Villivalam Pitches Bills To Shift Property Tax Burden

The Cook County Treasurer’s Office is backing two bills geared to hold delinquent property tax investors more accountable for their real estate purchases and ease the burden on individual taxpayers who have fallen behind on their tax bills.

State Sen. Ram Villivalam, a North Side Democrat, introduced legislation that would reduce the amount of interest charged on late property tax payments on Friday, the Chicago Tribune reported. In addition, the measure would also close a loophole in the state tax code that costs governments millions of dollars each year.

The bills were drafted by Treasurer Maria Pappas’ office in response to two different studies published last year that found the county’s property tax system disproportionately hammers Black and Latino communities.

“This approach to building a more equitable property tax system will help our most disinvested areas and work to close the racial wealth gap across our state,” Villivalam told the outlet.

The treasurer’s office also found that private investors and hedge funds have been able to take advantage of a “sale in error” process that would allow them to take control of properties they haven’t been paid for and then claim an error occurred so they can undo the transaction and get their money back — with interest paid by local governments.

Pappas’ office said the loophole process was created as a way to reverse tax sales on properties that never should have occurred, but did due to a mistake on the government’s part, such as accidentally including taxes on stretches of highway for sale or errant descriptions of properties in public databases.

But some investors have taken advantage of the process, using the provision to void sales because of discrepancies in the county assessor’s property description, even over minor differences like stucco being used as a building material instead of brick.

Since the treasurer’s office has to repay investors any time a sale in error is made, the loophole drains the city of $40 million each year, most often in Black and Latino neighborhoods, where many properties facing delinquent taxes that could be backfilled by investors are located.

The proposed bill would still allow investors to argue actual sales in error, but a judge will have to determine whether the error is significant enough to issue refunds to the investors.

“This is a system that has been rooted in inequities for years,” Pappas told the outlet. “You do what you can this year; you get this passed … And next year, you work with community groups to see what else can be done.”

— Victoria Pruitt