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Brown: Million dollar-plus property tax hikes on the way for some city building owners

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Updated: August 2, 2013 7:06AM

About the time the buzz of the Blackhawks’ victory parade finally dies down, you can expect more loud cries to start emanating from downtown Chicago.

This time, though, it will be the unhappy owners of major commercial buildings in the central business district raising a ruckus after property tax bills start arriving this week in the mail.

Tax bills with double-digit percentage increases could be commonplace this year for downtown office buildings, hotels and stores as assessment changes shift some of the tax burden away from homeowners.

Nine buildings — including such iconic properties as Water Tower Place and Merchandise Mart — will see tax increases topping $1 million each, according to Cook County tax data obtained by the Chicago Sun-Times.

Mind you, those are just the increases.

Seventeen more buildings will see taxes jump between $600,000 and $1,000,000 this year.

Most of those properties are looking at tax increases between 10 percent and 20 percent.

The biggest single property tax hike of nearly $3 million — or 125 percent — will go to the owners of 600 West Chicago Avenue, the former Montgomery Ward warehouse that now serves as headquarters for Groupon.

That tax bill is a bit of an outlier in that the building leased up rapidly with Groupon’s expansion following the city’s previous re-assessment three years earlier. That caused the building’s assessed value to double this time. The other properties facing the biggest tax increases experienced only minor assessment increases.

I don’t expect many 125 percent increases, except in special circumstances like this, although the data I have shows the Groupon building is hardly alone.

The bad news for the big boys downtown could prove to be good news for now in city neighborhoods where residential property taxes are expected to remain relatively flat. But it wouldn’t be surprising if tax increases of this magnitude lead the business community to demand future relief that could turn the tables.

For this year, though, they have little choice but to pay up.

As always, it’s dangerous to over-generalize about what any individual property taxpayer can expect to pay. Of the 1.8 million parcels of property in Cook County, about 54 percent will pay more property taxes this year than last. That means you’re almost as likely to get a tax cut this year as a tax increase. Almost.

It should never be forgotten that the main factor that drives property tax bills is the amount local governments levy, which relates back to their spending.

The various local governments that levy a tax against Chicago property owners will receive just under 2 percent more this year, compared with 1 percent more the year before and 2.5 percent the year before that.

But even when tax levies are just inching up like that, individual property owners can face big swings depending on how their particular piece of real estate is valued relative to others.

That’s an important factor this year behind the tax increases on the downtown commercial properties.

This year’s tax bills will reflect assessed values on Chicago neighborhood residential properties that will be about 14 to 20 percent lower, County Clerk David Orr’s office reported last week. That’s due to the assessor catching up to the falloff in the housing market.

“We’re clearly much closer to true value than we were three years ago,” said Tom Jaconetty, deputy assessor for valuation and appeals.

Meanwhile, though, the assessments on commercial properties in the downtown area are down only about 7 percent to 8 percent.

The net effect is to shift part of the tax burden from the homeowners in the neighborhoods to the big downtown properties.

It’s a simple mathematical truism, not a matter of interpretation, but Jaconetty refused to be drawn into that discussion, arguing taxes are not a proper topic for the assessor’s office.

“The assessor’s fundamental job is to establish value. End of story,” Jaconetty said.

Some have argued for years that the big downtown buildings were under-assessed relative to the typical homeowner. Still, Cook County’s system of classifying property already places a greater tax burden on commercial than residential buildings.

The Chicagoland Chamber of Commerce has been trying for months to warn the business community of the coming tax shift, said Jim Kane, of True Partners Consulting, who chairs the chamber’s tax committee.

But he admits it probably won’t be until the tax bills hit this week before he’ll have everyone’s attention.

Kane believes some of the pain for commercial properties could extend into the neighborhoods as well, where owners of shopping centers, nursing homes and car dealerships are among those bracing for trouble.

This may look like the end of the story, but I’m thinking it’s just the beginning.

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