On the night of March 20, at the end of a race that had cost candidates a combined $5 million, Joseph Berrios called Fritz Kaegi to congratulate him on his victory. Barring the unlikely introduction and even less likely victory of a Republican candidate in the fall, Kaegi will assume the office of Cook County Assessor in December and attempt to deliver on his reformist platform. What voters may not realize—and what Kaegi will have to contend with—is that the anticipated reforms are years away.

Starting last June, the Tribune, later joined by ProPublica Illinois, began publishing an investigative series on Cook County’s assessment system, finding it to be fundamentally flawed and shrouded in secrecy. Initial assessments of properties deviated from actual values by between sixteen and thirty-one percent—outside the allowable margin of error of fifteen percent, according to international assessment standards. Reporters found that the system is highly regressive: lower-priced properties are over-assessed, while higher-priced properties are under-assessed—meaning the city’s wealthy property owners are paying a lower effective property tax rate than the poor. Berrios’s office doesn’t review its own work for accuracy and refused to make public how it arrived at valuations, including hand checks, where the assessor’s office changes values from assessment models by hand. The office denied a Tribune open records request for the valuation method, preferring to take the case to court.

The investigation uncovered a pay-to-play “ecosystem” of lawyers, wealthy property owners, and the assessor’s office that benefited from the unfair system and ensured its propagation. Berrios’s office encouraged property owners to appeal their assessments if they believed they were unfair.

But the appeals process only reinforces the system’s unfairness. Property owners from poorer neighborhoods either generally don’t know about the process, can’t afford an attorney, or don’t have the time to appeal their properties on their own. The process is dominated by wealthy business property owners who hire property tax lawyers to file appeals on their already under-assessed properties. Between 2011 and 2016, the top five tax appeals firms were responsible for over $6 billion in reductions. Many of those firms contributed heavily to Berrios’s campaign coffers, ensuring the cycle went on.

Enter Frederick “Fritz” Kaegi, a former financial asset manager from suburban Oak Park who launched his campaign last June. Kaegi’s message was simple: “Bring fairness, transparency, and professionalism to our broken property tax system.” He picked up endorsements from the Tribune and the Sun-Times, all the while refusing to take donations from property tax lawyers. Kaegi’s plan to fix the assessment system, institute transparency, and end corruption and nepotism resonated with voters, who chose Kaegi with 327,769 votes to Berrios’s 243,425. (Andrea Raila, a third candidate who was at one point taken off the ballot for alleged petition violations but was returned at the last minute, received the remaining 147,224 votes.)

As Kaegi gears up to tackle the technical problems of assessing the 1.8 million parcels of property in Cook County, he will face various practical challenges that may bog down his reform platform. But if the promised changes take too long to materialize, or don’t meet voters’ expectations, Kaegi’s run and reforms may be short-lived.

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The Assessment Model

The first and largest challenge is how quickly Kaegi will be able to begin to assess properties accurately.

Kaegi has promised to implement a model developed in 2010, which came into being at the request of Berrios’s predecessor, James Houlihan. The MacArthur Foundation funded the project and Christopher Berry of the Harris School of Public Policy at the University of Chicago led the technical development of the model, with the aim of decreasing regressivity and improving accuracy. Berry and his team figured out a way to divide properties into categories based on price, which meant high and low-priced properties weren’t averaged together. The new model outperformed the old model in every way and Berrios agreed to use it. The Tribune investigation last year found that Berrios’s office never did. (In an email to the Weekly, the assessor’s office said it didn’t use the new model because “it didn’t work.”)

But in a phone interview with the Weekly, Berry said that Kaegi would have to build a new model. “I don’t think he can just take [the 2010 model]…and dust it off the shelf. The model was from many years ago.”

Creating a new model to assess the 1.8 million parcels of land in Cook County is a tall order under any circumstances, but Kaegi will have to do it on the fly. In an email, Kaegi acknowledged that not only is very little known about the current model, but that “the data used by the office is largely outdated.” There is no telling how long “improving the office’s data and data management” will take or how it will affect the accuracy and timeliness of assessments.

Sending out property tax bills on time—apparently at the expense of accuracy—was a major point of pride for Berrios, who said he was the first assessor to send them out on time in thirty-four years. When bills are late, so are payments. Before Berrios took office, taxing bodies, in order to keep schools and other government functions running, took out loans that ended up costing $5 to $6 million a month in interest.

When asked whether he would prioritize accuracy or timeliness, Kaegi wanted both but seemed to lean toward the former. “We need to take the entire workflow of the office into account, as we’re implementing changes to modeling, data management, and valuation,” he wrote. “We can’t just disrupt the entire system, we need to be thoughtful about how each reform has an impact on the timeline of assessment.”

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The Triennial Cycle

Another problem facing Kaegi is unfortunate timing. According to state law, every property in Cook County must be reassessed every three years. The county is divided into three areas—Chicago, the north suburbs, and the south suburbs—which are reassessed a year at a time.

Unfortunately for Kaegi, Chicago, which is the most populous of the three areas and contains more than half of his voters, is being assessed by Berrios this year. Kaegi’s office won’t get a chance to reassess Chicago until 2021, and the reworked property tax bills won’t come in until 2022, a full four years after the March election.

Kaegi maintained that “the assessor’s office may re-examine assessments more frequently if assessments are unjust,” a glimmer of hope that the promised change will come sooner for Chicago property owners. But he added, “If we were to undertake reassessment of Chicago sooner than 2021 we would need to make sure we had the capacity to do it fairly, accurately, and uniformly with the rest of the county.”

Berry was more skeptical that such a task would be possible. “If they were going to assess Chicago again a second time, that’s at the same time they’re supposed to be assessing another part of the county…that’s a big order to essentially double the work,” he said.

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The Assessor’s Office

Kaegi’s work will also involve reorganizing the staff at the assessor’s office to ensure every employee meets the highest professional and technical standards. Berry thinks Kaegi will need a firm hand. “The first thing he needs to do is clean house, inside and out,” he said. “It’s very clear that the people that create the assessment system now are incompetent.”

Kaegi wrote he is working on assembling a transition team this summer, adding that he plans on “implementing an HR plan that puts an emphasis on training, education, and culture, as well as diversity and inclusion.” But he declined to specifically state if there would be a limit to the number of people he would let go, or whether he would provide training programs for any employees found lacking in technical qualifications.

Additionally, the budget to the assessor’s office has seen significant cuts in recent years, adding yet another layer of difficulty to the task at hand for Kaegi. Between mid-2016 and the end of the first quarter of 2018, the Assessor’s office saw twenty-four resignations, two terminations, five layoffs—with just four new hires.

In this instance, Kaegi seemed prepared. “The county likely will be expecting more cuts when we’re in office, given that they don’t have the pop tax,” he explained. “But that doesn’t preclude us from having higher standards when we hire people.”

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Even if Kaegi’s team is successful in reassessing the county accurately and uniformly in the next few years, it may take more than that to change the culture of appeals that thrived under Berrios. Currently, everybody is encouraged to appeal, and for good reason: in 2015, eighty percent of residential appeals won reductions.

Kaegi believes that if his office assesses properties in an accurate, consistent, and uniform manner across the county, it will decrease the number of appeals to the assessor’s office over time because fewer will end in a reduction.

Initial accuracy in assessments will discourage some appeals at first while uniformity in assessments—meaning the methodology for valuing properties is transparent and applied equally everywhere—will take away the outliers that form the basis of many appeals arguments.

Not all appeals go through the assessor’s office, however. The Cook County Board of Review (BOR) is an elected, autonomous body of three commissioners, created in 1938 by the state General Assembly, that also processes property tax appeals. For over a decade, the BOR has granted reductions on appeals about sixty percent of the time. Berry speculated that “even if [Kaegi] was successful in fixing the system, undoing a lot of these inequities, if the Board of [Review] is going to continue giving reductions to people who don’t deserve them, that could completely undermine Kaegi’s efforts. A very hard problem.”

Kaegi, on the other hand, insisted that with consistent and accurate assessments, there will be less “ammunition for people to go before the Board of Review.”

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Kaegi is firm on his plan to combat the pay-to-play environment that existed under Berrios—even the perception of its existence. His office will publish its visitor log, implement rules on gifts and entertainment, and make campaign contribution information inaccessible to assessor’s office analysts, preventing them from seeing who has donated money to him. And even as he’s committed to never accepting donations from property tax lawyers, Kaegi added that he will be “exceedingly careful in vetting large donors,” especially big property owners. He didn’t say how the vetting would work exactly but confirmed that such rules would be made public.

Kaegi’s commitment to transparency is in direct opposition to Berrios’s legacy, who was criticized for being opaque and unwilling to divulge how his office reached assessments. Kaegi has promised to respond to the Tribune records request as soon as possible, which Berrios’s office has dragged out in a taxpayer-funded lawsuit.

Berry saw this commitment as an integral part of Kaegi’s platform. “The minimal conditions of transparency for me would be to, first of all, continue to release reports that honestly say what’s the quality of assessments throughout the city and break it down by neighborhood,” he said. “Secondly, as they formulate this new model, they’re going to need to be transparent about the model, they’re going to need to divulge the methodology…. If [Kaegi] were to not do one of those two things, that would be a very troubling sign.”

Kaegi has promised time and again that he will be open about reviewing the work of the assessor’s office and make public the methodology for valuing properties. When asked if there would be anything his office wouldn’t release, outside of proprietary information, he said, “I can’t imagine what it would be…. I can’t think of any good reason why the office would want to be obscuring.”

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A Political Process

Aside from practical and legal obstacles, Kaegi may run into political challenges that could hamper his ability to bring reform—or undo it entirely.

As Kaegi begins to assess high-priced properties at their proper levels, he may face legal challenges from wealthy owners who don’t want to pay more in taxes. There is already some precedent set by the Trump Organization, which has been suing local governments across the country to lower the assessments on Trump’s properties.

But perhaps the biggest political challenge will be from voters who are unsatisfied with the pace of change. As Berry put it, “[people] want to know that it’s going to be fixed next month…but I think the reality is it can’t be done too quickly and so I think there’s going to be some time when you’re just going to have to level with people.”

Kaegi went up against powerful political interests and won, despite not taking donations from property tax lawyers. Berrios was also the chairman of the Cook County Democratic Party, while some of the biggest property tax law firms that gained from the pay-to-play system have Speaker of the Illinois House of Representatives Mike Madigan and 14th Ward Alderman Edward Burke as partners. Part of Kaegi’s success, then, must be attributed to him self-funding over seventy-five percent of his campaign, to the tune of almost $2 million.

If Kaegi loses popular support and goes up against candidates supported by the likes of Madigan and Burke, a largely self-funded campaign style may not be sustainable or successful in the long-term. And if Kaegi is ousted in four years by the Democratic machine, it may spell the end of true reform of the assessment system.

Kaegi seemed confident in giving voters the power to choose. “It’s always possible that the property tax appeals industry will try to finance a candidate next time around in four years,” he said. “We will then put forth a choice [to voters]. Which one do you like better? Wanna go back to that old system?”

But he was also quick to bring the conversation back to the present. “That’s putting the cart before the horse. Right now, we’re totally focused on bringing change over the next four years,” he wrote. Much in Cook County will depend on that change.

Update 5/16: This story was updated to clarify that the assessor’s office had refused to share with the Tribune their valuation method, not assessment model, and to clarify facts about the appeals process and the assessor’s office’s reasons for not using the new model.

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Adam Przybyl is the Weekly’s deputy editor. His last contributions to the Weekly were a review of High-Risers: Cabrini-Green and the Fate of American Public Housing and an interview with its author Ben Austen in February.

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  1. The real problem that he will face, however, is that if the number of appeals is reduced, more homeowners will pay higher property taxes. Reform is all well and good but if voters see there taxes go up (and they will), then Kaegi will face a backlash. I thought this often during the campaign as people talked about Berrios. In the end, Berrios was doing what the people wanted. They just don’t know it yet.

    1. Another big thing is Kaegi has said he will assess business property, especially big downtown office buildings, based on their sale prices (or sale prices of comparable buildings). The assessor’s office has always valued such properties primarily on their income, as do most counties and states.
      Sale prices are speculative – NOT based on current income/value but rather on speculation/investment plans and expected higher future income calculated with a discounted cash flow analysis by the prospective buyer. So, sale prices are usually 20%-35% higher than actual current [income-based] value.
      Kaegi’s plan will dramatically increase taxes on business property…which will then pass those increases on to tenants…who will desert these buildings in droves. Really, does anyone actually expect Chicago to remain competitive if business rents increase 20-35%?
      Business property already pays taxes on a two-and-a-half-times larger portion of it’s market value than do homeowners. That is designed to put a bigger burden on the business tax base, which is good. But to now increase that already-bigger burden will be the huge brick that breaks the camel’s back.
      Kaegi’s bad idea, originally advocated by Chris Kennedy, the Tribune, Propublica and Crain’s Chicago Business, will be a disaster for the county, which is already losing businesses.

      1. 1) Most of the major commercial buildings in the loop are assessed well under 65–80% of their last sale price—take Willis Tower, whose assessed value is about a third of face value.

        2) It’s easier to systemically understate net income than gross receipts (i.e., sale price). Anyone who has filed tax returns for a business knows this. If that seems too steep, a fixed fraction of sale price (e.g., 0.7x) would be fine—you could even index it to the year-over-year strength of the local economy.

        Using sale price as a benchmark tends to advantage commercial enterprises less. And residential properties don’t get to plead low income against their assessments.

        3) A 20-35% increase in commercial assessment values would translate into a 20-35% increase in business rents? Find me a major Loop renter whose operating expenses are 100% property tax—or even 10% property tax—and we’ll talk.

        You said it yourself: current assessed values are based on income estimates. That means a commercial property’s tax bill is, by definition, a fraction of the building’s income. The assessed values obviously outstrip the property tax bill.

        Using your figures for the sake of argument, reassessment against sale price would mean a 20-35% increase, notionally, in the owners’ tax bill, not in overall operating expenses. This is a difference of at least an order of magnitude.

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