Systemic Flaws Revealed in Cook County Commercial Property Taxes

Cook County Board President Toni Preckwinkle has uncovered significant flaws in the property tax assessment system for commercial properties that found they’re consistently undervalued, through a report commissioned by the board.

The study, conducted by Josh Myers Valuation Solutions, highlights systemic issues, including undervaluation, lack of data-sharing and inconsistent methodologies between the Cook County Assessor’s Office and the Board of Review, the elected countywide body in charge of hearing appeals of tax values set by the assessor, the Chicago Tribune reported.

These discrepancies have contributed to an unfair tax burden on homeowners while complicating the tax appeals process for commercial property owners, the study found.

The analysis reviewed commercial property valuations from 2020 to 2022, comparing them to actual sale prices in a “sales ratio study.” It found that suburban commercial properties were undervalued, with assessments falling outside industry standards. For example, in the 2022 north suburban reassessment, initial valuations were at 86.6 percent of market value, dropping to 71.8 percent after appeals. Meanwhile, high-value properties in Chicago were often overvalued initially but corrected through appeals.

“The county’s unique classification system, combined with high government spending, is why Chicago has the highest commercial property taxes in the nation,” Farzin Parang of landlord lobbying group Building Owners and Managers Association said. “Until our property tax system promotes commercial investment and growth, residential property taxpayers will not see sustainable relief from dramatically escalating property tax bills.”

The report identifies poor collaboration between the assessor’s office and the Board of Review as a root cause. Differing approaches to valuation, such as capitalization rates used to calculate property income, have led to confusion and inaccuracies. Both offices have also failed to share critical data with each other, including property income and expenses, leading to a reliance on appeals to correct valuations.

Key recommendations from the study include:

Improved Data Sharing: Establishing a centralized database for property information accessible to both offices.

Consistent Valuation Methods: Assessor should be conducting annual studies on capitalization rates and aligning their applications with the Board of Review

Enhanced Transparency: Developing “hearing packets” for appeals that detail the assessor’s methodologies.

Preckwinkle emphasized the need for reform, describing the current system as inequitable and outdated. “It’s important for government to be equitable and fair and for people to believe it’s equitable and fair,” Preckwinkle told the newspaper. “We’ve got a system that has been challenged on those grounds for a very long time, so we’re trying to address that.”

Assessor Fritz Kaegi welcomed the recommendations, stating they address the “biggest equity issue in our property tax system.” He reiterated his support for modernizing valuations, including advocating for legislation to access anonymized property data with details on buildings’ financial performances.

The Board of Review also expressed its commitment to collaboration, aiming to reduce the reliance on appeals and improve public confidence in the system. Board members “have always been committed to transparency and collaboration among all government agencies involved in the property tax system and we will continue to assist each office with obtaining the data required to improve accuracy within the property tax system,” the board’s statement to the Tribune said, adding that it “looked forward” to the county investing in implementing the recommendations.