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Rethinking Property Tax Classification in Cook County
When new businesses decide to locate in areas with existing infrastructure on vacant or underutilized "infill" land, everybody wins. Without the need to invest in extending new roads, sewer systems, and power lines to undeveloped areas, taxpayers and local governments save money. Open space is preserved. Communities that may be struggling with vacant lots see new jobs, resources, and opportunities by way of new business, whether it's an industrial factory or grocery store.
Unfortunately, the property tax classification system in Cook County makes the areas in most need of redevelopment less appealing for new businesses to locate in comparison with other locations in the region. While the collar counties offer effective commercial and industrial property tax rates below 4 percent (as a percent of market value), in Cook County those effective rates can be as high as 8.7 percent in west Cook and 11.3 percent in south Cook. Phasing out of the classification system unique to Cook County could provide the needed incentives for businesses to grow in our region's most economically-challenged communities.
Because property tax assessment classification is little-understood, CMAP has prepared a series of two interactive issue briefs that shed light on the process. Today we launched Cook County Property Tax Classification, which drills deeper into the issue with case studies to show where phasing out Cook County's classification system over time could help attract businesses to neighborhoods sorely in need of economic development. By exploring a clickable map and related data, the user can compare how residential, commercial, and industrial property tax rates vary across West Cook and South Cook communities.
The new interactive map and data show that effective commercial and industrial property tax rates in West Cook ranged from 4.2 to 8.7 percent (as a percent of market value) in 2009, while the same effective rates were below 2 percent only five miles away in DuPage County. Effective commercial and industrial property tax rates were even higher that year in south Cook communities, ranging from 6.0 to 11.3 percent. If the Cook County classification system were phased out, West Cook's effective commercial and industrial property tax range would drop to 3.2 to 4.8 percent and South Cook's would be 4.0 to 7.0 percent. While phasing out Cook County's property tax classification system over time would reduce rates for commercial and industrial property taxpayers, rates (including residential ones) would remain relatively high due to the size of the tax base in these communities relative to the size of the tax levy. Phasing out classification, however, may spur new business developments, a larger tax base, and lower rates.
Because it ensures that commercial and industrial property tax rates in existing communities such as West Cook and South Cook are higher than in the rest of northeastern Illinois, the classification system impedes infill and redevelopment, which are prime goals of the GO TO 2040 comprehensive regional plan. Communities in areas like West Cook and South Cook face serious challenges in attracting new businesses and infill development. The result is a narrow tax base that grows more slowly than the cost of public services, which can lead to even higher tax rates for businesses and residents alike.
Our previous installment, Decoding Property Taxes and Classification, explained how property tax rates are determined, what the taxes pay for, which government units get the revenue, and why property tax assessment classification matters. Today's second installment shows how high tax rates can perpetuate a cycle where new businesses do not locate in the very communities that are most in need of economic development. As we will describe further in additional Policy Updates, phasing out the property tax classification system in Cook County may help to break this cycle.
CMAP staff have been investigating issues addressed in the Regional Task Policy Task Force's advisory report to the CMAP Board in response to the GO TO 2040 recommendation that state and local tax policies should be studied "through the lens of the regional economy, sustainability, equity, and the connections between tax policy and development decisions."