Changing tax system to help, Kaegi says

South suburban homeowners and business leaders have long warned that Cook County’s high property taxes were squeezing the life out of communities.

High costs were driving people and commerce into neighboring Will County and Indiana, they said. Hard economic times, such as the 2008 financial crisis, seemed to hit people in the Southland worse than in other areas.

“When the rest of the county gets a cold, you get pneumonia here,” Cook County Assessor Fritz Kaegi told a group of more than 100 people during a Chicago Southland Economic Development Corp. forum Friday at Glen woodie Golf Club in Glenwood.

Hopes are high for Kaegi, who took office on Dec. 3 after winning election in November. He campaigned on a platform of reform and promised to bring fairness, ethics and transparency to the assessor’s office.

He unseated Joseph Berrios, whowas criticized for using outdated and unscientific methods to determine property values.

Kaegi told the audience that when hewas a boy, his father told him howthe system in Cook County worked. You knew a guy who knew somebody, then you hired somebody to appeal your taxes. Over time, people accepted that appeals were a routine part of the process.

“The owner of a home in South Holland or Blue Island shouldn’t have to knowa guy,” Kaegi said. “It doesn’t work thatway in the rest of the country, where assessors get it right the first time. It’s very different here.”

Many hope Kaegi will restore integrity to the assessment process. He’s promised a number of changes, but they will take time to

implement. The northern third of Cook County might see the first effects as Kaegi’s office assesses properties this year.

“We’re doing the northern triad now. We will get to the Southland next year,” Kaegi said.

If nothing else, Kaegi displays a keen understanding of how assessments are intertwined with economic development and property tax issues. He said people in the Southland often tell him their concerns about the county’s recent requirement that businesses pay prevailing wages to construction workers in order to qualify for economic development incentives.

Kaegi said hewould “forcefully convey” those concerns to county board commissioners.

Kaegi’s office can only address assessments, yet he shared opinions about how other county and state officials could address equity concerns that seem to disproportionately affect the Southland.

For example, Kaegi supports a graduated income tax instead of the state’s current flat tax. Illinois depends too much on local property taxes to fund education, he said. Many other states cover about 50 percent of K-12 education costs, but Illinois ranks last in the nation and provides less than 25 percent, Kaegi said.

“The property tax has to carry so much of the burden for funding education,” he said.

The only way to permanently lower property-tax rates in south suburban communities is for the state to provide a greater share of education funding, Kaegi said. The bestway for the state to do that, he said, is to adopt a progressive income tax system.

“No one in Illinois has more riding on a progressive income tax than Chicago’s Southland,” Kaegi said. “Taxes paid by people here are much higher than they should be.”

Gov. J.B. Pritzker has said he supports a graduated income tax structure, in which people with larger incomes pay higher rates. Illinois is one of eight states with flat incometax rates.

The problem with relying too heavily on property taxes to fund schools, Kaegi said, is that physical assets like property are taxed too heavily while wealth from transactions isn’t taxed enough.

Kaegi said prior to being elected assessor, he spent his career managing assets and portfolios. He said he would earn bonuses when funds performed well, and a lot of people make big money off financial transactions.

“All the wealth fromthat sector doesn’t really get taxed,” he said.

Technology and services have greatly transformed the economy from the days when wealth meant factories and manufacturing centers, he said. It might have made sense to tax physical assets then, he said, but a lot of wealth today is not being taxed.

Kaegi said his office is working with state lawmakers on proposed legislation thatwould require information about commercial rents and costs be shared with the assessor’s office.

“Our first priority is a data modernization bill that collects operating income and expense data for income-generating commercial properties at the start of the assessment process,” his office said in a Wednesday report about Kaegi’s first 50 days in office.

Kaegi said hewould refuse campaign donations from firms that handle property-tax appeals and that he has cleaned house of employees who received jobs through patronage or nepotism.

A team fromthe International Association of Assessing Officers is auditing the office’s practices and will recommend how methodologies and operations can be improved, he said.

Kaegi has pledged to increase transparency about howthe assessor’s office determines property values. Publishing assessment methodologies will give banks more confidence to lend money for mortgages and help stabilize communities, Kaegi said.

“Transparency brings down the cost of doing business,” he said.