Cook County Is On A Property Tax Reform Mission. CRE Players Say They'll Believe When They See It

Illinois’ current property tax assessment system dates back to the year Apollo 13 launched and the Beatles broke up.

Cook County officials say it's finally time for the 55-year-old framework to get an upgrade, launching a mission to reshape it to increase transparency and regain trust from a wary business community.

For skeptical commercial real estate players, it can't happen soon enough — and seeing will be believing.

“That is what investors quote a lot: tax unpredictability,” said Vicky Lee, senior vice president of development for developer and general contractor Focus. “[Investors] don't want to deal with it and all of a sudden have a higher tax than what everyone assumed and underwrote. It's a big impact.”

Property tax assessments have been the bane of Chicago CRE’s existence for years. Owners have long railed against the Cook County Assessor’s Office for what they say is an unpredictable process that scares investors away from the city and tends to overvalue properties.

Chicago CRE professionals rated property taxes as the city's second-greatest near-term challenge behind safety, according to a midyear sentiment report released last September by the Real Estate Center at DePaul University and the Urban Land Institute's Chicago District Council.

And those interviewed by Bisnow said an imperfect system has only worsened in a sluggish postpandemic market, with fewer sales comps to anchor values in reality.

“It’s amazing that there's that much volatility in real estate taxes,” said Robert Habeeb, CEO of Maverick Hotels and Restaurants. “Real estate taxes should be up and down on some kind of a median over the long term.” 

Now, a reform group made up of a host of government officials aims to start addressing those issues. The Cook County reform group, formed in late 2021, is tasked with reshaping the tax system that originated in 1970 to be more equitable, efficient and predictable.

The group released a comprehensive study last month on commercial property valuation that highlighted current shortcomings and recommended sweeping changes to the system.

Proposed changes include standardizing valuation methods across county offices, improving data sharing between departments and validating sales to enhance property value accuracy.

But the biggest waves came when the study showed county properties weren’t uniformly assessed, appeals didn’t help with accuracy and properties in the suburbs were assessed lower than their worth. 

The results validated what many in real estate have said for years. Still, efforts to better ensure consistency and fairness may take time to come to fruition, said Cook County Director of Property Assessment and Tax Policy Jim Thompson, who leads the reform group. 

“It is necessary that we reform it. It is necessary that we make changes that people can see and feel, but this is a long-term project,” Thompson said. “It took us 55 years to get here. We're not going to be able to change it in one or two years.”

The study “is an initial step to building trust in the system,” he added. “And I think that is a long path, but I think that's an important path that will make property owners feel like their system is fair and accurate and equitable and efficient. That is really our goal as a reform group ... When we build that trust back, I think that's when people will feel like the system is changing.”

The assessor's office uses a mass appraisal system to determine the value of properties, which differs from a typical investment appraisal. The mass appraisal process calculates valuations by inputting market averages from similar properties, weighing for factors like rents, vacancy and cap rates, whereas investment appraisals input the unique characteristics of a property to determine a specific valuation.

Cook County reassesses properties every three years, alternating between the north and south suburbs and Chicago. Cook County's tax rates are also not fixed — they change based on local levies and an equalized assessed value. 

Owners of high-value properties almost always appeal their assessed valuations to the county's board of review and win reductions. According to the study, 97% of all properties worth more than $5M in Chicago appealed. Of those, 88% were granted a reduction.

Thompson said the reform group is currently meeting to create a timeline to implement the study’s recommendations. Some suggestions can be implemented easily, but ones that require more data sharing, technology or third-party users will take longer to put together, he said. 

The group should have a complete implementation plan in the next couple of months, Thompson said. 

“As reassessments in each [area the county assesses] come up and these processes are implemented, it is our hope that they will feel them immediately,” Thompson said of CRE stakeholders. “That they'll see a change throughout the entire process, not just in their assessment notice, but how the properties are looked at through the appeal process, and we anticipate and we hope that property owners will feel it right away.”

But the pace of the change may be too slow for many in CRE who say an unpredictable tax environment is one of the chief concerns for investors and lenders who are hesitant to put money into the city. Several said they would need to see proposals become reality before they're won over, characterizing the current assessment system as fickle and arbitrary.

In many of the other municipalities that Lee works with, the way assessors evaluate properties is more predictable, she said. And if a property owner disagrees with an assessment in Cook County, the complete appeal process can take multiple years to reach resolution, Lee said.  

Even Cook County Assessor Fritz Kaegi said that the tax system’s unpredictability makes it hard for lenders to underwrite potential tax bills, calling it “one of the biggest problems in Illinois and Cook County” at last week's Bisnow’s Chicago 2025 Market Kickoff.

The county’s property tax system currently benefits commercial owners with strong residential markets in their communities, Kaegi said.

“The way our property tax system works in Illinois is, it's zero-sum in every single place you're in,” he said. “The property tax that you pay is based on how everyone is assessed in the area that you're in. So if residential is doing well and doing better in the area [where] you're owning a commercial real estate asset, that's good because it drives down rates.” 

CRE stakeholders argue that is not the best formula to accurately assess taxes. 

Habeeb said Cook County's formula is flawed because the taxes “work backwards.” Local government property tax levies, the amount governments aim to collect in a given year, are established after budgets are created without regard to ups and downs in the values of the properties on which the taxes are paid, according to a report from the Cook County Treasurer. 

“People think real estate taxes go on the cumulative effect, that however much money I collect in real estate taxes is what I have to spend. And it's the opposite,” Habeeb said. “It's like a kids allowance. The kid comes in and says, ‘I want my 100 bucks.’ And you say, ‘Well, I got cut 20 hours last weekend.’ And his answer is ‘That's your problem.’ That's what happens with these real estate taxes.”

Thompson said some of the reform group’s recommendations, like open communication between the assessor’s office and the board of appeals, will help reduce surprises for property owners because both offices will utilize the same process to evaluate property. 

Kaegi noted the report also recommended that the assessor's office and the board of review should try to agree on estimated tax rates to share with participants in the market and with the public. That would help not only with the accuracy of assessments but also the underwriting to help facilitate investments, he said. 

The goal is greater consistency in assessed valuations, Thompson said. 

“We believe that as these recommendations are implemented, we will begin to see a more predictable system,” Thompson said, adding that the county has committed to ensuring that through an annual sales ratio study.

“That will provide the predictability I think investors are looking for.”