As property tax bills went out across the city, Mayor Richard M. Daley today proposed a five part plan to fundamentally reform the property tax assessment system to make it fairer and more predictable for Chicago homeowners.
"As I've said for years, our property tax assessment system is broken. Increases in residential property tax bills in Cook County for the last several years have resulted primarily from increases in assessments," Daley said in remarks delivered at La Follette Park, 1333 N. Laramie Ave.
"My proposal is guided by my ongoing commitment to help those homeowners who can least afford to pay the higher bills that result from higher assessments - seniors, long time residents, the working poor and those who live in poverty. These people are easily forced out of their homes if we don't continue to provide them with the relief and support they need," he said.
Daley said it is especially important to act now because the nation's economy is on the brink of a recession and the number of homeowners being forced from their homes by the home mortgage foreclosure crisis is increasing.
The Mayor's proposal:
Asks Cook County Assessor James Houlihan to begin an immediate correction of assessments, as he is permitted to do by law, of homes in the hardest hit neighborhoods of Chicago. These are neighborhoods where home values increased the most as a result of the 2006 re-assessment but have now decreased in the current housing crisis and where people are having difficult paying higher bills.
"Given the nation's economic downturn, we believe that many homes are worth less today than they were two years ago. If that's the case, future property tax bills should be adjusted to reflect a lower home assessed value," Daley said.
Calls on the Illinois General Assembly to amend the 7 per cent property tax cap legislation that it extended last year.
"Unless it is amended, in years two and three of the legislation the taxable value of homes is likely to increase far more than 7% for many because the exemption decreases in both those years, which means their property tax bills bill increase.
"At the same time, some people who were eligible for relief this year may not receive it next year. That's why the legislature needs to amend last year's bill and provide more relief this year and next, Daley said.
The Mayor said he is open to ideas on details of such an extension and suggested that setting the exemption at a "reasonable number" between $26,000 and $40,000 would be appropriate.
Creates an expert panel to advise Daley on the overall issue and make recommendations for long term reform of the assessment system.
"Even if the first two steps are taken, we have yet to provide long-term relief to our homeowners by reforming the property tax assessment system in Cook County. It is broken and must be fixed before Chicago is next re-assessed in 2009," he said.
Asks the panel identify the components of establishing an annual assessment factor for Cook County.
"Cook is one of the few counties in Illinois that reassesses property only every three years without an adjustment factor for non-assessment years," Daley said.
"As we've learned the hard way, conducting assessments every three years only produces sticker shock - either that home values have increased beyond a homeowner's ability to pay in good economic times or that an overvalued home means higher taxes which are difficult to pay in bad economic times.
"A yearly assessment system based on a formula involving inflation and accurate housing costs will protect our homeowners from dramatic increases. And, it will be more fair and predictable," he said.
Asks the panel to suggest ways to protect the city's renters from the trickle-down effects of higher assessments.
"The reality is that when residential rental building owners receive higher tax bills, they are inclined to pass these increases along to their renters, yet there is no real protection for them under the current legislation. There needs to be, and we need to figure out a way to do it," the Mayor said.
Daley pointed out that the tax bill going out this week is the second one received by homeowners based on the Cook County Assessor's Office 2006 reassessment of homes.
That assessment showed home values had increased dramatically throughout Chicago, but especially in neighborhoods on the South and West sides where working families are struggling to make ends meet.
The average increase was 41% in the City of Chicago, with some neighborhoods having increases averaging in the range of 70% - 90%, Daley said. The previous re-assessment, done in 2003, showed the assessed value of homes increased by more than 32% across the City of Chicago. These increases occurred in neighborhoods primarily consisting of low-income residents, seniors, and long-time homeowners.
Even with the 7% cap legislation in effect, some homeowners in some of the lowest income neighborhoods saw significant increases to their tax bills because of the 2006 reassessment.
In one representative house in the 4300 block of South Calumet, the property tax bill increased from approximately $900 a year to about $2,000 a year, Daley said.
"The size of the increase caused by the 2006 reassessment far surpasses the impact that the homeowner will feel as a result of the property tax increase in this year's city budget," the Mayor said.
"To put it in perspective, even with the 7% legislation, this homeowner's tax bill went up more than $1,000. In 2009, when the city's 2008 property tax hike will show up on bills, it will increase the bill by only $ 72. It's clear the problem is our property tax assessment system," he said.
City property taxes have risen by an average of 1.5% a year since Daley became Mayor in 1989, while the annual rate of inflation in that time has been 3.8%.
The Mayor said that what makes the need for fundamental assessment reform even greater is that because of the actions of the Cook County Assessor's Office after the 2001 tax year, residential property owners assumed a greater share of property tax burden than commercial property owners.
Currently, even with the 7% cap, residential property owners are responsible for 48% of the taxes compared with commercial property owners, who are responsible for 38% of the tax burden, he said.
"Fundamental reform in the assessment system should bring greater fairness to everyone involved," Daley said. "The steps I am announcing today will also bring greater predictability to our property tax system and to our homeowners.
Finally, Daley said that he would continue to pursue in Springfield fundamentally reforming the way public education is funded in Illinois, including providing property tax relief and greater accountability to the system.