All Forum Posts by: Sid Franklin

More bad, but not unexpected news.  Civic Federation: $588M property tax hike won't be enough to shore up finances

http://chicago.suntimes.com/chicago-politics/7/71/...

The report notes that Emanuel is making three rosy and risky assumptions that, if he

If you purchased from a senior citizen who was using the senior property tax freeze, their taxes may have been artificially lower because of the freeze.  Be wary of this law when purchasing a sfh home or 4 unit or less rental buildings and bake this tax hike into your valuation.

Good Tribune article today on how Rahm and the City Council plan to transfer the entire $550 million property tax hike to properties valued over $250,000.

http://www.chicagotribune.com/news/local/politics/...

"Emanuel has cast a populist shine on his proposal by adding a pledge to insulate some homeowners completely, and others partially, from the added price of tax hikes. But the convoluted property tax system is constructed as a zero sum game, so any breaks bestowed on one group of taxpayers add to costs for others.

In essence, those who don't qualify for a break under Emanuel's plan could be hit with a double tax whammy. First, they have to bear the cost of a higher tax. Second, they have to pay a little more on top of that to make up for tax breaks Emanuel wants to give to homeowners.

What's more, the mayor's plan has broad impact on tax bills because doubling the homeowner's exemption would apply to more than just levies earmarked for City Hall. The losers in any tax burden shift would also have to pay more for other citywide public bodies, in particular Chicago Public Schools, which consumes 54 percent of the take from property tax bills.

"My concern is for the small businesses," said Ald. Scott Waguespack, 32nd, whose ward straddles trendy North Side neighborhoods. "Their taxes go up, a lot of the small businesses work on the fringe. …They are already looking at huge leases — $5,000, $10,000 in some areas. They're barely making it, and this will push them over the edge."

I think you are mixing apples and oranges here.  A property tax appeal, although helpful at times in reducing the amount a taxpayer will pay, does not shield you from the tax hikes being discussed in this forum post.

Mayor Rahm Emanuel proposes $600 million property tax hike. Largest tax hike in the history of the City of Chicago.

http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-property-tax-increase-met-0922-20150921-story.html

BOMA opposing Mayor Emanuel's $250K exemption proposal that's part of his push for a  $500 million property tax hike.

http://chicago.suntimes.com/news/7/71/964021/downtown-building-owners-call-emanuel-tax-relief-plan-simply-untenable

“The expansion of the homestead exemption credit, however, shifts the majority of the burden for this increase onto commercial properties, meaning that commercial properties could see increases of 20 percent or more in property taxes. That’s before additional increases are considered for schools, parks and other property tax levies,” he wrote.

“An increase of this magnitude is simply untenable for many businesses occupying commercial buildings.”

Earlier this week, Emanuel sloughed off the gripes and fears of downtown building owners and their local Ald. Brendan Reilly (42nd).

The mayor likened those sky-is-falling complaints to what happened in 2011, when he raised Chicago’s already-high hotel tax in his first city budget.

“A lot of the hotel industry was nervous then. They were critical. That was 8,000 rooms ago. We’ve added 8,000 rooms both built and are being built right now. Record tourism, convention and hospitality growth in the city. And as you know, we have two new office buildings going up in the city. One of ‘em was done on spec,” Emanuel said.

“So, while there will be a change, it will be done fair and progressive and we’ll continue to promote a business environment that fills up these office buildings in a way that also has built up our hotels.”

The mayor added: “I’m committed to making sure that seniors on fixed incomes, people who go from paycheck to paycheck at the end of the month are held harmless…It is fair. It is equitable. It’s progressive.”

The warning from downtown building owners may well be a moot point.

Despite the mayor’s appeal to reconsider, Republican Gov. Bruce Rauner appears to be dead-set against the mayor’s plan to raise the homeowner exemption.

Rauner has insisted on a two-year, statewide property tax freeze as part of the package of pro-business, anti-union reforms that triggered the state budget stalemate.

Signing off on Emanuel’s plan to raise a homeowner exemption that now stands at $7,000 of a home’s assessed valuation could not only undermine Rauner’s agenda and weaken his political hand. It could saddle the governor with some of the blame for the largest property tax increase in modern Chicago history.

“We applaud the Mayor for proposing a property tax freeze for some families, but he should support a property tax freeze for all Chicagoans. The Mayor should only consider a property tax increase in the context of structural reforms that give homeowners and job creators faith in the future of Chicago,” Rauner’s spokesman Mike Schrimpf said in an emailed statement.

“Too many areas of Chicago are already suffering from massively high unemployment and are unattractive to businesses and manufacturers that provide good-paying jobs. We shouldn’t make that problem worse, which is what a property tax hike without structural reforms will do.”

Schrimpf noted that Rauner has offered almost $500 million in financial relief for his old friend Emanuel. That includes $200 million in increased annual payments for the Chicago Public Schools “while protecting the district’s special $600 million block grant deal” and nearly $250 million more in annual savings through “structural reforms.”

“The Mayor can and should do a lot more to reform the city’s finances if he wants the Governor’s support,” Schrimpf wrote."

More fun - Rahm proposing an "exemption" on properties under $250K.  From the Chicago Tribune:

"If Emanuel raises city property taxes by $500 million, the owner of a $250,000 home could pay $470 more a year, based on a Cook County clerk's office estimate using this year's figures. Aides to Madigan and Cullerton said details of how Emanuel's exemption concept would work are still being drafted.

Exemptions work by lowering the assessed value of a home on which a tax bill is calculated. State tax code provides an exemption on all homeowners' primary residences. Other tax breaks, taking the form of exemptions or assessment freezes, are given to longtime homeowners who make less than $100,000 a year, senior citizens, disabled people, returning veterans and people who recently have invested in home improvements.

When housing prices soared prior to the Great Recession, the legislature added an additional exemption, which limited property tax increases driven by the rising home values, but that break has since expired.

So if Emanuel and state lawmakers provided a bigger exemption to homeowners, that comes at the expense of owners of commercial property, who already have their parcels assessed at 2 1/2 times the value of homes. For example, the owner of a commercial property worth $250,000 this year received a tax bill of nearly $11,600. The $500 million city increase would have raised that tab by a little more than $1,300."

I think the exemption would also increase property taxes on homes valued over $250K as well.

http://www.chicagotribune.com/news/local/politics/...

 John - this formala is all I could find after a very quick search.

"Every additional $1,000 in annual property taxes reduces the amount a buyer can pay for a house by about $18,500 at current interest rates, according to an industry rule of thumb, Noah Ostroff an agent with Coldwell Banker Preferred, said Tuesday."

http://articles.philly.com/2013-02-21/news/37202601_1_property-taxes-home-buyers-rental-properties

Yes, and according to today's Sun Times, a $500 million dollar hike for the City is not nearly enough to solve the debt crisis.  Mind you, the $1.5 Billion property tax hike mentioned here does not cover CPS, Cook County or other governmental debt or any pay raises or retirment benefit hikes that occur before the debt is paid off.  A $1.5 Billion hike would roughly translate to a $1500 hike for every $250K of value.  Commercial properties will likely pay a lot more in property taxes than residential properties.

Here's the article: http://chicago.suntimes.com/news/7/71/943156/500-million-property-tax-hike-enough-shed-chicagos-junk-bond-rating-analysts-warn

“Fabian’s conclusion was that, as tough as it will be for homeowners and their aldermen to swallow a $500 million property tax increase, Mayor Rahm Emanuel and the City Council need to bite the bullet even harder.

“I would have preferred to see this as the first of several property tax increases and part of a more aggressive plan. Say, $200 million or $300 million every year for the next three or four years as opposed to one large one because one large tax increase can create political volatility,” Fabian said.

“The political cost of a $500 million raise probably makes this the only revenue raise — at least the only significant one that we’ll see in the near term. And that’s just not enough. So, either it means much deeper spending cuts or a return to gimmicks, particularly if the economy softens.”

Fabian acknowledged that Chicago bonds have been “trading up a point or two for the first time in quite a while” since the Chicago Sun-Times first disclosed last week that Emanuel is poised to raise property taxes by a record $500 million for police and fire pensions and school construction and impose a first-ever garbage collection fee.

But he argued that it will take a lot more than that to rid Chicago of its costly junk bond rating.

“The city could have $1.5 billion [worth] of increases and it would still be [just] almost enough. We’re still very far from [the solution] because the full cost of the pensions for the city and the school district are enormous,” Fabian said.”

This is just the beginning of tax hikes in Chicago.  In return, you don't get anything but debt payments (for police and fire).  No better policing, schools, public transportation or parks.  The proposed tax hike does not even touch the Chicago Public Schools debt or other city debt (bonds and other pensions).  Cook County recently raised its sale tax 1% to cover pensions (and then gave out pay increases).  Investors need to be careful out there.  Prices may decline.

http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-property-tax-hike-met-0903-20150902-story.html