The Chicagoland Chamber of Commerce and other groups recently filed a lawsuit in Cook County Circuit Court challenging the constitutionality of a state law that allows Illinois counties to impose a 7 percent cap on property tax assessment increases.
Illinois enacted the law in July 2004, after thousands of taxpayers in Chicago and surrounding Cook County protested property tax bills that skyrocketed after their property was reassessed. Cook County is the only county among the 102 in Illinois that has adopted the cap.
Claim Cap Would Shift Tax Burden Unfairly
Chamber officials complain the cap shifts hundreds of millions of dollars in tax burden onto commercial and industrial taxpayers and thousands of homeowners throughout Cook County, whose property values do not rapidly escalate.
“We strongly believe the law is not only unfair and unconstitutional, but actually prevents true reform of our property tax system,” the group said in announcing its lawsuit October 13. “Many of you know that Cook County already treats residential taxpayers differently than business taxpayers. This new law intensifies this unequal treatment and asks businesses and many homeowners to pay more so some taxpayers can pay less.”
“Cutting taxes for high-value homes and then asking other homeowners and all Cook County businesses to pay more is not reform,” said Chicagoland Chamber President and CEO Gerald Roper. “It takes us backwards.”
The lawsuit asks the Cook County Circuit Court to strike down the new state law authorizing the assessment cap and order an eventual recalculation of the 2003 property tax bills. The lawsuit does not challenge certain other sections of the law, such as narrowly focused additional tax relief for seniors and homeowners beyond the so-called “assessment cap.”
Plaintiffs include several individual homeowners and business owners, the Chicagoland Chamber of Commerce, the Building Owners and Managers Association of Chicago, and the Chicago Development Council. Defendants are the three Cook County officials involved most directly in tax assessment and billing: Assessor James Houlihan, Treasurer Maria Pappas, and Clerk David Orr.
“This law is not tax relief. It’s a tax shift–and for many, that means a tax increase because they’re paying more than they would have paid if this law had never been enacted,” said Roper.
Unfairly Benefits Chicago Homeowners, Chamber Says
The Chamber contends the law:
- benefits Chicago homeowners at the expense of suburban homeowners, especially those in the south Cook County suburbs;
- favors certain Chicago homeowners in wealthier or gentrifying neighborhoods at the expense of homeowners in neighborhoods where values have not appreciated as much;
- benefits existing homeowners at the expense of young families buying their first home or homebuyers entering a new neighborhood;
- pits homeowners against apartment tenants by increasing taxes on apartment buildings, driving up rents; and
- shifts tax burdens to small businesses and other commercial tenants, increasing their costs of doing business throughout Cook County.
- The lawsuit alleges a number of legal and constitutional flaws, including the following:
- The Illinois Constitution requires that property taxes be levied uniformly, but the new law does not treat all homeowners alike.
- The measure discriminates against suburban Cook County homeowners by the manner and timeframe in which the tax cap would be implemented in the three Cook County assessment districts.
- By giving counties the ability to opt in or out of the new homestead-exemption scheme, the law unconstitutionally delegates to counties the exclusive authority of the General Assembly to establish Homestead Exemptions.
- The law makes fair administration of the Property Tax Code impossible in situations where taxing bodies derive property tax revenue from more than one county, which is not uncommon in school districts near the borders of Cook County.
- The law violates the equal protection clause of the Illinois Constitution by establishing tax classifications that “have no rational foundation in sound public policy relevant to the purposes ostensibly served by the law,” thus depriving the plaintiffs and other taxpayers of equal protection under the law.
- The retroactive application of the law to 2003 taxes affected thousands of real estate transactions during 2003 and the first six months of 2004, but neither party in any of those transactions could have anticipated the tax shifting caused by the law nor had the opportunity to negotiate the division of responsibility for the unexpected tax increases.
Law Called “Band-Aid,” “Good First Step”
Houlihan was instrumental in the bill’s passage. At a July 2004 meeting with the County Board, he conceded the assessment cap shifts tax burdens, but by only about 1.9 percent. Studies conducted by his office have shown the property tax burden has been shifting from businesses to homeowners, because housing prices have been climbing faster than those for commercial or industrial property.
“This will slow down the shift,” Houlihan said.
Chicago Sun-Times reporter Abdon Pallasch quoted Cook County Board member Larry Suffredin, who lobbied heavily for the 7 percent assessment cap, as saying, “This is a Band-Aid. This is a good first step.”
Steve Stanek ([email protected]) is managing editor of Budget & Tax News.