In the city of Chicago, over 500 property tax valuations were successfully appealed and lowered. When that resulted in a nearly $3B revenue loss for the county, the original values (i.e. county revenues) were reinstated. (More on the details below.) Whether property owners will accept this result has yet to be seen.

At their core, property tax consultants, firms, and property tax management software (e.g. itamlink) provide structure and systematized logic to appealing property tax bills.  

As a concept, identifying flawed property valuations seems straightforward. However, questions arise given the extreme difference in perspectives demonstrated in Chicago between property owners and taxing authorities. Namely…

1. What factors affect property valuations and appeals?  

2. How much room is there for mis/interpretation?  

3. With so much variability, what does it mean to “pay your fair share”?

Chicago provides a worthwhile (and, quite frankly, “textbook”) case study into one situation that flared up without notice – the repercussions of which are proving to be severe. The example also underscores the financial impact local government decisions can exact on property owners, especially at scale.

It may be polite to characterize the valuation perspectives of owners and local government officials as a mere difference of opinion. But those differences constitute the basis of commercial property tax obligations, totaling billions of dollars. Practically, this dynamic can turn into a no-holds-barred, gloves-off battle, that can easily escalate to expensive and drawn-out litigation that affects the health of local economies.

The Real Deal – a site for concise and timely real estate news – detailed the situation that recently transpired in Cook County, Illinois  

The owners of significant commercial real estate buildings successfully appealed their property assessments to a three-person Review Board. This Board heard the cases presented by landlords of hundreds of commercial assets in downtown Chicago, including high profile office towers.

After the appeals were presented, the Board, a committee established by Cook County as a mechanism to resolve such disputes, ruled in favor of the landlords. Their decision significantly lowered their properties’ assessed values.  

For example, the taxable value of Chase Tower and the Digital Realty Trust-owned data center were initially assessed at $152.9M and $132M respectively. Ruling on the appeal, the Board lowered those assessments to $73.9M and $65M.  

Obviously, the tax relief on appeal was significant, and undoubtedly was a triumph for landlords. However, the cause for celebration proved short-lived.  

In early February, Cook County Assessor Fritz Kaegi abruptly reversed the decision affecting more than 500 Cook County properties. Kaegi declared the Board’s decision flawed and immediately reinstated the higher values originally placed on those buildings.  

Such a move by local governments is a rarity given the structures and processes that have been established for submitting, responding to, and adjudicating appeals.  

What drove Kaegi to that decision is unclear, but the city’s dependence on commercial property tax revenue could provide a clue.  

When the Board made their appeals decisions, it effectively wiped $2.7B from the city coffers, a figure representing 3% of the city’s tax base. So, it’s reasonable to question whether the basis for reversing the decision was based on a logical counterargument, or simply because of the reliance the city has on that revenue.  

In other words, is it more ethical to fairly reduce property valuations for real estate owners or unfairly maintain high valuations for the sake of local revenues?  

Basically, which is more important, local business or local government?

If local government revenues trump local business health, property owners may need/want to roll up their sleeves and prepare for another battle.  

If this is the case, they need the tools that can really help them put their best foot forward. itamlink is uniquely positioned to do just that. If you’re not using itamlink, please get in touch with Rethink Solutions for a demo.