Home COVID-19 Impact  Illinois homeowners beware, COVID-19 means even higher property taxes – Wirepoints

Illinois homeowners beware, COVID-19 means even higher property taxes – Wirepoints

By: Ted Dabrowski and John Klingner

Illinois homeowners can count on higher property taxes next year to be one of the many negative outcomes of COVID-19. Commercial property assessments are expected to drop due to the consequences of the coronavirus and that’s going to leave residential property owners holding the bag.

The lockdown has left many businesses and commercial properties with reduced or no income for months, bringing down the economic value of their properties. Many owners can be expected to appeal their property assessments to reflect that reality. Commercial and office space in downtown Chicago and other suburban areas will also see their assessments drop as businesses shrink their footprint going forward. Nationwide, over 74% of CFOs plan to permanently shift some employees to only work remotely post-coronavirus, according to a recent Gartner survey. 

As commercial values fall – and local governments show little to no willingness to cut spending – homeowners will have to make up the difference.

Illinois State Sen. Craig Wilcox says he’s seen little indication of cities or public unions finding ways to save large amounts of taxpayer dollars during the crisis:

“We’ve seen very few public sector unions kicking in on this ‘Illinois is all in this together.’ There’s not been a halt to automatic COLAs. And there’s not been agreement by the public unions to renegotiate any collective bargaining agreements on a short-term scale. We’ve not seen significant layoffs. I don’t think we’re going to see lower tax levies come Nov-Dec of this year.”

A shift in the state’s tax burden toward households has been going on for decades. Residential property owners paid about half of the $11.7 billion in total property taxes 25 years ago. Today, they shoulder nearly two-thirds of the $31.8 billion property tax burden.

Property tax appeals

Property reassessments after an official state disaster like a tornado or a flood are commonplace in Illinois, but COVID-19 is a far different kind of disaster – commercial properties have lost value due to the state’s lockdown, not physical damage. 

Regardless, many property owners will likely use existing appeal laws regarding disasters to request lower assessments. For example, McHenry and Lake County commercial properties are allowed to appeal their assessments to reflect up to a 50 percent vacancy in their businesses during an affected period.*

Similar appeal rules in other counties will cut commercial assessments across the state and the heavily commercial Northeast region will obviously see the biggest reductions. Meanwhile, residential properties will get no similar “disaster” relief. That means, all else equal, homeowners are going to bear a bigger share of the tax burden.

Reassessing Cook County commercial properties

When Cook County Assessor Fritz Kaegi took office in 2018, he was determined to shift more of the county’s property tax burden on to businesses. The assessor has worked to raise commercial assessments and lower residential assessments to correct what he called a structural imbalance in property taxes. Now Kaegi is preparing to do the exact opposite in the wake of the pandemic. He plans to reevaluate all properties with an eye toward cutting commercial property assessments. From Crain’s:

“Kaegi says the sweeping reassessments are necessary as the coronavirus wreaks havoc on the economy. Commercial landlords are expected to see a significant reduction in rental income, as stores and restaurants remain closed. Similarly, residential landlords face uncertainty in their ability to collect rent as unemployment numbers reach record highs.”

Empty offices are sure to make a big difference in the county’s commercial value going forward. The Gartner survey found nearly a quarter of companies nationwide plan to shift more than 20 percent of their employees to remote work. For example, Morgan Stanley’s CEO says they’ll need “much less real estate” in the future as employees have “proven we can operate with no footprint.”

The news is especially bad for Chicago homeowners, as the city is more reliant on commercial properties than most areas. Not only will they get hit with having to pay a bigger slice of the property tax pie, but the pie is expected to grow significantly. Mayor Lori Lightfoot says Chicago faces a $700 million budget deficit and in the absence of structural reforms, property tax hikes are the most likely way to fill the gap. Homeowners will end up getting hit with a double whammy of increases.

Overall, Illinois homeowners already pay the highest property taxes in the nation. It’s hard to imagine many residents putting up with paying even more.

The smart thing to do would be for local governments to find ways to cut costs in the wake of the coronavirus crisis. But given their track record, don’t count on it.

*The reassessments do not allow for a reduction in the value of the land and any help from the federal government is taken into account.