Cook County Assessor Fritz Kaegi’s latest valuation of Chicago’s urban core places more of the county’s tax burden on commercial property owners than homeowners.
A summary of his latest assessment of downtown, which is conducted every three years, said “because commercial property increased in value by more than residential property, homeowners saw their share of the tax base drop from 51 percent to 49 percent.”
That 2 percentage point difference equates to about $200 million out of the county’s overall burden, Kaegi said at a Jan. 29 press conference. Yet if a trend of the past couple years extends into 2025, it’s doubtful homeowners will hold that much of an edge over commercial property owners when all is said and done — Cook County’s complex tax assessment appeal process has tended to favor CRE in recent years.
Kaegi’s methodology has taken the spotlight lately as he completed his appraisals of Chicago for the first time since 2021, when the full effects of the pandemic on the commercial real estate market were still taking shape. Following adjustments to Kaegi’s work made by the Cook County Board of Review in response to taxpayer objections, residential property owners previously shouldered more of the overall tax burden.
In fact, reductions of Kaegi’s assessments granted by the Board of Review to commercial property owners helped to swing a 19.9 percent average tax bill increase onto the average homeowner in the southern portion of Cook County last year.
At the Jan. 29 press conference announcing his latest findings, Kaegi said commercial property owners’ reliance on tax reductions from the Board of Review played a role in increased assessments for homeowners on the southern end of the county.
While the assessor’s latest findings could reduce homeowners’ tax bills, commercial owners have been sounding the alarm that their properties have been over-valued for taxing in the wake of the pandemic.
Kaegi said the growth is bolstered by the multifamily and industrial markets.
“A strong market for multifamily apartments and industrial properties helped boost commercial property values in 2024, and offset more modest growth in the office sector,” Kaegi said. “The residential housing market also grew, but at a slower rate.”
As assessments were released on a neighborhood-by-neighborhood basis over the past year, downtown Chicago office owners blasted Kaegi’s assessments.
“The fact that the assessments of office buildings are continuing to increase with no acknowledgment of the impact of the pandemic doesn’t seem objective. It’s not consistent with what’s happening in other markets or what’s happening in our market,” Farzin Parang, executive director of the Building Owners and Managers Association of Chicago, said in November.
Hotel landlords also pushed back, claiming their recovery from the pandemic hasn’t been as robust as the assessor seems to think based on the big hikes in value their properties underwent.
Kaegi said his office took office building classes into account, placing higher value on Class A offices than Class B and C offices that have been losing tenants to high end buildings and and struggling to replace them.
The assessor’s office, the Cook County Board of Review, the Cook County Treasurer’s office, and real estate industry groups have all been engaged in yearslong saga of finger-pointing over how to manage property valuations and billing so that the local tax burden is not too high on any particular group of taxpayers.
Cook County is unique in that local government bodies such as the city councils and school districts set their budgets before property values are assessed. That means rather than the assessor giving these bodies a target of available property tax revenue to aim for, local governments give the tax base a total dollar amount they’ll extract via taxation.
When his assessments for parts of downtown Chicago were released in November, industry groups criticized the assessor for ignoring the scale of the city’s office market distress.
Other data points highlighted in Kaegi’s summary of his findings include:
• Across the entire city, the two major property classes with the largest total growth over the three years were Class 3 multifamily and Class 5B industrial, which increased their total values by 34 percent and 65 percent, respectively.
• Class 5A, which includes office buildings, hotels, retail and other standalone commercial property, increased 22 percent from $14.3 billion to $17.5 billion.
• Class 2 residential property increased by 18 percent. (This reflects total growth in residential assessed values, not median or average changes.)
• In the three townships that include the city’s Loop area (North Chicago, South Chicago, and West Chicago), Class 5A property increased by $2.5 billion, or 21 percent, in assessed value.
Kaegi released a separate report last month, noting that commercial property owners tend to undervalue their properties when protesting assessments to the Cook County Board of Review but boast higher values when they sell.
The assessor’s office analyzed 60 commercial properties that sold for more than $2 million within three years of undergoing a private appraisal. It found that among that sample of properties, the median increase from appraised value to sale price was 38 percent.
But other groups have found commercial property owners and the Board of Review aren’t entirely to blame for distrust in the county’s tax system.
A separate report from Cook County Board President Toni Preckwinkle released in December found. That study, conducted by Josh Myers Valuation Solutions, highlighted systemic issues, including undervaluation, lack of data-sharing and inconsistent methodologies between the assessor’s office and the Board of Review.
Not all areas of the county have seen the tax burden shift toward commercial property owners.
The southern third of the county is assessed first in the county’s three-year assessment cycle. With the 2023 reassessments complete and new tax bills sent out, a separate report from Cook County Treasurer Pappas found record-high jumps in tax bills for the area.
A group of South Side city council members and mayors of south suburban towns spoke at Wednesday’s press conference about the stress these tax increases piled onto residents.
In addition to critiquing the Board of Review process, Kaegi and the other local officials are pushing to re-instate a “circuit breaker” program that provides automatic refunds to homeowners experiencing sharp increases in property taxes. The program, which was scrapped in Cook County in the early 2000s, would need state funding and statehouse approval, Kaegi said.
The proposal is in early stages and is sponsored by state Rep. Justin Slaughter and Senator Patrick Joyce.
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