The Cook County, Illinois, tax assessor's office was in the midst of its triennial assessment of the southern suburban townships when the COVID-19 pandemic hit.
The county is broken up into three parts — north, south, and Chicago — and each section is assessed once every three years. Ordinarily the assessments would be based on a property's value as of January 1, but the assessor’s office has decided to wait for the appeals process to be completed, after which it will issue revised assessments to properties in the southern triad based on property class, whether or not the owner has appealed.
“I wouldn’t characterize it as a full reassessment of the whole county, but the first thing is to reassess the south triad of Cook County,” assessor Fritz Kaegi (D) told Tax Notes on April 9. “We do have the ability to take into account what’s happening this year. The COVID-19 impact on real estate valuations is still shaking out, and markets are determining new prices.”
“We’re looking at the impact of COVID-19 on each different asset class, each community, as best we can. Some asset classes — think small-level retail or hospitality — will be disproportionately hurt because of the crisis,” Kaegi said. “There may be some aftereffects, too. We will also look at which residential properties were more impacted in the downturn in 2008 and 2009 and which were more resilient. Some communities saw housing prices fall over 50 percent and never recovered.”
For the north suburbs and Chicago townships, the assessor’s office will look at the appeals data and determine how best to adjust values within property classes and townships by issuing a factor adjustment to the property values.
The reassessment will not affect property tax revenue because Cook County adjusts property tax rates to meet budgetary requirements. A change in valuation only affects which share of the total property tax revenue pie each asset class pays.
Cook County assesses properties by looking at their fair cash value and assessing residential properties at 10 percent of their value. Commercial properties are assessed at 25 percent of their value.
One of the difficulties in assessing values is that appraisals are generally backward-looking. A property’s value is a reflection of prior values and sales, but assessors try to get up-to-date data to better reflect current conditions.
Kaegi said that for a situation like the pandemic, more data is needed, and his office is looking at several approaches. They talk to brokers and see what transactions are closing, though fewer are at the moment. They can look at the real estate investment trust market, in which assets are continuously traded and the market discounts what’s expected in each asset class. They can also look at past behavior during the 2008 crisis.
Then there is the appeals process, which requires property owners to submit the Real Property Income and Expense (RPIE) form. The form was created to gather data on what’s happening in the market and requires owners' input on vacancy rates, the number of units, rental and business income from different tenant groups, and other information.
Although the RPIE is voluntary for the regular assessment process, Kaegi has backed state legislation (S.B. 1379) that would make it mandatory for large commercial property owners to complete the form on an annual basis. Using the form during the pandemic will better inform broader adjustments to property values.
“All data points go one step further than intuition. . . . If we’re assessing based on third-party databases, the data is older, and it’s like driving by looking into the rear-view mirror. The RPIE gives us data on what’s happening now, and with COVID-19 we can see through the appeals process that ‘here is how much I’ve given my tenants in rent abatement or forbearance,'” Kaegi said.
Kaegi hopes that this up-to-date data will encourage landlords and tenants to work together to keep businesses and tenants in place through rent assistance or forbearance. The assessor’s office is working on rules for an affidavit that both the landlord and tenant can provide that would take rent adjustments into account in the appeal and assessment process.
S.B. 1379 was approved 36 to 16 by the Senate in April 2019 and is now in the House Revenue and Finance Committee's Property Tax Subcommittee. More than 300 people have filed witness slips in support of the legislation, and more than 300 have filed slips in opposition.
Carol Portman, president of the Taxpayers’ Federation of Illinois, is against the legislation and the amount of information required on the RPIE, but understands that some data is needed.
“I’m nervous about [them] getting all that data. What are they going to do with it? Will it be helpful, or will it muddy the waters?” Portman said. “They have good data people, so we will see. And good for them for trying to help people. It will make property owners feel better to see that there’s been an adjustment acknowledging the impact, but we’ll see whether it really impacts the dollars they pay.”
In referencing the 2008 recession and the drop in property values, Portman acknowledged that residential properties were more affected than commercial properties.
“I suspect that commercial properties will be hurt worse than residential this time around. It will be interesting to see,” Portman said. “[Kaegi’s] last round of reassessments really reflected a dramatic increase in commercial and industrial, compared to residential. Generally speaking, everyone’s values went up, but the residential weren’t as dramatic as the business properties were, or the business share of the tax pie.”
Kaegi’s office released reassessments for the northern suburbs in December 2019. The reassessment set a 74.4 percent increase for commercial properties and 15.6 percent increase for residential properties. While the values increased a great deal, experts opined that the transparent process was positive for the market long-term, according to a report from Cushman & Wakefield.
In 2017 the Chicago Tribune and ProPublica published a series of articles chronicling systematic abuse by the Cook County Assessor’s Office under former assessor Joe Berrios, benefiting wealthy and well-connected homeowners to the detriment of minority neighborhoods. A subsequent lawsuit was settled in November 2019, with plaintiffs’ lawyers crediting Kaegi with making substantial reforms.
Correction, April 14, 2020: An earlier version of this article said that the Cook County Assessors’ Office was nearing the end of its triennial assessment. The assessors’ office had sent out notices to four townships in the South Suburbs, but was still in the process of reassessing other properties.