What it’ll take to root out discriminatory property taxes in Cook County

Photo by Max Herman

Community groups outlined their plan to reform Cook County’s regressive tax assessment system outside of Assessor Joe Berrios’ office on August 1, 2017.

Longstanding concerns over fairness, transparency and accountability at the Cook County assessor’s office under Joe Berrios have come under renewed scrutiny in the weeks since an investigation by the Chicago Tribune and ProPublica revealed that property assessments are systematically skewed to overtax low-income communities.

Democratic gubernatorial candidates are addressing conflict-of-interest issues by calling for a ban on donations by tax appeal lawyers to candidates for assessor, among other reforms.  A citywide coalition of community groups this week called on Cook County to refund the money they say low-income neighborhoods have overpaid as a result of biased assessments.

Fritz Kaegi, who’s challenging Berrios in next year’s Democratic primary, argues that solving the problem requires a change of leadership in the assessor’s office.

A longtime progressive Democratic activist with decades of experience as an investment manager, Kaegi said, “The assessor can do much of this on his or her own, using better models, using modern statistical packages, and getting rid of this conflict-of-interest baggage and ethical cloud over the assessor’s office.” He’s refusing to take donations from tax lawyers.

“A fair, ethical, transparent assessment system” is “totally doable,” Kaegi said.

As the investigation discovered, Berrios announced in 2015 that he was implementing a new, state-of-the-art computer model designed to improve accuracy and reduce bias, but he continued to use the old model.

“I strongly suspect he has an interest in keeping the system opaque,” said Kaegi. “The assessor says this system has worked for 30 years, so why should we change it? The fact is, we’ve learned a lot about statistics and data and software since the 1980s.”

Berrios refuses to release details about how his office values properties – what factors are considered and how they are weighted.  He’s now appealing a judicial ruling ordering him to fulfill a Freedom of Information Act request by the Tribune for that information.

The assessor touts his “hand-check system,” by which property valuations are adjusted on a case-by-case basis.  That kind of discretion gives Berrios “great power” and is “totally unacceptable,” Kaegi said.

Berrios is just as opaque when it comes to individual homeowners, Kaegi said.  Every other assessor in the state responds to homeowners’ queries by providing details about how their homes were valued, he said; the Illinois Property Tax Codes requires it.  Berrios refuses to do so.

That makes it impossible to know the exact source of bias in the assessments, though “we do know the output is producing discriminatory results, for low-income minority neighborhoods and for other outlying areas,” Kaegi said.  He’s certain, though, that the assessor’s model fails to take adequate account of the impact of foreclosures and bank-owned properties–one likely reason regressivity “exploded” following the 2009 housing crisis, according to the Tribune.

Fritz Kaegi

Kaegi agrees that the system represents “institutional racism” and adds that, “the way you address institutional racism is [to] ask, where does unintended bias come from? And it comes from a flawed statistical model, but more importantly, the influence of the tax appeals lawyers.  You address those two things and you can produce a less biased outcome.”

Berrios cites the large number of appeals – they’ve tripled in number over the past dozen years – as evidence that the system is responsive. But the investigation showed that the appeal process consistently increased unfairness, in part because moderate-income homeowners are less likely to appeal.

Kaegi said a better measure of the office’s effectiveness “is how well are you doing for people who don’t appeal. When the assessor says, ‘Oh, you should just appeal,’ that’s admitting that the system doesn’t work for the average person, since the majority of people do not appeal.” He thinks the office should focus on getting valuations right the first time, and instead of promoting appeals, use its resources to educate homeowners about exemptions, which he says is one way to help long-term homeowners facing pressure from gentrification.

Kaegi stresses that the biggest distortions to the system come from appeals to commercial buildings downtown, which studies have shown account for as much as 80 percent of appeals reductions. “While there are many factors creating bias in the system, the huge amount of value that’s being marked down downtown” is “the biggest source of bias,” he said.

He points out that the Willis Tower’s valuation is based on a market value of about $600 million, while the building sold two years ago for $1.05 billion. Or Trump Tower, where a politically-connected law firm won a 70 percent reduction on the value of its retail space.

“It doesn’t have to be that way,” he said, describing a straightforward process of valuing a commercial property based on its rental income and capitalization rate.

But Berrios’s office insists on using a variety of “alternative methodologies, where they have discretion through a very non-transparent process to look at costs and other factors, and in the case of Trump Tower, to say this retail space is substandard,” Kaegi said. “When you start making all these exceptions behind closed doors, you end up with all these strange outcomes.”

The bottom line is, every questionable tax break for downtown properties means higher taxes for everyone else – and the tax burden has been steadily shifting from commercial to residential properties for years.

Berrios has cited his Latino heritage and the fact that he grew up in Cabrini-Green as a defense against charges of racially-biased assessments.  But Latinos were heavily represented among a multi-racial group of community organizations that protested outside his office Tuesday morning.

“The evidence is clear: The assessments are unfair,” said Hilario Dominguez, housing organizer for The Resurrection Project.  “We need leaders who are willing to step up and provide assistance for those who need it – working class families who struggle to put a roof over their heads.”

He dismissed the announcement by Cook County Board President Toni Preckwinkle, a Berrios ally, that she would seek a review of the assessment process. “We do not need another study,” he said. “We need transparency.”

Edith Roblas of the Southwest Organizing Project brought a copy of her tax bill, which went up 327 percent this year.  David McDowell of SWOP said the group “expected to fight predatory lenders and big banks to keep our families in their homes, but we never expected to have to fight the Cook County assessor’s office to keep our families in their homes.  But we will.”

Clem Balanoff of Our Revolution said the assessment system “transfers money from poor and minority communities into the hands of the wealthy.”

The groups delivered a letter to Berrios calling on him to stop fighting FOIA requests, to implement the new computer model, and to “refund homeowners who were punished for [his] mistakes.”

(This column has been updated with a corrected assessment value for the Willis Tower of $600 million, not $600,000; according to the assessor’s office, this amount is in line with an independent assessment done for the Chicago Board of Education. In addition, according to Deputy Assessor Tom Shaer, the actual sale price of the property, contrary to media reports at the time, was $1.05 billion. Shaer adds that high-end properties often sell for more than their assessed value; that the assessor’s office has turned over its assessment models to the Chicago Tribune along with millions of assessment files; that the hand-check method is used for only 2 percent of residential properties; that only 14 percent of homeowners appeal their assessments; and that the assessor’s office does educate homeowners about exemptions.)

 

  • matt mcclure

    Berrios and company also has been responsible for shifting more tax burden to residents and off of business. Supposedly this helps business and the homeowner be damned. Businesses win tax appeals 11x more often than homeowners and businesses see 3% increases whereas I had one of 37% and multiple increases over the decades between 20-31%. Business has the ear of Joe B and the public pays for it.