Figures obtained by Evanston Now from the Cook County Assessor’s Office show that this year’s new tax assessments have substantially shifted the property tax burden to commercial and industrial properties and away from homeowners.
The assessor’s office says the total assessed value of all residential property increased 25 percent this year to $927 million. But the total value of commercial and industrial property soared 125 percent to $627 million.
Both figures likely will be changed as a result of appeals by property owners.
But if the ratio between the residential and commercial numbers remains the same, it means that when next year’s tax bills arrive homeowners would end up paying 60 percent of total property taxes, down from 73 percent this year, and the burden for commercial and industrial property owners will rise from 27 percent to 40 percent of the total.
The total amount of tax to be raised is determined by the City of Evanston, local school districts and other taxing bodies. The tax assessment determines what share of that burden each taxpayer will have to pick up.
Fritz Kaegi.
At a meeting in Evanston last week, the new Cook County assessor, Fritz Kaegi, said most of the increase in the commercial assessments was driven by a decision by his office to reduce the capitalization rate assumptions for commercial properties.
The capitalization rate is the ratio of a property’s net operating income to its market value. For example, if a building had a net operating income of $100,000 and the cap rate was 10 percent, it would be considered to have a market value of $1 million
During the last triennial reassessment in 2016, Kaegi said, the capitalization rate assumption used was 11.95 percent. For this year’s reassessment it is 6 percent.
“When the cap rate is lower,” Kaegi said, “then the value of a property is higher.”
Kaegi says the new assessments more accurately reflects actual capitalization rates investors achieve on commercial properties.
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