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Part II: Let's talk taxes, baby

Sunday, December 07, 2008
Daily Southtown
by Kristen McQuerey

With property reassessment notices in hand, many Southland residents are questioning increases reflected in the paperwork.

From Country Club Hills to Orland Park, rising assessments beg the question: Will tax bills increase, too? If so, why?

Can you still buy the 52-inch flat screen for your, um, wife for Christmas? Or will your discretionary income be gobbled by property taxes?

Last week, I explained one reason for higher assessments in the midst of a foul housing market. The assessments reflect home sale prices for 2005, 2006 and 2007 during a much hotter real estate environment.

This week, I'll revisit tax cap legislation of the 1990s; how it affected your pocketbook; and the status of the 7 Percent Expanded Homeowner Exemption pushed by Cook County Assessor James Houlihan.

Sharpen your pencils, pupils. Here we go:

In 1991, the state Legislature approved the first Property Tax Extension Limitation Law, also known as tax cap legislation. The law limits the amount of money governmental bodies can collect to 5 percent above the previous year or the consumer price index, whichever is less.

The law is the reason taxing bodies must go to referendum to take on new debt for school buildings and water parks. Voter approval is required.

"Tax caps are a break on greed," according to Cal Skinner, a former House member who worked on the law.

Most taxing bodies request more money each year than they intend to spend. Once their request is filed with the county clerk, however, the clerk applies a tax rate that brings them into compliance with the tax cap law.

That's why you might see a legal notice in the newspaper, for example, from a school district levying taxes that appear to violate the cap law. The district is estimating the amount of money it needs, erring on the high side, knowing the clerk will pull them under the cap with an appropriate tax rate. Then the bill is sent to you.

So caps have done what they intended. They rein in spending.

Still, tax caps are only one spoke in the wagon wheel. The algebraic nature of property tax bills means the amount you owe is not restricted to a 5 percent increase or the consumer price index.

Another spoke is your assessment, which is the value your local assessor places on your property.

In 2003, when the real estate market soared, assessments in traditionally under-assessed Cook County climbed. From Lincoln Park to Englewood, homeowners began to see triple-digit increases.

To Band-Aid the bleeding, Houlihan introduced legislation limiting annual assessment increases for homeowners to 7 percent.

The 7 percent bill wasn't focused entirely on reducing property tax bills. It was designed to infuse predictability into the process. At least in Cook County, homeowners could expect, after each three-year reassessment cycle, an assessment increase limited to 21 percent.

Remember, folks: We're only talking assessments here, not tax bills. There is no direct correlation between a rise in assessments and a rise in actual bills.

Are assessments an indicator? Yes. But your tax bill has far more to do with what your local school district is charging you, not what the assessed value of your home is.

After three years of the program, Houlihan's office says homeowners did, in fact, see more manageable increases in their assessments. He and Gov. Rod Blagojevich tried to make the 7 percent bill permanent in 2007.

But House Speaker Michael Madigan disagreed, along with the business community and south suburban lawmakers. The freeze, they believe, benefitted North Side residents at the expense of South Siders - a contention Houlihan describes as a myth.

The freeze also became unnecessary, opponents said.

"The assessment cap was put in place during a booming real estate market when property values were rising rapidly," Chicagoland Chamber of Commerce president Jerry Roper said. "That day is long gone."

Either way, here's the bottom line for Southland residents of Cook County:

The tax bill you paid this fall reflected the 7 percent freeze under the homeowners exemption of your bill. Your tax bill - not your reassessment notice - included an exemption of $20,000 instead of the usual $5,000.

Next fall, the exemption will jump to $33,000 when the "freeze" bill is maximized.

The following year in 2010, the exemption will drop to $26,000, and then it will fall back to $5,000 in 2011, unless lawmakers decide to renew the law.

Personally, I'm ambivalent about Houlihan's bill. What we need is an overhaul of our state's taxation system. Until then, we're blind mice skittering through a maze.

Next Sunday, I'll examine school district levies in Lincoln-Way. I'll also show you two businesses across the street from one another, one in Cook County and one in Will County, and the difference in their property tax bills.

Most importantly, I must correct an error from last week: Assessor Houlihan and Board of Review Commissioner Brendan Houlihan are not related. They are not cousins.

I mixed up my Irish. My apologies.

Kristen McQueary covers government and politics for the SouthtownStar. She can be reached at (708) 633-5972 or kmcqueary@southtownstar.com.



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