I used to complain an awful lot about some of the crazy assessed property values I would stumble upon in my day to day real estate work. When Joe Berrios was running the Cook County Assessor’s office I would routinely find higher end properties assessed at a fraction of their market value. However, since Fritz Kaegi took over I really don’t find those problems anymore so, based upon my anecdotal evidence, I think Fritz Kaegi has done a tremendous job of cleaning up the property tax mess that Joe Berrios created.
As a reminder, the way property taxes work, it’s not enough for your own property to be fairly assessed. You also need everyone else’s property fairly assessed because the tax burden, which is simply the county’s/ city’s revenue requirement, is spread out across all properties in proportion to their assessed values. So if your neighbor’s property has a low assessed value more of the tax burden is shifted to everyone else in the neighborhood. That’s why an accurate property assessment process is critical.
You don’t need to take my word for the fact that things have gotten better because there is a fairly simple way to determine how good of a job the tax assessor is doing. The accuracy of the assessments can be objectively measured. When the Chicago Tribune and ProPublica did an analysis in 2017 they basically concluded that Joe Berrios was an idiot.
Since then the International Association of Assessing Officers has also conducted a few studies of Cook County’s assessments. Their reports focus on a few key metrics but two of the more meaningful ones are the ratio of the assessed value of properties (as determined by actual sales prices) to their market values and then how spread out those ratios are. This latter metric is referred to as the coefficient of dispersion and is defined by the IAAO as the average percentage deviation of the assessment ratios from the median ratio.
The first IAAO study looked at the 2018 assessed values of commercial properties and confirmed that Joe Berrios was an idiot. Whereas the median ratio should be between 90% and 110% it actually came in at 61%. In other words, commercial properties were under assessed by about 39%! And while the coefficient of dispersion should be less than 15% it was actually slightly above 52%! In other words, the valuations were all over the map.
The second IAAO study looked at the 2019 assessed values of all properties and showed much better results for Fritz Kaegi’s first year behind the wheel. The median ratio came in at 96% before appeals and the coefficient of dispersion came in at 16.4%.
Of course, you may be aware that many, many people are freaking out over their new property tax assessments and cursing Fritz Kaegi. But that’s because there are some big changes associated with cleaning up the Berrios mess and also property values have appreciated nicely over the last few years. And then the hysteria is further compounded by the fact that people don’t understand the basics of the property tax system. They think that a 50% increase in their assessed value means their taxes are going up 50%. However, as I explained above, the real impact is determined by changes throughout the entire system. If everyone’s assessed values went up exactly 50% there would be no change to anyone’s property taxes. And across the board assessed values are going up. We won’t know until we get our tax bills what the real impact of all this is.
Unfortunately, there was much wailing and gnashing of teeth by commercial property owners and landlords when Fritz Kaegi legitimately tried to increases their assessed values by 77% on average in the northern suburbs. That would have been the fair thing to do. Unfortunately, the 3 member, elected Board of Review overruled some of his assessments, resulting in a mere 25% increase in assessed values.
But the bottom line is that Fritz seems to be doing a great job and you should keep in mind that he is up for re-election next year. This is one down ballot election you’re going to want to actually cast a vote for since it directly impacts your wallet.
#PropertyTaxes #CookCountyAssessor
Gary Lucido is the President of Lucid Realty, the Chicago area’s full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider’s view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.