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County: Higher property taxes partly a hangover from foreclosure crisis
Cook County says Bank of America's alleged predatory lending practices that sparked foreclosures mean that property owners are footing the bill for those homes' drop in value.

Tuesday, December 10, 2019
Crain's Chicago Business
by Dennis Rodkin

The foreclosure crisis has mostly faded out in recent years but it’s still casting a shadow over Cook County property owners’ tax bills, the county’s legal team argues in the latest volley in its lawsuit against one of the nation’s largest mortgage lenders.

Despite a substantial hit to its property tax base when more than 100,000 homes were in foreclosure and infected their neighbors with declining values, Cook County maintained its spending on health care and other services. To compensate for the loss of tax revenue on foreclosures, the county had to “raise the tax rates affecting all similar classes of property and, as Cook County has done, raise other taxes,” according to a filing submitted by State’s Attorney Kim Foxx on Dec. 3.

While there’s no dollar figure included, the county’s claim is the latest volley in a lawsuit it launched in April 2014. The county alleged that Bank of America’s predatory lending, particularly in black and Hispanic neighborhoods, helped bring on a tsunami of foreclosures. Cook County argues that, among other things, the foreclosure wave wiped out property tax collections by pushing down home values in those communities.

Predatory lending and the subsequent fallout crushed Cook County’s “ability to levy and collect taxes on individual properties whose values have declined due to defendants’ discriminatory lending, servicing and/or foreclosure activities,” private attorneys managing the case wrote in the filing.

Other property owners wound up carrying the freight for the foreclosed properties and their neighbors whose value dropped, the attorneys wrote.

And that, the filing says, has harmed Cook County residents. “Raising the tax rate disadvantages the county in competition for new businesses and business expansion compared to neighboring counties with lower tax rates,” the filing says.

Higher tax rates “adversely impact the prosperity of businesses and the community at large,” the filing says, and can have “political repercussions on county officials.”

Kenneth Wexler, managing partner of Wexler Wallace, a Chicago law firm that is one of three handling the case under Foxx’s name, declined to comment and said no one involved with Cook County’s effort would comment.

“The court has already ruled twice that the county’s tax revenue claim is without merit,” Bill Halldin, a media relations officer for Bank of America, said in a statement. The Dec. 3 filing is Cook County’s third attempt, a so-called ‘memorandum of law in support of its motion for reconsideration.

In a March 2018 ruling, U.S. District Court Justice Elaine Bucklo wrote that the lost tax revenue is a few steps “remote” from the alleged discriminatory lending practices and not a direct effect of the alleged discrimination. Cook County is requesting that she reconsider that opinion.

In a brief phone call, Halldin said Bank of America will file its response to the motion for reconsideration in the next few days.

Cook County’s memo does not specify how much additional tax other property owners had to pay. Cook County’s filing is, essentially, a request to Bucklo that it be permitted to tally that damage, with the tens of thousands of property records it has in hand.

The county does not claim that higher property taxes are only the result of foreclosures, but that foreclosures contribute to recent years’ increases.

Bucklo wrote that the county has a right to ask for compensation for costs it incurred while, for example, maintaining vacant foreclosures. But she asked Cook County to explain how it could claim to have lost tax revenue because of the foreclosures when its tax collections didn’t decline in the wake of the crisis. Cook County’s attorneys pointed out that because the county continued funding services and paychecks, it had to raise rates on everyone to compensate for the loss of tax revenue on foreclosed properties and their neighbors.

Cook County likened the situation to a married man who becomes disabled as the result of a work-related accident. If his wife takes on additional work to compensate for the loss of income, the filing says, that doesn’t negate the man’s claim of damages.



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