Bill could set up wave of property tax hikes
Legislation headed to Pritzker addresses over-assessment errors
Legislation headed to Gov. J.B. Pritzker’s desk could set the stage for a wave of annual real estate tax increases across Illinois by giving local taxing bodies the ability to make up for refunds they’ve issued due to erroneous property over-assessments by shifting those costs onto the rest of their taxpayers.
In Cook County alone, refunds issued by local taxing bodies during the 2020 calendar year in categories covered by the legislation total $176.3 million — an amount roughly in line with annual refunds issued since 2015, based on statistics obtained through a Freedom of Information Act request from the county treasurer’s office.
Under the measure, starting with next year’s property tax bills, a taxing district levy shall be increased to reflect refunds through rulings of the Property Tax Appeals Board, a court-ordered assessment correction or a certificate of error. Because such appeals can often take years, and due to annual assessment errors, the recapture provision means likely annual future increases in property tax bills regardless of current limits in state law.
The legislation points to the power of the education lobby in Springfield, from local school districts and administrators to teachers’ unions, amid Illinois’ overly dependent system of funding schools at the local level through property taxes rather than through state funding.
Property taxes for schools traditionally make up the biggest line item on real estate tax bills and proponents of the legislation came largely from the education community.
The measure, approved May 31 with only a lone negative vote in the House and Senate, received little debate despite its potential financial ramifications for taxpayers who have long been weary of ever-increasing property tax bills.
Pritzker has not stated a position on the bill. He has not yet formally received the bill from the legislature and his office said he looks forward to reviewing the measure.
The legislation has the potential to further shift school and other local government costs from businesses to homeowners since the bulk of successful over-assessment appeals are made by commercial property owners. That’s especially true in Cook County, with its large commercial property and development base and the fact that it is the only county where commercial property is assessed at a higher rate than residential.
For example, if a commercial property was over-assessed by $10 million, the other property owners — who had already received their notices and thought they knew what their tax burden was going to be — would have that $10 million collectively added to their tax bills the next year.
“If signed by the governor, this will be the worst property tax shift in decades,” said Andrea Raila, a longtime property tax appeals specialist and an unsuccessful 2018 candidate for Cook County assessor who testified against the measure.
“This gives the taxing authorities the right to ignore that these assessments were too high and in error in the first place and allows them to raise their levies and rates to recapture all of these overinflated, fake assessments,” she said. “If signed, watch for huge tax burdens shifted over to taxpayers in the future.”
The legislation requires county treasurers each Nov. 15 to issue a report listing the amount of refunds that their local taxing bodies had to make due to successful assessment appeals, often times amounts that require back interest to be paid.
Taxing bodies can recoup the losses the following year by tacking it onto their basic tax levy, regardless of whether it exceeds the limits of 3% or the rate of inflation under the state’s Property Tax Extension Limitation Act, which covers non-home rule units of government. Chicago is a home-rule unit.
Local taxing districts cannot build the refunded levy money into their base levy the following year. But due to the length of time in processing property tax appeals, levies and tax bills are expected to increase annually.
The concept of the legislation is an attempt to hold local taxing districts harmless for drawing up their annual budgets, only to the see the amount of revenue they have available to spend through property taxes reduced by having to issue refunds due to erroneous over-assessments.
But Raila and other critics contend it allows taxing districts to collect money that never truly existed because the assessments were erroneous and shift the burden onto the taxing district’s other taxpayers to make up for assessment mistakes.
The legislation was the initiative of state Sen. Don DeWitte, a St. Charles Republican, after requests by officials from northwest suburban Huntley’s Community School District 158 for help in making up for lost revenue due to erroneous over-assessments.
“What this bill will do is it ensures that if you’re assessed a million dollars in a given year, the following year when it pays out, you will see a million dollars in property tax revenues,” DeWitte said of local governments. “Then any adjustments that are made in the process are washed over to the following year’s property assessment.”
DeWitte said he believed the legislation would put more pressure on assessors to deliver more accurate assessments to avoid constant property tax increases driven by mistaken calculations. “That definitely was one of the byproducts of this legislation,” he said.
Cook County Assessor Fritz Kaegi’s office said he took no position on the bill when it was being considered in the General Assembly and had no comment on its passage — though the assessor’s office was actively involved in negotiations on other elements of the legislation.
DeWitte said he expects negotiations will ensue between local taxing bodies and assessors over the ability to recapture revenues from over-assessments because commercial property owners “typically don’t put any demand on school systems, or the park district systems, or the library districts.”
But there are no provisions in the measure that establish those types of negotiations and DeWitte acknowledged “we’re going to have to do a lot more work and massage it with regards to exactly how this process gets put in place and what the dynamic will be between assessors and governmental entities throughout the 102 counties in the state.”
“So,” he said, “call it a work in progress.”
But Raila said the legislation points to unfairness in the property tax system.
“It’s fundamentally wrong in the most simplest of terms because those assessments were improper to begin with,” she said. “It shows government’s insatiable appetite for the property-tax dollar even though that tax dollar truly doesn’t even exist because it’s wrong and in error.”