Higher Assessments Hit North Suburban Commercial Property Owners

CHICAGO — As Cook County Assessor Fritz Kaegi completes his first round of suburban reassessments since his election on a reform agenda last year, north suburban commercial property owners are seeing significantly larger increases in valuations than homeowners.

The change means owners of apartment buildings, retail properties and industrial facilities will pay a larger share of the county's total property tax burden. Although taxpayers in several townships have already seen higher assessment values for residential properties, the far larger growth in commercial and industrial valuations will result in some homeowners paying smaller tax bills despite higher home values and tax rates.

A key factor in this year's higher commercial assessments is the assessor's use of lower capitalization, or "cap," rates compared to his predecessor, Joe Berrios. The rates reflect the amount of income landlords receive from properties after paying tax. The assessed values are determined by dividing the property's net operating income by the cap rate — the lower the rate, the higher the assessed value.

Scott Smith, chief communications officer for the Kaegi's office, said the new cap rates are far more reflective of market conditions.

"The cap rates that were used in 2016 were out of sync with what most financial analysts would say were accurate cap rates at the time," Smith said, citing data from commercial real estate firms. He said the methodology used by Berrios' office during the prior reassessments remained a mystery.

"There was no significant record of how that work was done," Smith said.

Berrios, the former chair of the Cook County Democratic Party, faced criticism for his role in a regressive property tax assessment system that left poorer homeowners to pick up more of the burden than richer ones while favoring tax appeal attorneys — he filed a lawsuit and a failed appeal in an attempt to toss out ethics rules prohibiting him from taking campaign cash from the lawyers ahead of his defeat in the March 2018 primary.

Kaegi, an Oak Park financial manager, has argued the new cap rates used in this year's north suburban reassessment are much closer to market valuations. The assessor told Crain's Chicago Business the changes to the reassessment formula would produce a system that is "less risky and more predictable" for real estate investors.

The assessor's office determined new cap rates for each type of income-generating property — from apartments and office buildings to supermarkets, shopping centers and retail strips — based on comparisons with similar properties in other counties.

Some of the cap rates set by Berrios' office had been twice as high, a system that resulted in assessed values falling dramatically short of their market value when sold, according a 2018 Crain's analysis. Berrios spokesperson Tom Shaer disputed those findings at the time, telling Crain's that "sales prices don't indicate current value."

So far in 2019, Kaegi's office has mailed out new assessment notices in nine of the 13 townships in the county's north suburbs. Among those, the largest increases for commercial properties have come in Evanston, Barrington and New Trier townships.

Reassessments are completed every three years, and this year's reassessments will be reflected in 2020 property tax bills. The south suburbs will be reassessed next year and the city of Chicago again in 2021.

The assessor's office has released residential and commercial assessment reports from eight north suburban townships so far. The reports show the changes since the last triennial reassessment of the north suburbs three years ago and how the new valuations compare to the assessed values that were in place when Kaegi took over last year.

Click on any of the links below for the full residential or commercial reports released for Evanston, New Trier, Northfield and Maine townships.

Evanston Residential Properties / Industrial and Commercial Properties

• The median assessed value of homes increased by 8.56 percent since the 2016 reassessment.
• The median sales price rose to $485,000 from $468,500 in 2016.
• The total assessed value of all residential properties combined increased by 25.26 percent since 2018.
• Since 2016, average assessed values of industrial properties increased by 46 percent. Offices increased by 71 percent. Commercial and retail properties were up by 92 percent and apartments, due to significant new construction in the past three years, rose by 281 percent.
• The total assessed value increased by 125.43 percent since 2018.

New Trier Township Residential Properties / Industrial and Commercial Properties

• The median assessed value of homes decreased by 11.44 percent since the 2016 reassessment.
• The median sale price rose from $825,000 in 2016 to $830,000 in 2019.
• Since 2018, the total assessed value of all residential properties was up by 12.2 percent.
• Since 2016, the median assessed values of industrial properties rose by 10 percent. Offices were up by 45 percent, commercial and retail rose by 65 percent and the average apartment assessment was up by 107 percent due to new construction.
• Since 2018, assessed values were up by 96.59 percent for industrial and commercial properties in the township.

Northfield Township Residential Properties / Industrial and Commercial Properties

• The median assessed value of homes rose by 1.58 percent since the 2016 reassessment.
• The median sale price was up from $560,000 in 2016 to $575,000 in 2019.
• Since 2018, the total value of residential properties in the township was up by 13.74 percent.
• Median assessed values of industrial properties rose by 11 percent. Offices increased by 15 percent, commercial and retail properties' value rose by 46 percent and apartments were up by 52 percent.
• Since 2018, the total assessed value of industrial and commercial properties rose by 82.09 percent.

Maine Township Residential Properties / Industrial and Commercial Properties

• Median assessed value of residential properties increased by 6.22 percent since the 2016 reassessment.
• The median sale price rose from $285,000 in 2016 to $316,125 in 2019.
• Since 2018, the total value of residential properties was up by 21.75 percent.
• Median assessed values of industrial properties rose by 11 percent since 2016. Offices were assessed 23 percent higher, the median assessed value of commercial and retail space was up by 73 percent. The median value of apartment buildings in the township dropped by 43.72 percent.
• Since 2018, the total assessed value of industrial and commercial properties increased by 87.86 percent.

Wheeling Township Residential Properties / Industrial and Commercial Properties

• Median assessed value of residential properties increased by 2.94 percent since the 2016 reassessment.
• The median sale price rose from $308,000 in 2016 to $335,000 in 2019.
• The total value of residential properties rose by 14.93 percent since 2018.
• Median assessed values of industrial properties rose by 27 percent since 2016. Offices were assessed 30 percent higher, apartments 39 percent higher and the median assessed value of commercial and retail space was up by 55 percent.
• Since 2018, the total assessed value of industrial and commercial properties increased by 74.84 percent.

According to Kaegi's office, assessment notices were mailed to property owners in Wheeling Township on Monday with reports expected to be posted this week. Niles Township taxpayers are scheduled to begin receiving assessment notices after Sept. 9.

The deadline for appeals has passed for Evanston, New Trier, Maine and Northfield Township, but appeals can still be filed with the Cook County Board of Review, a three-member panel of county commissioners that hears complaints from taxpayers and can determines tax exemptions.