Kaegi botched COVID tax relief

Cook County Assessor Fritz Kaegi tried projecting unemployment neighborhood by neighborhood and using that estimation of pandemic-related job losses to just how much he’d lower every homeowner’s property assessment by. But then housing prices quickly rebounded. | Anthony Vazquez / Sun-Times file

When the COVID-19 pandemic hit, Cook County Assessor Fritz Kaegi decided to give homeowners a break based on his office’s unusual effort to estimate pandemic-related job losses and use those calculations to lower property assessments.

It turned out to be a wild miscalculation that worked out well for some, including Mayor Lori Lightfoot. The property tax bill on her home in Logan Square fell after Kaegi cut her property assessment in the booming neighborhood by 11%, a Chicago Sun-Times analysis has found.

But it didn’t work out so well for homeowners in some parts of Cook County, like Greater Grand Crossing, the poor South Side neighborhood that Kaegi decided would likely face the same level of pandemic-related unemployment as Winnetka. Those South Side homeowners ended up seeing small increases in their taxes.

Unemployment projections aren’t the sort of math his agency ever did before. But Kaegi says he decided he needed to do something when it became clear within weeks of the March 2020 state-ordered shutdown in response to the pandemic that home values in Chicago and the suburbs were falling.

So that spring Kaegi had his staff recalculate the values placed by his agency on all 1.5 million homes in Cook County, cutting each of those assessments by a median of 10%.

That didn’t mean everyone would end up paying less in taxes. Government taxing bodies still needed the same money to operate. So the amount of property taxes collected countywide wouldn’t change.

But Kaegi’s move affected every tax bill, resulting in lower tax bills for some homeowners, higher ones for others — and higher tax bills for most commercial buildings even though businesses were hard-hit by the pandemic, too.

Kaegi says that’s because commercial properties hadn’t been paying enough property taxes — which fund schools, police and other government services — because they’d been under-assessed by predecessors holding his office.

A few commercial properties did get one of Kaegi’s COVID property assessment breaks. Those included cuts that resulted in lower taxes for Wrigley Field, Arlington International Racecourse and many hotels. Others — among them Willis Tower — ended up with big tax increases.

Kaegi’s method

Instead of relying on sale prices to determine the value of residential property, as assessors across Illinois always do, Kaegi came up with his own neighborhood-by-neighborhood projections of unemployment, reasoning that job losses from businesses shutting down as a result of the pandemic would cause home values to plummet.

So, in April 2020, Kaegi’s chief data officer devised a computer program, using data from the U.S. Census Bureau and the Federal Reserve, to predict how many people would lose their jobs in each Cook County neighborhood and how that unemployment was likely to affect the values of homes, condos and small apartment buildings.

He estimated the unemployment rate in every neighborhood would go up by at least 8%, and as much as 16%. His office then cut its assessment on most residential properties by somewhere between 7.5% and 15.4%.

But housing rebounded

By the time homeowners got their tax bills in early 2021, housing prices already had rebounded. In fact, they had skyrocketed past pre-pandemic values as people rushed to buy more spacious homes in outlying city neighborhoods and in the suburbs.

But Kaegi’s COVID cuts — the likes of which weren’t seen anywhere else in the country — already were locked in.

“They took a gamble, and the gamble didn’t turn out as they expected,” says Laurence Msall, president of the Civic Federation, which monitors government finances.

Civic Federation president Laurence Msall.

Beyond that, Msall says, “A lot of the relief they gave was uneven and not where it was needed.”

Kaegi’s staff couldn’t provide the data to show how each homeowner’s COVID reduction was calculated.

Mystery calculations

Just how much COVID relief each homeowner got from Kaegi is a mystery.

The COVID break wasn’t spelled out on the property tax bills that were paid last October.

Nor does it appear on any county tax websites, though other tax breaks do, including the homeowner’s exemption.

The Cook County treasurer’s office — the government body that mails out property tax bills — says it doesn’t know how much each homeowner’s bill was affected.

Lawyers who handle property tax appeals say they have been unable to figure out how Kaegi calculated the assessment reductions or how much that might have saved a homeowner.

Kaegi sent letters advising homeowners he was reducing their assessments because of COVID. But he didn’t say by how much.

The assessor’s website shows the average COVID break in each neighborhood. But it doesn’t show how much individual homes’ assessments were reduced.

‘We guessed it wrong’

Kaegi’s former data chief Robert Ross, who quit last year, says the computer program he created set the line of “winners and losers” at 10%: Your property taxes went down only if Kaegi lowered your home’s assessment by 10% or more, according to Ross. Otherwise, a lower assessment of less than that much meant you still ended up paying more compared to the year before, he says.

In a May 2020 memo to Kaegi and other top officials in the assessor’s office recommending how to make the COVID breaks happen, Ross pointed out, “While it is outside the purview of the assessor to change assessments in response to factors other than changes in fair-market values, it is nevertheless interesting to consider such reductions in the context of underlying demographic factors.”

It soon became clear that the agency was wrong in predicting the effects unemployment would have on many neighborhoods, particularly those where home values soared.

“We guessed it wrong, which means some people won and some people lost,” says Ross, who since has been discussing the COVID breaks with Kari Steele, who’s running against Kaegi in the June Democratic primary.

Some still have break

For Chicago homeowners, Kaegi eliminated his COVID assessment reductions after one year because he was required by law to reassess every property in the city in 2021.

But he’s letting north suburban homeowners keep their COVID breaks for a second year as his staff works this year on reassessing all suburban properties north of Oak Park.

And all suburban homeowners from Oak Park south get to keep their COVID breaks until the assessor’s staff reassesses their communities in 2023.

That’s left some, including Msall and some county officials and property tax lawyers, wondering why Kaegi isn’t doing away with his COVID assessment breaks the same way he created them — all at once.

“You manipulated the system for everybody in one year, but you’re rolling it back over three years,” says Msall, who has been critical of some of Kaegi’s past proposals.

Kaegi says his office can’t handle reassessing the entire county in one year and that the law doesn’t allow him to increase assessments for homeowners except as part of a broader reassessment.

Kaegi was supposed to have set all Cook County property values for the first year of the pandemic on Jan. 1, 2020. But he says the disaster proclamation Gov. J.B. Pritzker issued March 12, 2020, gave him authority that year to reduce property values after the deadline.

His office appears to have discussed the COVID breaks with the Cook County state’s attorney’s office, which says it produced two pages for him it says are confidential, protected by attorney-client privilege.

Asked what the state’s attorney’s office advised, Kaegi’s legal director Christina T. Lynch says, “We sought no opinion, and received none, from the state’s attorney on matters pertaining to whether we could apply a COVID adjustment/reduction.”

Kaegi spokesman Scott Smith says the communication wasn’t a legal opinion but that the assessor would not waive privilege to release it.

How some were affected

Based on a database Kaegi’s office provided of his 2020 assessments for all 1.8 million properties in Cook County, here are some examples of how he applied his COVID assessment reductions:

• Like many of her neighbors in Logan Square, Lightfoot’s assessment went down 11%, which cut the property tax bill on her single-family home by $135 — to $9,272.

Mayor Lori Lightfoot was among homeowners whose property taxes went down thanks to Cook County Assessor Fritz Kaegi’s COVID breaks.

Most of her neighbors’ bills also went down — with the exceptions of three large apartment buildings that got no COVID relief because each one has more than six apartments. Their tax bills went up by as much several thousand dollars.

“It is our expectation that the mayor’s property tax assessment was treated the same as every other Cook County taxpayer,” Lightfoot spokesman Cesar Rodriguez says.

Smith says the apartment buildings near Lightfoot’s home didn’t get any COVID breaks because larger “apartment buildings in Chicago were significantly under-assessed in 2018 under Assessor Joe Berrios, and therefore most did not receive additional COVID reductions.”

• On the Gold Coast, Kaegi gave an 8% assessment cut to Pritzker’s 20,000-square-foot mansion as well as the six-bedroom house he owns next door — that’s the house that got $330,000 in breaks from Berrios because the toilets had been removed during stalled renovations. Despite Kaegi’s COVID assessment cuts, the property taxes on Pritzker’s two homes went up by a combined $9,367 last year — to $475,759.

Gov. J.B. Pritzker: Didn’t ask for or know he got COVID break.

A Pritzker spokeswoman says the governor didn’t know he got any COVID break because his taxes went up and because, like other homeowners, he didn’t apply for such a break.

Pritzker’s COVID adjustment was lower than those given to wealthy homeowners on the North Shore because “these calculated employment effects were less drastic in the Gold Coast neighborhood than in Winnetka,“ Smith says, referring to Kaegi’s unemployment predictions.

• Another of Cook County’s richest residents, Arie Steven Crown, got a 10% assessment cut on his $29 million mansion in Winnetka, which has the largest residential property tax bill in the county.

After Kaegi’s assessment cut, Crown’s tax bill went down by $9,683 last year, to $665,803, though the assessor says some of the savings came from Winnetka’s public schools cutting the amount of money they sought from taxpayers.

One of Chicago’s richest families for generations, the Crown name appears on the towering water fountains in Millennium Park and the performing arts theater at McCormick Place.

Winnetka home of Arie Steven Crown, who got a 10% assessment cut on the $29 million mansion, which has the largest residential property tax bill in Cook County.

Crown and his attorneys didn’t return calls.

• Kaegi gave smaller COVID breaks to modest homes in neighborhoods like Grand Crossing, where an 1,100-square-foot bungalow near 74th Street and Perry Avenue saw its assessment cut by 8%, but its tax bill went up $50, to $1,970.
• Kaegi gave former Illinois House Speaker Michael Madigan and his West Lawn neighbors an 11% cut in their assessments. But the tax bill on Madigan’s side lot rose, so Kaegi’s cuts saved Madigan about $20.

Madigan couldn’t be reached. He heads the law firm of Madigan & Getzendanner, which handles property tax appeals for many downtown buildings that Kaegi says were unfairly under-assessed by Berrios.

Cook County Assessor Fritz Kaegi’s COVID assessment cuts saved former Illinois House Speaker Michael Madigan about $20 on his property taxes.

• Kaegi gave 12% assessment cuts to Ald. Edward M. Burke (14th) and his neighbors in West Elsdon. That saved the alderman and his wife Anne Burke, chief justice of the Illinois Supreme Court, $423. They paid $15,625.

Ald. Ed Burke (14th) saved $423 in property taxes thanks to Cook County Assessor Fritz Kaegi’s COVID assessment cuts.

The alderman — who also ran a law firm that appealed property assessments for Loop buildings — is facing federal charges accusing him of withholding city permits from a Burger King that didn’t hire Burke’s firm to handle its tax appeals.

• Kaegi raised his own assessment, causing his tax bill to skyrocket from $27,919 to $42,789. Kaegi doesn’t take a homeowner exemption or any other exemptions that his office awards to help people reduce their taxes.

Kaegi asked his staff members to re-examine his 4,000-square-foot home in Oak Park that he bought 12 years ago for $1 million. Following an in-person inspection, they determined the home was worth more than $1.1 million — a 47% increase over the $720,000 value Berrios had set.

“I decided it was a good idea to have something called a field check, which is what any homeowner can do to have a re-measurement of all the different dimensions to all the different aspects that drive value up,” the assessor says. “I just thought that was a good idea for people to know the assessor has got the most up-to-date measurements on his house.”

• Kaegi was reassessing all south suburbs when the pandemic hit. His neighbors were facing significant increases in their assessments when he decided to do the COVID adjustments. He estimated his neighborhood’s unemployment rate would rise by about 8.8%, so he scaled back his neighbors’ assessment increases by 8%.

Many of his neighbors saw their bills rise by a few hundred dollars. One person’s bill fell by a few hundred dollars.

• Though on his website Kaegi pledged to give COVID relief to “all homes in Cook County,” that didn’t happen.

Dr. Gordon Siegel is one of about 5,000 homeowners in the city and the north suburbs who didn’t get a COVID adjustment, according to the Sun-Times analysis.

Siegel owns an 11,000-square-foot home a few blocks west of the Water Tower but wasn’t aware of COVID breaks or that he didn’t get one until being contacted by a reporter.

“I have no idea why not,” Siegel says.

The North Side home of Dr. Gordon Siegel, who was one of about 5,000 homeowners in Chicago and the north suburbs who didn’t get a COVID adjustment.

Smith says Siegel’s home didn’t get any relief because his assessment is frozen by a state program that encourages rehabilitation of historic homes.

According to state officials, though, nothing prohibits Siegel’s assessment from being lowered.

Kaegi staffers acknowledge that errors were made in processing some residential properties. They say homeowners who didn’t get a COVID adjustment on their assessments can apply for a refund known as a certificate of error. Those who didn’t get a COVID break will likely have the same assessment for the 2019 and 2020 tax years as shown on the Cook County tax portal website.

Blowback from business

“The COVID adjustment, to us, is very objective evidence of how the assessor is putting his thumb on the scale for what looks to be a political purpose,” says Farzin Parang, who heads the Building Owners and Managers Association of Chicago. “In a way, he’s shifting the tax burden on commercial property in the middle of a pandemic that has primarily affected commercial property value.”

Kaegi dismisses such complaints: “It is no coincidence that the loudest criticisms of our COVID reductions are coming from property tax attorneys and large commercial property owners who have, in the past, benefited from an assessor’s office geared to insiders who know how to work an unfair and broken system which shifted the property tax burden onto homeowners.”

The assessor didn’t give a COVID break to essential businesses that stayed open during the shutdown, such as grocery and liquor stores.

The assessor’s relief was inconsistently applied for entertainment venues and restaurants — businesses ordered to shut down for many months.

Consider these River North properties two blocks apart: Harry Caray’s Italian Steakhouse, 33 W. Kinzie St., and the row of buildings on North Clark Street that’s home to three Rick Bayless restaurants — Frontera Grill, Topolobampo and XOCO — plus Lettuce Entertain You’s Three Dots and a Dash.

Harry Caray’s Italian Steakhouse, 33 W. Kinzie St., saw its property taxes go down by more than $46,000, to $199,692.

Harry Caray’s got a 23.3% assessment cut from Kaegi and another 4.4% reduction from the Cook County Board of Review, which hears tax appeals.

Kaegi and the Board of Review didn’t give any breaks to Albert Friedman, who owns the buildings that house the Bayless and Lettuce Entertain You restaurants.

Friedman’s taxes went up $32,078, to $326,948. Harry Caray’s fell by $46,199, to $199,692.

Harry Caray’s attorney Patrick Cullerton argued the restaurant was closed most of 2020.

Friedman’s attorney, from Madigan and Getzendanner, noted that his restaurant tenants had stopped paying rent in the spring and summer.

The lawyers didn’t return calls.

Asked about the differing treatment, Kaegi’s spokesman says, “Many commercial properties in Chicago did not receive additional COVID reductions, as their values were already below-market value even after accounting for COVID’s effects on market prices.”

Albert Friedman, who owns the buildings at on North Clark Street that house Rick Bayless and Lettuce Entertain You restaurants, saw his taxes go up $32,078, to $326,948.

Businesses that got a break

Kaegi helped out the Arlington International Racecourse, 2200 Euclid Ave., Oak Forest Bowl, 15240 S Cicero Ave., and Wrigley Field — but not Wrigley’s neighbor Metro Chicago.

Arlington International Racecourse lost $7.9 million in 2020 because it had only 30 racing days, down from 71 the year before, according to the appeal filed by the track’s attorney Steven Pearlman.

Arlington International Racecourse lost $7.9 million in 2020 because it had only 30 racing days, down from 71 the year before, according to the track’s attorney. Its assessment was cut by 25% and its tax bill fell.

Kaegi gave the track a 25% cut, which left it with a tax bill of $2.7 million last year, $531,410 less than it paid the year before.

“The 2020 reduction in assessed value of Arlington reflects the agreed-upon value and a provision which allowed the property to be reassessed if the racetrack did not operate for a certain number of days,” Smith says.

Oak Forest Bowl, 15240 S. Cicero Ave, Oak Forest, saw its tax bill go down from $135,926 to $112,172.

In the south suburbs, Kaegi planned to raise Oak Forest Bowl’s assessment by 32% but instead cut it by 15%. So its tax bill went down from $135,926 in 2019 to $112,172 in 2020.

Kaegi granted even more assessment relief than the bowling alley’s lawyer asked for, lowering the assessed value an extra $17,085, to $284,915.

Asked why, Smith says the bowling alley “received a reduction based on the effects of COVID and evidence submitted in the appraisal as part of its appeal.”

Owner Keith Tadevich says: “Between the two shutdowns last year, six months, we were shut down. We had no revenue come in. Something is better than nothing, and I’m thankful for anything that’s a reduction. Did it offset not having business for six months? No.”

Wrigley yes, Metro no

Wrigley Field got a 12% cut after the Cubs argued that COVID drastically reduced their schedule while limiting the number of fans who could attend games. As a result, the tax bill on the ballpark and its surrounding property fell below $4 million — a cut of $155,321.

The tax bill on Wrigley Field and its surrounding property fell below $4 million — a cut of $155,321.

Blocks north of the ballpark, Metro Chicago had to shut its doors to concerts. Owner Joseph Shanahan asked Kaegi for a break but was rejected. Shanahan turned to the Board of Review, which cut the assessment by 20%, leaving the venue with a tax bill of $89,963 — about $7,452 less than the year before.

Kaegi’s office says the venue already was assessed “below-market value even after accounting for COVID ‘s effects on market prices.”

Metro Chicago owner Joseph Shanahan asked Cook County Assessor for a break and was rejected because, a Kaegi spokesman says, the venue already was assessed “below-market value even after accounting for COVID ‘s effects on market prices.”

Half paid more anyway

After Kaegi’s COVID assessment breaks went into effect, Cook County Treasurer Maria Pappas found that 50% of the county’s homeowners ended up with bigger tax bills, and more than 78% of the commercial property owners ended up with bigger bills to cover the COVID discounts homeowners got.

The Willis Tower’s tax bill rose nearly 11% last year even though the building had its own COVID issues, including new restaurants that didn’t open, closing its observation deck and a drastic decline in daily visitors from 10,0000 to fewer than 1,000.

The skyscraper’s tax bill soared $3.8 million last year, to $38.8 million — the largest property tax bill in Cook County.

Willis Tower’s tax bill rose $3.8 million, to $38.8 million — the largest property tax bill in Cook County.

In Rosemont, the Fashion Outlets of Chicago shut down for 82 days, but its property tax bill still rose 22% — up $2.8 million, to $15.2 million. This came after Kaegi gave the mall some COVID assessments breaks, and the Board of Review corrected an error in measuring its square footage that also lowered the assessment.

Fashion Outlets of Chicago in Rosemont saw its property tax bill still go up 22% — by $2.8 million, to $15.2 million.

Lawyer: Kaegi’s motive was reelection

In the assessment appeal, the mall’s attorney, Patrick McEnerney, accused Kaegi of doling out COVID breaks to curry favor with voters as he seeks reelection.

“The assessor is slashing residential values predicated on ‘COVID-19 relief’ without a shred of evidence regarding any value decline in residential markets,” McEnerney wrote. “These overt and obvious efforts to pander to voters/homeowners are being pursued and implemented — all at the expense of commercial real estate owners.”

Kaegi says that trying to give homeowners a break was the right thing to do. He says that, though “we didn’t have all the data that we would have liked, we had enough to make a good decision” and that the aim was to come up with assessments that “were as close to being a good snapshot as we could with the data that we had.”

A SNIPPET FROM MEMO THAT ‘GUESSED IT WRONG’

From May 2020 Robert Ross memo to Cook County Assessor Fritz Kaegi: “critical assumptions.”