Property Taxes Focus of Crain’s Op-Ed Penned by BOMA/Chicago Executive Director Farzin Parang
BOMA/Chicago Executive Director, Farzin Parang, recently authored an opinion piece on property taxes that was published in Crain's Chicago Business, "Property Taxes Don't Have to Be a Zero-Sum Game. The text of the letter is below.
Property Taxes Don't Have to Be a Zero-Sum Game
Crain’s has recently written about the significant challenges facing downtown office buildings. Top-line solutions have included urging owners to invest more and pushing the Mayor for solutions. The elephant left out of that conversation: the important role of property tax policy.
Our city now has the second highest commercial property tax bills in the country, behind only Detroit. These bills are meaningful: the biggest portion of an office tenant’s rent in Chicago – by far – goes straight to its share of property taxes. That is why it is so shocking to see Assessor Fritz Kaegi piling additional property tax burden onto businesses during the pandemic. Crain’s recently spotlighted 14 downtown office buildings that are struggling to pay their mortgages. Despite their financial woes, the Assessor doubled those buildings’ aggregate assessment. The idea that those empty office buildings are somehow worth twice what they were before the pandemic defies logic.
To justify his actions, Assessor Kaegi attacks businesses with heavy “us vs. them” rhetoric that pits residents against their own economy. His politically charged language is effective, but the data do not validate his decisions. Instead, they show inaccuracy and political favoritism—the same story we hoped Kaegi would end.
According to the State’s Department of Revenue, when Kaegi began his term as Assessor, residential and commercial properties in Cook County were almost identically underassessed. Instead of increasing assessments uniformly, however, Kaegi has favored his political base and reduced the assessment of single-family homes, while increasing the tax burden on commercial property. The latest data from his 2019 reassessment of the northern suburbs demonstrate how he pushed residential assessments even further below their assessment target.
Source: Adjusted Median Sales Assessment Ratios for Cook County. Illinois Department of Revenue, 2019 and 2020 sales ratio studies evaluating 2018 and 2019 assessments.
Then, in 2020, Kaegi used the pandemic as an excuse to further reduce residential assessments and shift even more taxes onto struggling businesses, this time across the entire county. To do so, Kaegi made up assessment methods that were not sanctioned or used elsewhere in the country. These assessment games were undeniably inaccurate. When Kaegi started reassessing Chicago in 2021 to his mantra of “businesses aren’t paying their fair share,” the city’s commercial properties were actually assessed the highest of all the property types. On top of that, the property tax deck is stacked against businesses by Cook County law—after the Assessor sets their value, they are assessed at 250% the rate of residential and apartment properties. That did not deter Kaegi from continuing to wildly increase commercial property assessments all over Chicago, however.
Make no mistake: this is not the tired “downtown vs. the neighborhoods” trope. Assessor Kaegi’s increases are impacting your neighborhood retailer, favorite restaurant, hair stylist, and more. And the double impact of the Coronavirus and Kaegi on downtown office buildings is bad for everyone. Our office buildings drive innovation and growth for thousands of businesses employing hundreds of thousands of residents from every neighborhood. It is those businesses that pay commercial property tax, and most of them are small businesses, even downtown. While those small businesses are hurt most immediately by the Assessor’s games, diminishing office tenancy also affects thousands of good-paying, union jobs our industry employs across every demographic.
The more we push office tenants away with higher taxes, the worse our recovery will be for other industries that rely on downtown’s density, too: restaurants, retail, cultural institutions, tourism, and even public transit. Reducing the viability of our commercial buildings also disproportionately increases residential property taxes—because of the stacked system, every dollar of lost commercial property value is $2.50 that must be taxed from residential properties.
Rest assured, the large commercial buildings downtown pay the highest property taxes in the County—and they are not asking for preferential treatment. They do ask, however, that our serious policymakers move beyond the notion that property tax assessments are a zero-sum game that pits us all against each other. We are in this together—and as long as commercial property subsidizes residential property taxes, we need tax policies that foster business growth. Business growth disproportionately creates more property tax revenue for everyone. Not only is it the most effective and sustainable way to manage .ever-increasing residential property tax bills, it also increases our jobs, investment appeal, and quality of life across the entire city.