More transparent, predictable assessments are creating a better economic environment for all of Cook County. Here’s the proof.

In the past month, some real estate market participants have sent letters of concern to elected officials and local news outlets, suggesting investment in downtown Chicago is in danger because of market-value-based commercial assessments. They have also called for our office to “pause” Cook County’s triennial assessment process and to make changes to property classification rates.
In response, Cook County Assessor Fritz Kaegi wrote the following open letter to everyone with interest in the vitality of our area’s residential and commercial real estate markets.
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I want to ensure everyone sees Cook County both as a community where homeowners can thrive and as a market that is open for business, which is why I’ve pursued an agenda of transparency, fairness, and predictability.
I give our valuations team one simple mandate: to fairly and uniformly estimate the fair market value of each property, taking care to document the sources and uniformity of our assumptions. This makes our office more accountable and helps property owners know if they are being treated fairly and uniformly.
It would violate the law and expose taxing bodies to lawsuits — not to mention violate the will of the public — to tell our hard-working analysts to do otherwise for a select few.
Our office is guided by the Illinois Property Tax Code[i] when estimating the market values of property in Cook County, which are then used to calculate assessed values according to Cook County ordinances, which set classification rates.
Our state’s process of dividing municipal levies through assessed property values means that Cook County assessments are interconnected. Assessed value for one property is only meaningful in the context of the total assessed value in a taxing district; it also means that the rate one homeowner pays on the assessed value of her home depends on how all others are assessed, including commercial property owners.
The Cook County Assessor’s Office thus has a duty to assess properties impartially and uniformly. When one constituency asks us to deviate from both the law and fair market values to give that group favorable treatment, it also asks us to shift a greater share of property taxes onto all other property owners.
The voters of Cook County were fed up with past practices that would lead to deviations from the good stewardship, fairness, and accuracy required by law. We believe the assessment system’s original sin is to confer favorable treatment on a select few, or for elected officials to take the law into their own hands to achieve some political end.
As for the suggestion that we are attempting to shift the burden to commercial property owners, the previous capitalization rates used for commercial assessments by the assessor’s office, as reported in Crain’s Chicago Business, were out of sync with industry standards.[ii] We have corrected these practices. Independent third-party data, separately reported in Crain’s, supports our work. No one has said our overall approach is incorrect or faulty:[iii]
This approach represents the best practices used elsewhere in the United States — in places that have thriving real estate markets — which better serves investors and property owners like the letter’s authors. Before, our office never revealed to the public the details of how assessments were derived. Now, we clearly explain how we arrive at our assessments and document the underlying sources, all of which is available on our website. Investors, owners, and contractors are better able than ever before to predict how properties will be assessed.
It makes no sense to say that an opaque, unaccountable, idiosyncratic, and seemingly random assessment system generates more certainty than a transparent, predictable one.
My staff and I often meet face-to-face with those who have questions about our work, in one-on-one meetings and in groups big and small. Whether through our countywide listening tour, increased activity on our social media, more openness with the press, or in more than 150 other in-person outreaches, we have tried to demystify our assessment and property tax system. But I do recognize the need for our office to do more to facilitate an understanding of our complex property tax system.
* First, those calling for a multi-year process of reassessment fail to acknowledge that the full reassessment cycle is taking place over three years, and will not be felt in Chicago until taxes are payable in July of 2022.
* Second, extending the reassessment period further prolongs unfairness in the system. Freezing in place old assessments, or even using them as a reference point, destroys fairness, accuracy, and predictability in our system.
* Third, assessment changes almost never entail the same amount of change in taxes. When assessed values increase, tax rates typically drop as there is more taxable value to equitably distribute the levies. When some predict a 90% tax increase on commercial property in Evanston — or similar increases in other northern suburbs we’ve reassessed — they have egregiously exaggerated and misunderstood the tax implications of this year’s reassessment.
* Fourth, County ordinance — not the policies of our office — establishes the 25% and 10% classification rate system. At our office, we cannot take the law into our own hands to give preferences to some at the expense of others. We do note that many of our peers, such as Boston, Minnesota, New York, and Washington D.C., have the same kinds of classification systems as ours — and, it must be said, they have healthy real estate markets.
With all of this said, we understand that market participants — some of whom were used to the “idiosyncrasies” of Cook County’s property tax system and may not be familiar with best practices elsewhere in the United States — are in an adjustment period. The complexity of our overall system makes adjustment harder than it should be.
My office has gone to great lengths to give market participants disclosures, models, tools, and other information to aid predictability and understanding of the system. Some market participants are already benefiting from this new transparency and predictability by stepping up activity in the second half of the year.
Crucially, office vacancy is at its lowest point since 2016[iv] and leasing activity is at new peaks[v]; given that lessees are the parties that assume property taxes when they sign net leases, informed market participants are demonstrating comfort with the assessment and property tax levy outlook by pricing this into the rents they pay.
There have also been significant deals reported in the last three months. A German investor agreed to purchase Sterling Bay’s West Loop headquarters for $175 million[vi]; Spear Street Capital, a San Francisco-based investor will soon pay upwards of $415 million for 967,000 square feet of office property here[vii]; and Beacon Capital Partners has a contract for a 40-story office building at 190 S. LaSalle St for $230 million.[viii]
Any one of these deals from the past quarter would qualify to be in the top five or six largest commercial building sales in the Chicago area between July of 2018 and the first half of 2019.[ix]
To provide more predictability and insight, we will have an Analyst Day in December for market participants that will bring together our tools and reporting to help parties create their own rate scenarios under different assessment and levy assumptions.
Lastly, there is one major enhancement needed for better predictability in our assessment system: using more accurate, timely, and appropriate data in our assessments. Third-party real estate data is patchy, imperfect, and may be out of date — or completely unavailable in some neighborhoods. In these cases, investors have to guess at the assumptions that we use in our assessments.
To improve upon this, we have pushed for SB 1379, the Data Modernization Bill, which will give our office and the public anonymized, accurate, and up-to-date data needed for predictable assessments. The data will give market participants the assurance we all need and enshrine transparency and accountability into law for this and future administrations of the Cook County Assessor’s Office.
The bill passed the Senate with a bi-partisan super-majority, and added 19 co-sponsors in the House since the spring session’s end to give it a total of 43 co-sponsors.[x]
If the signatories value predictability and accuracy for those considering investments in Cook County, they should support this bill.
We have met with many people who want to see our residential and commercial real estate markets thrive. We remain ready and eager to talk with anyone else who is interested in creating further predictability in Cook County, a desire we all share.
Regards,
Fritz Kaegi
Cook County Assessor
[i] 35 ILCS 200/9–155
[ii] Hinz, Greg. “The story behind those commercial assessment hikes everyone’s mad about.” Crain’s Chicago Business [Chicago] 19 July 2019.
[iii] Gallun, Alby. “Landlords get socked as Kaegi reassesses north suburban properties.” Crain’s Chicago Business [Chicago] 16 October 2019.
[iv] Ecker, Danny. “Downtown office vacancy lowest since 2016.” Crain’s Chicago Business [Chicago] 8 July 2019.
[v] Cushman and Wakefield. “Chicago Downtown Office Leasing Activity Reaches Decade High.” Cushman and Wakefield press release, October 14, 2019. On the Cushman and Wakefield website. http://cushwakechicago.com/chicago-downtown-office-leasing-activity-reaches-decade-high/
[vi] Ecker, Danny. “Sterling Bay’s Fulton Market HQ selling to German investor.” Crain’s Chicago Business [Chicago] 6 August 2019.
[vii] Ecker, Danny. “California investor buying West Loop office tower.” Crain’s Chicago Business [Chicago] 8 October 2019.
[viii] Ecker, Danny. “LaSalle Street building poised to sell for about $230 million.” Crain’s Chicago Business [Chicago] 16 October 2019.
[ix] Hariman, Kasey. “The Chicago Area’s largest commercial building sales 2019.” Crain’s Chicago Business [Chicago] 18 October 2019.
[x] State of Illinois SB 1379, 101st General Assembly, 2019.
