determine the value of income-producing properties without access to actual market data. When commercial property owners receive their assessments, they have to correct the Assessor’s assumptions which can result in a large change in the assessment. With 1.8 million parcels of real estate in Cook County, that makes the task very difficult. Allowing County Assessors to collect market data prior to valuation will make the process more accurate and fair.

In February, Senator Toi Hutchinson partnered with Cook County Assessor Fritz Kaegi to introduce SB 1379. In April, the bill passed the Senate and is now up for debate in the House. The bill enables the Cook County Assessor’s Office to collect operating income and expense data for income-generating properties. Other County governments can follow suit if their County Board passes a resolution to empower their Assessors to collect this data.

“There are all kinds of commercial properties where we don’t have good third party information; storefronts in the neighborhoods, small office space or courtyard apartments in some areas, and we could be getting it wrong,” says Assessor Kaegi. “We don’t have good information about costs. We will be able to do a better job of assessing those buildings and getting those assessments right with this bill.”

How the bill works

More accurate assessments mean a more fair tax distribution. The bill gives the Cook County Assessor’s Office the ability to collect the same data that is submitted to the Cook County Board of Review for property owners who appeal their assessment for income-generating properties. By collecting income and expense data up front, modeling will be able to take current market rents, vacancy rates, and other market trends to guide the assessment process rather than market assumptions.

“We are transparent in our modeling now, but it is still not predictable because people do not know what data we will put into our models,” Says Assessor Kaegi. If the bill passes, they will have a good idea. We will publish the information and you can situate your asset based on the things we are publishing and then you can predict how you will be assessed. You can then decide how to invest in your property.”

To make sure data is collected, there is a penalty for failure to submit income and expense data, defined as 0.05% of the prior year's market value. The data will remain confidential throughout the process, with criminal penalties for anyone in a governmental office who discloses a property’s information. The bill also exempts the data from disclosure under FOIA prior to anonymization and market-level compilation. Small business or apartments should not be impacted. Commercial properties with a market value under $400,000 and residential properties with 6 or fewer units or market value $1 million or less are exempt. 

Understanding our neighborhoods better

Assessor Kaegi also hopes the information will give us a clearer picture of what is happening in neighborhoods. “Think of Auburn Gresham. We will have better occupancy information, rent information, cost information, and that can really help keep the stock of affordable housing out there and track housing information in a way we never have before,” says Assessor Kaegi.

Data-driven policymaking is essential for effective government. This bill guides decision-making and process to improve accuracy and results in greater tax fairness. For all these great reasons, MPC supports the Data Modernization Act.

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