Chicago Tax Assessor Credited With Some Fixes to Unfair System

Cook County Assessor Fritz Kaegi is delivering on his signature promise to make the property tax system fairer, but questions remain about whether his office is getting the numbers right.

Kaegi has “clearly improved” the fairness of assessments over his two terms, reversing the system that for years overvalued working-class homes while giving breaks to the wealthy, the Chicago Tribune reported, citing a study by University of Chicago professor Christopher Berry.

About 70 percent of assessments of homes that fall below the luxury category by Kaegi’s predecessor were trimmed down. Berry’s analysis concluded that for the first time in years, Cook County’s assessments are “within industry standards” on fairness.

During the prior tax assessor Joe Berrios’ term, the tax office was taking taxes off the most-valuable properties and putting them on everyone else, Berry found. From 2010 to 2018, assessments shifted $1.9 billion from the upper 30 percent of property owners downward.

Berry’s study, which focused on homes, smaller apartments and condos, credited Kaegi with virtually eliminating the “Robin Hood in reverse” effect under Berrios.

The fixes have come at a cost. While Kaegi has leveled the playing field among homeowners, residential properties overall are under-assessed compared with actual sales prices. In other words, Kaegi may have made the system more equitable, but less accurate. Homes are supposed to be taxed at 10 percent of market value. Under Kaegi, that figure slipped to 8.2 percent in his second term, down from 8.8 percent under his predecessor.

That gap has implications for commercial real estate as well. Cook County’s unpredictable property tax regime is a perennial headache for investors. Commercial assets are supposed to be assessed at 25 percent of market value, a rate that helps make Chicago’s effective tax load among the nation’s highest. Kaegi has raised valuations on office towers, hotels and industrial sites, fueling pushback from business groups and contributing to Democratic leaders declining to endorse him for a third term.

Kaegi faces a steep re-election fight. Party officials have rallied behind Lyons Township Assessor Pat Hynes, who argues that Kaegi’s office has been plagued by misclassifications and erratic suburban valuations. Kaegi’s political pitch is that he fixed a system long tilted toward the wealthy. The bigger question for real estate is whether he’s created a system that can be trusted to produce stable, predictable values.

— Eric Weilbacher