Commercial property owners in Cook County, Illinois, have been bracing for higher tax bills – the expected outcome of a three-year reassessment led by newly elected Assessor Fritz Kaegi, who won on a reform agenda – but a new report from Cushman & Wakefield explains why the increases may not be as significant as some have feared.
Entitled “What’s Next: Chicago’s Changing Tax Landscape,” the report outlines how property taxes are calculated and uses Chicago’s north suburbs, where the assessed value of all commercial property rose 74.4% over 2018, to show the possible tax implications for Chicago and the city’s south and west suburbs as reassessments continue through 2021.
“With recent commercial property reassessments coming in very high, our clients are understandably concerned about how a dramatic increase in tax liabilities might affect the long-term value of their investment,” said Cushman & Wakefield Vice Chair Paul Lundstedt. “But as this guide shows, a higher assessed value doesn’t necessarily translate to a higher tax bill. In fact, because the tax rate is likely to fall as assessments go up, some buildings may not see any tax increase and perhaps a tax reduction.”
The report uses north suburban Evanston as a case study for how property taxes in other parts of Cook County may be impacted by higher assessments. It predicts an Evanston tax rate of 5.66% for 2019/2020, well below the actual rate of 9.41% in 2018. Under this scenario, a property whose assessed value rose 66% between 2018 and 2019 would not see a change in property taxes. If the assessed value doubled, taxes would increase by approximately 20%, while a 150% jump in assessed value would translate to a property tax increase of about 50%.
“For the past several years, Chicago has been a favorite among investors because of its relative affordability compared with coastal markets, centralized location and deep talent pool, among other attributes,” Lundstedt added. “Yet uncertainty over property taxes has cast a shadow over the market in the eyes of some would-be buyers. The assessment increases may be unsettling now, but a more transparent assessment process bodes well for the market long term and will undoubtedly pull some investors off the sidelines. In fact, astute investors have sensed an overreaction to the issue and see it as an opportune time to invest in Chicago.”
An update to the report will be publishing at mid-year addressing any changes to the Chicago tax landscape over the first half of 2020.