Chicago alderman approved a $589 million increase in property taxes on Wednesday, a record hike that will be phased in over four years.
The proposal would help fund public safety pensions, which are in horrible shape. From DNAInfo:
“Budget Director Alexandra Holt testified during budget hearings that this year’s property tax increase would be $318 million, or a 37.7 percent increase in the city’s tax levy, with an average increase of 12.2 percent on homeowner tax bills that will come due next summer.”
Here are a few things property owners need to be aware of:
1. There is no tax increase on leases or property transfers. But there are other fees added to the proposal: A garbage collection fee, on-demand ride services fees, cab fees and fees on e-cigarettes.
2. The tax increase is dedicated to first responder pensions. The state of Illinois mandates payments to fire and police pension funds. Facing a huge shortfall, the tax plan would shunt $544 million to these funds.
3. Will rents go up? It’s very possible, but you’ll have to wait to find out. That’s because assessed valuations for properties have to be worked out. Until that happens, landlords and commercial property owners aren’t going to know exactly what they will have to pay. Once they do, prepare for increased costs to be passed on.:
“An increase in property taxes is bound to cause an increase in rents,” Heather McRae, a senior loan officer at Chicago Financial Services was quoted in Chicagoist as saying. “The bottom line is, an increase in property taxes increases the cost of holding the asset, which in this case is real estate. The owner will need to cover that additional cost and increasing the rent is the swiftest way to do it.”
4. You tax bill will come this summer and should reflect the increases. Pay special attention to escrow funds held to pay taxes. Make sure there’s enough in the fund to pay the bill. Tax bills are based on property valuation. So if you think the assessment is wrong, know the process to appeal. Real Property Alliance has a handy video and resource guide on property tax bills and what to do if you think they are incorrect.
5. Chicago Mayor Rahm Emanuel is seeking state legislation to increase the homestead exemption (nearly doubling it). While this would help off-set some of the increase for homeowners, it will shift most of the burden of the tax increase to non-residential property owners in the City.
— Hat tips to Brian Bernardoni and Mike Scobey, who work with the Illinois Association of REALTORS® for their takes on the impacts.