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The Fastest Growing Property Expense

Article:
(This archived article was published in 2014.  More recent data is found in the articles section of our web site). We are all aware of the high property tax rates that exist in Cook County. What is not as well-known is how rapidly the property tax rates have been increasing relative to the Consumer Price Index.  The rate of inflations is reported in the Consumer Price Index (CPI) as follows:

2010

2.7%

2011

1.5%

2012

1.7%

2013

1.5%

Average annual compounded CPI growth rate: 1.85%. 

To check the annual average compounded growth for communities in Cook County we used the following methodology: In this example we used tax code 72001 for the City of Chicago.   

Chicago - Tax Code 72001





EQUALIZATION

TAX RATE

EQUALIZED RATE

ANNUAL INCREASE

YEAR

FACTOR

2009

3.3701

4.627

15.59


2010

3.3000

4.931

16.27

4.4%

2011

2.9706

5.455

16.2

0.0%

2012

2.8056

6.396

17.94

10.7%

2013

2.6621

6.832

18.19

1.4%

 Compounded Average Growth Rate 4.0%. 
Chicago's compounded growth rate increased by an average of 4% over this time period which is over double the rate of inflation. Chicago, however, appears to be a model of restraint compared to many of its suburban neighbors whose tax rate increases were generally much higher.

Community

2009/2013 Tax Rate

Average Compound Growth Rate

Homewood

10.585/16.397

5.4%

Chicago Heights

11.477/19.006

7.0%

Glenwood

10.527/17.123

6.6%

South Chicago Heights

8.767/13.438

4.9%

Orland Park

8.334/12.390

4.1%

Hickory Hills

8.063/12.311

4.8%

Oak Forest

9.582/14.388

4.4%

South Holland

10.977/18.585

7.6%

Lansing

11.062/16.914

4.9%

Brookfield

8.767/12.372

2.8%

Markham

11.706/20.355

8.4%

Elmwood Park

6.680/11.093

7.2%

Cicero

9.812/15.716

6.3%

LaGrange

6.544/9.924

4.7%

Westchester

5.743/8.771

4.9%

North Lake

8.825/13.704

5.3%

Berwyn

5.742/9.442

6.8%

Melrose Park

7.452/11.783

5.8%

Franklin Park

8.639/13.237

4.9%

Glenview

5.189/8.514

6.8%

Northbrook

5.264/8.664

6.8%

Evanston

6.217/9.884

5.9%

Skokie

6.441/10.218

5.8%

Morton Grove

6.661/10.609

5.9%

Wilmette

4.984/8.375

7.4%

Niles

5.800/9.573

7.0%

Des Plaines

6.590/10.840

6.9%

Elk Grove Village

5.796/11.212

6.9%

Schaumburg

6.090/9.696

6.0%

Rolling Meadows

6.575/11.212

7.8%

Arlington Heights

6.701/10.523

5.6%

Mount Prospect

6.596/10.724

6.5%

Winnetka

5.177/8.626

7.2%

* Note: All of the above data reflects just one randomly selected tax code for the community, although tax rates often vary in different parts of the same municipality. The implications of this trend are rather concerning. Real estate tax rate increases at 2X, 3X or even almost 4X the rate of inflation year after year cannot be sustained without significant negative impacts on property values. Real estate taxes are already generally the largest single expense for a property. If potential property buyers do not have some expectation of offsetting property appreciation or at least maintaining value then corresponding increases in capitalization rates and steadily diminishing demand could be anticipated. Unless the primary method of funding governmental services shifts to a different source of revenue, or local communities severely cut their spending, it is hard to imagine this ending in a good place.

J. Chie, Esquire

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