As shocking as it may be for some, Fritz Kaegi is cleaning up
the Cook County property tax chaos wrought by Joe Berrios
I used to complain a lot about some of the crazy real estate stocks I would stumble upon in my day-to-day real estate work. When Joe Berrios ran the Cook County Assessor’s office, I routinely found high quality properties valued at a fraction of their market value. However, since Fritz Kaegi took over I really haven’t found these issues so I think Fritz Kaegi has done a tremendous job based on my anecdotal evidence to clean up the property tax mess that Joe Berrios wreaked.
As a reminder, the way property tax works, it is not enough that your own property is valued fairly. You must also measure everyone else’s property fairly, as the tax burden, which is simply the county / city’s revenue, is spread across all properties in proportion to their estimated values. So if your neighbor’s property has a low appraisal, more of the tax burden is passed on to everyone else in the neighborhood. For this reason, an accurate property appraisal process is vital.
You don’t need to take my word for it that things have gotten better, because there is a relatively simple way to find out how good a tax advisor is. The accuracy of the ratings can be measured objectively. When the Chicago Tribune and ProPublica did an analysis in 2017, they basically concluded that Joe Berrios was an idiot.
Since then, the International Association of Assessing Officers has also conducted some studies of Cook County’s assessments. Their reports focus on a few key metrics, but two of the more telling are the ratio of the estimated value of properties (as determined by actual sales prices) to their market values, and the distribution of those ratios. The latter is known as the coefficient of dispersion and is defined by the IAAO as the average percentage deviation of the evaluation rates from the median ratio.
The first IAAO study looked at the 2018 commercial property values and confirmed that Joe Berrios was an idiot. While the median ratio should be between 90% and 110%, it was actually 61%. In other words, commercial properties were undervalued by around 39%! And although the dispersion coefficient should be less than 15%, it was actually a little over 52%! In other words, the reviews were all over the map.
The second IAAO study looked at the values of all properties assessed in 2019 and showed significantly better results for Fritz Kaegi’s first year at the wheel. The median ratio before objections was 96% and the coefficient of dispersion was 16.4%.
You know, of course, that many, many people are freaking out about their new property tax assessments and curse Fritz Kaegi. But that’s because there are some big changes going on in cleaning up the Berrios mess, and property values have risen well in recent years too. And then the hysteria is compounded by the fact that people don’t understand the basics of the property tax system. They think that a 50% increase in their estimated value means their taxes will increase 50%. However, as explained above, the actual impact will be determined by changes in the overall system. If everyone’s estimated values increased by exactly 50%, nobody’s property taxes would change. And the rated values are increasing across the board. We won’t know until we have our tax bills what the real implications of all of this is.
Unfortunately, there was a lot of whining and grinding of teeth from commercial property owners and landlords when Fritz Kaegi legitimately tried to increase their estimates by an average of 77% in the northern suburbs. That would have been fair. Unfortunately, the 3-person elected audit committee overrode some of its ratings, resulting in a mere 25 percent increase in the scores.
But the bottom line is that Fritz seems to be doing a great job and one should keep in mind that he is up for re-election next year. This is a down election that you actually want to vote for as it will directly affect your wallet.
Gary Lucido is the President of Lucid Realty, the Chicago area’s full-service real estate agency offering home buyer discounts and discount commissions. If you’d like to keep up to date with the Chicago real estate market or get a glimpse of the downside of the real estate industry, you can sign up for Getting Real via email using the form below. Please verify your email address when you receive the confirmation message.