Study stalls assessment cap renewal
Thursday, April 13, 2006
by KAREN BERKOWITZ
Is it fair to ask some homeowners to finance the property tax breaks enjoyed by others?
That question landed in the legislature's lap two weeks ago -- along with hard evidence that sizable numbers of homeowners have been paying higher property taxes as a direct result of the 7 percent assessment cap in Cook County.
The cap was enacted to protect homeowners from the whiplash of sudden tax increases as a result of home prices going bonkers and interest rates hitting historic lows.
But according to the official impact analysis for the Illinois Department of Revenue, the assessment cap has caused tax rates paid by all property owners to be 4 percent to 7 percent higher on average than if the measure had not been enacted. The study has put the bill to extend the cap on hold.
In Chicago, eligible homeowners saved 14 percent following the 2003 reassessment, and other taxpayers paid 4 percent more.
When the northern suburbs were reassessed in 2004, qualifying homeowners saved 9 percent, while other property owners paid 7 percent more. The same pattern is expected to hold when the 2005 reassessment plays out this fall on the tax bills of property owners in the western and southern suburbs.
The cap effectively limits the growth in assessments to 7 percent a year through an expanded homeowner exemption, up to $20,000.
"The assessment cap is a tax shift with some homeowners getting a tax cut, but all other taxpayers getting a tax increase," noted the authors of the study by the Institute of Government and Public Affairs at the University of Illinois.
The rush to extend the assessment cap before the 2006 reassessment in Chicago was stopped in its tracks after the study's findings were aired in the Illinois House of Representatives.
"The study pointed out that there are a lot of losers," said State Rep. Barbara Flynn Currie, D-25th, of Chicago speaking to why Senate Bill 2691 was not expected to move out of the rules committee that she chairs.
"When you do something to help out homeowners, you know there is going to be some impact on the business, commercial, industrial and renter (sectors.)
"What they discovered was there was a fair number of homeowners who were disadvantaged because their properties had not escalated in value as much. That gave people some pause for thought," said Flynn Currie, noting the measure can be considered in the fall session and still apply to the Chicago reassessment.
In tony bedroom communities like Winnetka, Kenilworth and Barrington Hills, homeowners saw little benefit from the tax cap because the large exemptions had a corresponding effect on tax rates.
"If everyone in your community is getting a decrease in their assessment and it is a pure bedroom suburb, everybody's tax break is nobody's tax break," said Richard Dye, an economics professor at Lake Forest College and a co-author of the institute's study.
"There is a relatively small gain for homeowners in high value, high appreciation suburbs," said Dye. "But the few non-eligible property owners, retailers and apartment buildings get clobbered with big tax increases."
Among homeowners, the biggest winners were in communities with industrial, commercial and multiple-family apartment buildings to absorb the tax shift.
The Cook County Assessor's office contended the report was misleading because it focused solely on the shift that occurred with the expanded homeowner exemptions and did not include data from prior years.
"Shifts in relative tax burden occur each time a reassessment is conducted," noted Maura Kownacki, spokeswoman for Cook County Assessor James Houlihan.
The intent of the Expanded Homeowner Exemption was to slow a massive shift from commercial to residential taxpayers because of an overheated real estate market.
"It was designed to smooth out increases in taxable value for residential homeowners in rapidly appreciating areas, and to act as an insurance policy" for homeowners in areas of slower growth, who might experience similar upturns in the future, said Kownacki.