Residents dived deep into how property tax exemptions work – and how they affect Evanston – at a public discussion Wednesday evening led by staff from the Cook County Assessor’s Office.
Christina Lynch, director of legal for the assessor’s office, presented and answered residents’ questions in the Parasol Room of the Morton Civic Center, 2100 Ridge Ave. The event was jointly sponsored by Council Members Clare Kelly (First Ward), Tom Suffredin (Sixth Ward) and Eleanor Revelle (Seventh Ward).
At the center of most questions was Northwestern University, one of the largest owners of the more than 1,000 tax-exempt parcels across the city. Lynch said Northwestern’s exemption is one of only 80 “charter exemptions” granted by the state government prior to their prohibition in the 1870 Constitution, and based on both state and federal case law, it seems it “may be here to stay permanently.”
“Every court challenge that Northwestern has faced since then (1870), they have won,” Lynch said. “So yes, charter exemption does create inequities in the property tax system – pretty big ones.”
Full and partial exemptions
Below the level of charter exemptions, though, things become more nuanced.
To get and keep a tax exemption on a particular property, a landowner has to be an exempt type of owner – all of which are nonprofits – and use that property for an exempt purpose. Lynch said most exempted property owners, including Northwestern, must recertify all of their exempt property each year and notify the assessor of changes in ownership, as the new owners would have to apply for a new exemption.
Property owners must also notify the office of any changes in use, as it could change the extent of the exemption. If an owner leases part of their exempt property to a for-profit business, for example, then the leased portion of the property is subject to taxes. A “partial exemption” still applies to the landowner, while the lessee is on the hook for the taxes on their leased portion of the property, Lynch said.
She added that details on partial exemptions can differ in very specific ways based on terms set by the Illinois Department of Revenue (IDOR), which the assessor’s office is responsible for sorting out.
“Every letter that they (IDOR) issue specifies and clearly says the name of the owner that gets that exemption, and then the PIN numbers that are exempt … and then it tells you if it’s 100% (exempt), or however it’s split up,” Lynch said. “There’s very strange partial exemptions from time to time that we see, that we have to kind of make sense of.”
These partial exemptions only apply to leases, not licenses allowing for-profit companies to operate on exempt land. In either case, though, the landowner would stay exempt: lessees are liable for taxes on the portions they rent, and licenses for non-exempt activities can’t be taxed per a state supreme court ruling.
Potential tax burden isn’t measured
During a later Q&A session, resident Mike Vasilko asked Lynch how much Northwestern would owe in property taxes if it weren’t exempt.
“That’s the million-, or the billion-dollar question, right?” Lynch replied.
The question is nonetheless unanswerable, she explained, because the assessor’s office doesn’t assess the value of tax-exempt properties unless they lose some or all of their exemption. Since tax bills are calculated based on properties’ assessed values, it’s impossible to know what their tax bills would be.
She added that some other jurisdictions in the U.S. do assess exempt property, taking down what’s called a “shadow value.”
“Hypothetically speaking here, if there were a change of hands or a change in the use, they would have a better idea of what that historical market value is of the property in order to come up with a current-year market value,” Lynch said. “But we don’t do that in Cook County, and we’re not required to.”
Appeals shift burden to homeowners
At the end of the meeting, Lynch shared data from Evanston’s most recent reassessment in 2022.
She said the total assessed value of all taxable Evanston properties was $1.495 billion, a 28% rise from the last reassessment in 2019. Residential properties made up $993 million of this, with commercial and industrial properties taking up the remaining $502 million.
The value of residential and commercial properties increased at close to the same rate, Lynch said, but added that value reductions granted by the Cook County Board of Review were far from equal.
“For every dollar of reduction that the Board of Review granted to residential properties, it granted four dollars to non-residential (properties),” Lynch said. “And that’s why it shifts the burden onto the residential homeowners when they make those types of reductions on commercial properties.”
Lynch said that due to this disparity in reductions, residential properties’ share of Evanston’s overall tax levy in 2022 grew from 66% to 70%.