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Why local school districts are lining up against Fritz Kaegi
Many commercial landlords say the Cook County assessor has inflated the value of their properties. Worried they'll be on the hook for big tax refunds, a surprising number of local governments agree.

Thursday, July 02, 2020
Crain's Chicago Business
by Alby Gallun

When the owner of the Edens Plaza shopping center in Wilmette appealed its property tax assessment last year, it had an unlikely friend in its corner: New Trier High School.

After Cook County Assessor Fritz Kaegi more than doubled the property’s estimated market value, to $67.8 million, last year, the shopping center’s owner, Chicago-based Newport Capital Partners, sought a reduction from the county Board of Review, which hears assessment appeals.

New Trier Township High School District 203, the village of Wilmette and two other local taxing bodies intervened in the case, agreeing with Newport that Kaegi’s office had overshot by a lot—even though Edens Plaza’s estimated value was still less than the $72 million that Newport paid for it in early 2019.

Last November the local governments settled with Newport on an even lower value: $42.5 million.

With Kaegi’s office hiking assessments on commercial properties, a surprisingly high number of local governments—which rely on property taxes for their funding—have sided with landlords when they appeal their assessments. They have become important, if accidental, allies in a PR campaign to discredit Kaegi and his push to shake up the assessor’s office.

It seems counterintuitive: Local officials should want the biggest property tax base possible, right?
But they are motivated by one key factor: The potential that landlords will take their appeals to the Illinois Property Tax Appeal Board or the courts—and they’ll win. A successful appeal on a big commercial property could force a local taxing body to pay out millions of dollars in budget-busting tax refunds in the future. It’s a risk-mitigation strategy.

“Our goal is to do everything we can to avoid refunds,” said Chris Johnson, assistant superintendent for finance and operations for the New Trier school district. “It’s good for us to have the certainty.”

Local governments intervened in about 200 assessment appeals with the Board of Review last year, according to the board. That’s up from just 11 in 2018 and 13 in 2017. Typically, local governments intervene to argue that a property is undervalued, but now they’re saying values are too high.

“It’s unprecedented that we’ve seen this at the board,” said Michael Cabonargi, one of three commissioners at the Board of Review.

Most of the cases cover properties in the northern and northwest Cook County suburbs, which Kaegi valued last year under the county’s triennial assessment process. The cases have involved the Westfield Old Orchard Mall in Skokie, a big data center in Northlake and the Sears headquarters in Hoffman Estates.

Landlords benefited from having governments on their side. The appeals backed by local taxing bodies last year resulted in a nearly 33 percent reduction in estimated aggregate market value, from $8.29 billion under the assessor to $5.57 billion under the Board of Review, according to an analysis by Renew Cook County, a landlord-backed group that’s running a PR campaign against Kaegi.

To Renew, the data just confirms what it has been saying for months: that Kaegi’s office is unfairly inflating the value of commercial properties to shift the property tax burden away from homeowners and onto local landlords and businesses. The average residential property tax bill in Cook County rose 1.3 percent this year, versus a 9.8 percent increase for the average commercial and industrial bill, according to the Cook County Treasurer’s office.

Many landlords will pass along their property tax increases to their tenants. Some have been hit with hikes of 40 percent or more, said Renew spokesman Rob Nash.

“That’s a massive blow to the regional economy,” he said.

Scott Smith, a spokesman for Kaegi, dismissed Renew as a purveyor of “propaganda” for wealthy property owners, saying interventions by local governments are a “normal part of the assessment process.”

“It’s not surprising that there would be an increase in these type of requests as we reassessed the north suburbs,” Smith wrote in an email. “Many commercial properties of this type had not seen significant changes in their assessments in the past several years so an increase in interventions would be expected as these assessments are now closer to current fair market value, as third-party reporting has shown.”

Elected in 2018, Kaegi defeated predecessor Joe Berrios by pushing a reform agenda, saying Berrios drastically undervalued big commercial properties and was too friendly with property-tax appeals attorneys. Assessments are arguably the most important variable used to calculate property taxes, but are also hotly contested and can vary wildly.

In Hoffman Estates, for instance, Kaegi’s office valued a former AT&T corporate campus at $226.6 million in 2019, up from $40.9 million. The problem: The 1.6-million-square-foot property was empty, and a New Jersey developer, Somerset Development, bought it for just $21 million last year.

After the village of Hoffman Estates intervened in Somerset’s appeal, the Board of Review signed off on a $44.3 million value for the property, according to the board.

Municipalities and school districts would rather know what a property’s value is now, rather than wait for an appeals process that sometimes can drag on for years.

New Trier, which has an annual budget of about $110 million, tries to limit its exposure to refunds, which can total anywhere from $1.5 million to $3.5 million annually, Johnson said.



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