My house is worth what?!

A property tax reassessment Q&A

Opinion

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Editor's Note: The following is a statement from Oak Park Township Assessor Ali ElSaffar explaining this year's reassessment increases and how, why and by when, you can file an appeal.

In mid-July, the Cook County Assessor will reassess the value of all Oak Park properties. Oak Park residents may have unhappy memories of the last reassessment in 2002, when assessed values increased by an average of 46 percent for residential property. The tax bills resulting from the 2002 reassessment arrived in the fall of 2003 and included some dramatic tax increases.

Although the prospect of another reassessment may fill local residents with dread, Oak Parkers should understand that for most properties, tax increases from the 2005 reassessment (to be paid in 2006) should be less than the increases from the 2002 reassessment. This is partly due to a cooling in the housing market. Assessed values of homes increased by about 38 percent in 2005, which is somewhat below the 46 percent increase of three years ago.

In addition, Illinois law has changed to protect many homeowners from the type of large tax increases Oak Parkers experienced as a result of the 2002 reassessment. The new law, commonly known as the 7 percent assessment cap, will phase in assessment increases at a rate of 7 percent per year over a three year period; most assessment increases above 22.5 percent will be completely exempt from taxation. The 7 percent cap will protect partially offset the large assessment increases Oak Park homeowners will experience this year.

 

Q Why are assessed valuations expected to increase by 38 percent?

A Since the last reassessment in 2002, Oak Park property values have rapidly increased. The 38 percent increase is the cumulative effect of annual increases in property values of about 12.6 percent per year over three years.

Q If assessed value growth is capped, why did my assessed value increase by more than 7 percent?

A The increase on your reassessment notice represents the Cook County Assessor's estimate of your home's value, without regard to the 7 percent assessment cap. The 7 percent cap will appear on tax bills in the form of an expanded homeowner exemption.

The exemption will partially counteract assessment increases.

Q In the past, the homeowner exemption saved me about $500 per year. Has this changed?

A Yes. In prior years, homeowners received a standard exemption of $4,500 in equalized assessed value (your property's assessed value multiplied by approximately 2.5) from taxation.

This translated into tax savings of about $500 for Oak Park homeowners. Under the old rule, the exemption amount was the same both before and after a reassessment.

The new rules expand the homeowner exemption so that its value can vary from $5,000 to $20,000 in equalized assessed value (EAV), resulting in tax savings of between $500 and $2,000. In the example in the chart above, the property's taxable EAV (the EAV minus exemptions) is $100,000 for tax year 2004.

In the 2005 reassessment, the EAV increased to $127,000. Under the 7 percent cap, $20,000 of the property's new 2005 EAV will be exempt from taxation in the first year of the reassessment cycle, leaving a taxable EAV of $107,000. This taxable value is 7 percent above the taxable EAV of the 2004 base year. Ninety percent of condominiums and 20 percent of single family homes will have assessment increases phased in as indicated by the chart.

The value of the homeowner exemption gets smaller during the three year reassessment cycle. In tax year 2006, the second year of the cycle, increases in a property's EAV that are 14.5 percent above 2004's base taxable EAV will be exempt from taxation, and in the third year, increases 22.5 percent above the base will be exempt. The 7 percent cap legislation is scheduled to expire at the end of this reassessment cycle, although there will be efforts to extend it beyond the 2007 tax year.

Q Do all properties qualify for the expanded homeowner exemption?

A No. The homeowner exemption is available for owner-occupied homes, condominiums and apartment buildings of six units or less. If a property is rented and the owner does not live on the premises, the homeowner exemption is not available. Large apartment buildings and business properties are also not eligible for the homeowner exemption. Properties not eligible for the homeowner exemption may see large increases in their tax bills.

Q Are there exceptions to the expanded homeowner exemption?

A Yes. Properties with large increases in assessed values, and/or high property values may face tax bills that reflect taxable EAV increases of more than 7 percent because the maximum homeowner exemption is $20,000. Therefore, a home with a taxable EAV of $100,000 and a new EAV of $140,000 can receive a homeowner exemption worth $20,000. But reducing the new $140,000 EAV by $20,000 results in a taxable EAV of $120,000. This is 20 percent above the base. Because of the maximum homeowner exemption, it is estimated that 80 percent of Oak Park's single family homes and 10 percent of its condominiums will have taxable EAV increases that exceed 7 percent.

In addition, the expanded homeowner exemption automatically falls to the minimum $5,000 value in the year after a sale. Thus when a property sells in 2005, the homeowner exemption in tax years 2006 and 2007 tax years (taxes paid in calendar years 2007 and 2008) will be only $5,000?#34;even if this results in higher taxes than would otherwise be the case under the 7 percent cap.

Q If my assessed valuation increases by 38 percent, will my taxes also increase by 38 percent?

A No. To put increases in assessed valuations in perspective, it is important to understand the two primary factors that influence your property tax bill.

1. Combined tax levies of local governments. Your property taxes fund the annual tax levies set by local governments, which currently total about $116 million in Oak Park. In spite of the 38 percent increase in assessed values, tax levies by law cannot increase by anywhere near 38 percent. The levy for 2005 taxes (paid in 2006) is expected to increase by about 7 percent.

2. Your share of the combined tax levy. Every property pays a portion of the combined tax levy of local governments. Your share of the levy is determined by your property's portion of the total taxable EAV of the community. A property that comprises 1 percent of the community's taxable EAV pays 1 percent of the community's property tax levy.

A reassessment changes each property's share of the community property tax levy. Your share of community taxes grows when your taxable EAV grows at a rate higher than the community's growth rate. When your taxable EAV's growth rate is lower than that of the community, your share of community taxes falls.

After the 2002 reassessment, the value of homes grew at a rate faster than that of businesses and other property types. As a result, a dramatic shift in the tax burden occurred, with homes paying a greater share of Oak Park taxes, and businesses paying a smaller share. This is less likely to happen during the 2005 reassessment because of the 7 percent assessment cap, which limits the taxable EAV increases for homes. Indeed, it is possible that some of the tax burden will shift back to business if business property values increase at a rate faster than capped home values.

Q What are the grounds for an assessment appeal?

A A successful appeal will reduce an individual property owner's share of the local tax burden, resulting in a lower tax bill. There are two primary circumstances when assessment appeals are appropriate:

1. Lack of uniformity. The basic rule of property assessment is that similar properties should be assessed similarly. If there is a lack of uniformity, an appeal is appropriate. To substantiate such an appeal, it is necessary to find properties comparable to yours that have lower assessed valuations. The Township Assessor can help you find comparable properties quickly and easily.

2. Errors in property characteristics. Every residential property has a set of characteristics which determine the property's assessed valuation. A copy of the characteristics file will be mailed with the notice of reassessment and can also be viewed on the Cook County Assessor's website. If there are mistakes in the characteristics file, an appeal to correct the mistake and possibly reduce your assessed valuation is appropriate.

A wide range of characteristics can influence your assessed valuation, including a property's interior square footage, state of repair, and proximity to undesirable conditions. Not all mistakes in the characteristics file will lead to reductions in your assessed valuation, but it can be worthwhile to check the file for accuracy.

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