Study of Cook County's 2018 Commercial Property Assessments Reveals Potential Inequities and Failure to Meet Industry Standards
Monday, September 21, 2020
A report from the International Association of Assessing Officers (IAAO), released today by Cook County Assessor Fritz Kaegi, found that the 2018 estimated market values of commercial properties in the City of Chicago and Cook County did not meet the IAAO’s standards for high-quality assessments. Overall, the 2018 estimated market values exhibited significant underassessment and regressivity as well as a lack of uniformity, creating the potential for unfair tax disparities.
“I’ve promised to fix the inequities and unfairness of the past,” said Assessor Fritz Kaegi, who took office after the 2018 estimated market values were determined. “A data-driven look at the previous reassessment can help everyone understand the extent of the problem. Reports like this are the only way to know whether an assessment system is fair or not.”
This new data and reporting now provides a complete analysis of the 2018 reassessment of the City of Chicago. Moreover, Assessor Kaegi has released several reports about the office’s current assessment methodology. With the City of Chicago set to be reassessed in 2021, property owners now have a better understanding of the fairness of previous assessments and increasing transparency about the current work of the office.
Key findings from the report include:
- Commercial properties in the City of Chicago, as a category, were underassessed in 2018.
- On average, for properties in Chicago in 2018, estimated market values equaled 52% of their sale values.
- The townships of Hyde Park and Lake were the only townships in the city with a sales ratio that tracked the market.
- Underassessed properties can lead to some property owners paying more than their fair share of property taxes.
- Commercial assessments lacked uniformity, with the accuracy of assessments varying significantly across property types and location.
- Uniformity is a measure of whether properties in the same property class type are assessed in the same way.
- Commercial assessments in the City of Chicago exhibited significant regressivity.
- Regressivity means properties with high market values are more likely to be underassessed, while properties with low market values are more likely to be overassessed.
- Regressive commercial market values were found throughout the city with the highest levels of commercial regressivity found in the central business district, the near south side, and the near and far northwest sides.
- Regressive market values can mean some property owners are paying more than their fair share of property taxes.
- Underassessment, regressivity and uniformity concerns were found across Cook County - not just in Chicago, but also in other commercial assessments in the north, south, and west suburbs.
- Two-thirds of the townships throughout the county and more than half of the towns and municipalities examined as part of the study appear to be underassessed. (Not all municipalities had enough sales to measure compliance.)
- Regressivity in the estimated market values of commercial properties was found in 77% of the county’s townships. 82% of municipalities demonstrating regressive estimated market values.
- Uniformity issues occurred in all but one township and in every single municipality.
- The municipalities with the highest commercial assessment regressivity were Bedford Park, Evanston, Homewood, Winnetka, and Oak Park. The townships of Evanston, Rogers Park, North, and Oak Park were found to have the highest commercial regressivity.
The IAAO sales ratio study compared actual property sales in the City of Chicago and Cook County during 2018 with the estimated 2018 commercial market values determined by the previous Cook County Assessor and certified by the Cook County Board of Review. It follows a similar sales ratio study of 2018 residential property sales and estimated market values in the City of Chicago, which also demonstrated regressivity and a lack of uniformity. (The residential study was released in June 2019 by the Civic Consulting Alliance.)
According to the IAAO, sales ratio studies are “statistical tests to identify potential inaccuracies and inconsistencies” in property assessments, which are then used to calculate property taxes.
“My team and I have already taken significant steps toward more accurate assessments, though we know there is still work to be done,” said Assessor Kaegi. "Gaps in data can structurally embed disparities and inaccuracy in the assessment system leading to underassessment of some at the expense of all others. Closing these data gaps is the key to addressing tax disparities.”
Since taking office, Assessor Kaegi has pursued a data-driven, reform-minded approach to the administration of the Assessor’s Office. The office now uses industry data sources from respected commercial real estate sources like CBRE, JLL, Trepp, REIS/Moody’s, and Bloomberg, and has increased its outreach to affordable housing developers and agencies to improve valuation data for rent-restricted properties. The office also has ongoing discussions with commercial real estate market investors to track real-time market conditions.
Following the recommendations of an IAAO audit in 2019, the Assessor’s Office expanded its valuation staff. In the past year, new directors and manager-level hires in the valuation department have included the former assessors of some of the largest jurisdictions in the country, the former senior manager of Deloitte’s real estate consulting practice, and holders of licensed appraisal designations from the Appraisal Institute.
Assessor Kaegi continues to champion the passage of a data modernization bill in the Illinois General Assembly. Passage of this bill would require commercial property owners to submit income and expense data about their properties through the RPIE tool to the Assessor’s Office in advance of their reassessment, which would improve accuracy and fairness.
Recruiting experienced talent, implementing additional technology, and improving data sources will help address the issues noted in this study so that no one is paying more than his or her fair share of property taxes. The Assessor’s Office will commission future sales ratio studies of its estimated market values in keeping with its commitment to fairness and transparency and in line with further recommendations of the 2019 IAAO audit.
The IAAO Sales Ratio Study of Cook County was initiated by the Cook County Assessor’s Office with assistance from the Civic Consulting Alliance. The study was supported by a grant from the MacArthur Foundation.