Kaegi’s office unveiled the computer gizmo to commercial real estate professionals today, part of a broader push to help them understand how he’s trying to reform the assessor’s office and improve the way it values the county’s 1.8 million real estate parcels. Kaegi took over as assessor last year after unseating incumbent Joseph Berrios, who was criticized for using an opaque and unfair process that undervalued commercial properties.
Sounding like the money manager he once was, Kaegi told investors that he wants to make the assessment process more transparent and predictable—and more investor-friendly as a result.
Real estate professionals who want to use the tool can download it from the assessor’s website. By plugging in certain assumptions for each variable, they can estimate a property’s future taxes, theoretically making it easier to figure out how much it’s worth. Robert Ross, chief data officer at the assessor’s office, demonstrated how taxes for a $1 million apartment building would rise or fall based on changes to its assessed value, the overall tax base or the tax levy.
Investors will be playing the guessing game for a while. Right now, only landlords in in northern Cook County know what the assessor thinks their properties are worth. The total assessed value of all commercial and industrial real estate in north suburban Cook rose 74.4 percent from 2018, versus a 15.6 percent increase for all residential property, according to the assessor’s office.
But north suburban landlords won’t know for sure how much their new assessments affect their taxes until next summer, when they receive the second installment of their 2020 tax bills.
Under Cook County’s triennial assessment process, the assessor’s office will value properties in South County next year and in the city of Chicago in 2021. That means investors who own big downtown high-rises—the most valuable real estate in the county—won’t know the tax impact of Kaegi’s methods until mid-2022.
That’s the kind of uncertainty that scares off many investors. Unable to predict a property’s key expense without any accuracy, a lot of investors simply won’t bid on a property that’s for sale. Or they’ll offer a lowball price to account for the risk that they’re wrong.
Recent data indicates that’s what could be happening here. Single-property commercial sales in the Chicago area fell 33 percent in the first nine months of the year from the same period in 2019, according to New York-based research firm Real Capital Analytics. It was the biggest drop among the top 25 U.S. markets and much larger than the 6 percent decline for the nation overall.
Moreover, a Real Capital commercial property price index for the Chicago market has fallen 4.1 percent this year, the worst performance among major metropolitan areas.
Though Kaegi has alienated real estate investors, he still has an important ally in his corner: Mayor Lori Lightfoot, who also campaigned on a reform agenda.
Under Berrios, “we knew this was a system that benefited the few to the detriment of everyone else,” she told investors at the Kaegi event. “Clearly, voters were sick and tired of opaque and unaccountable practices.”
Echoing Kaegi’s message, Lightfoot stressed how important predictability is to investors. She and the city’s chief financial officer, Jennie Bennett, who also spoke, also emphasized the city’s improved fiscal condition, noting that they balanced its 2020 budget with a only a small property tax increase.