RESEARCH Business Illinois
CHICAGO
Mayor Daley's opposition to business property-tax cuts could hurt city

Mark Reutter, Business Editor
(217) 333-0568; mreutter@uiuc.edu

10/1/02

CHAMPAIGN, Ill. — Beware of the boomerang effect.
Chicago Mayor Richard Daley’s new-found zeal to challenge commercial property owners who win reductions in property-tax assessments could come back and harm the city with less business investment in the future, a tax expert at the University of Illinois at Urbana-Champaign says.

"Heavy taxation on business property is often cited as one of the key reasons for the lack of competitiveness of Cook County in regard to the location and retention of business," said J. Fred Giertz, a professor of economics at the Institute of Government and Public Affairs.

"If the mayor is successful in his efforts, the competitiveness disadvantage of Cook County will be accentuated."

Cook County, which includes Chicago, is the only Illinois county that uses a classified property-tax system. This permits the highest class of property (usually business property) to be assessed at up to 2.5 times the level of the lowest class (usually residential property).

In practice, however, business tax assessments in Chicago can go above the 1-to-2.5 ratio because residential property is not assessed at its legally mandated level.

Last month, Daley announced that his administration would challenge owners who won big property tax reductions for office buildings and factories, saying that the state appeals process has become tilted in favor of big corporations.

The city plans to challenge assessment reductions of $5 million or more before the local-level Cook County Board of Review. This would involve up to 100 cases a year.

It would further intervene in cases seeking $1 million or more in reductions before the state-level Property Tax Appeals Board. Daley is pressing for state legislation to prevent Cook County businesses from appealing to the state tax board.

The state board has made several rulings that Chicago business property assessments violate Cook County’s classified tax system and the state constitution. "If these decisions are upheld and broadly applied, the result eventually would be a major shift in the property-tax burden from highly assessed business property to residential property," Giertz said.

"Understandably, the city is worried about losing a source of tax revenues. On the other hand, the long-term consequence of taxing business unfairly should be considered because it encourages businesses either to leave Cook County or never to locate there in the first place."

Daley, who is expected to run for re-election next year, faces the anger of voters who have seen their tax bills skyrocket as home values in the city have shot upward.

But compared to homeowners in other counties in the Chicago metropolitan area, "Cook County residents do not pay high property taxes," the Illinois economist said.