A new report shows how local government borrowing and pension obligations add to property taxes now and for years to come. The research by the Cook County Treasurers Office, provided exclusively to Crain’s Chicago Business, is the first-ever breakdown of government debt in Cook County by individual property.
The analysis by County Treasurer Maria Pappas combines all debts, including borrowing for infrastructure projects, ongoing expenses, unfunded pensions, and other employment obligations for government workers.
The study found:
An office tower in downtown Chicago with a market value of $697 million has an attributed share of debt of 41.5%
A shopping center in Calumet City valued at $26 million has a debt share of 38%
A house worth $66,970 in suburban Riverdale has an attributed local government debt share of 48%
Areas with heavy debt loads have property tax bills so steep that owners will pay more in taxes than their home is worth in a relatively short period of time. For example, the owner of a $100,000 house in highly leveraged Ford Heights will pay that much in taxes within 18 years.
Since tax bills are at least 2.5 times higher for commercial property owners than for homeowners, it is difficult to attract new commercial development in high-debt, high-tax communities.
In many municipalities, government debt appears overwhelming and will likely bring property tax hikes in the future to pay them off. In places like Chicago, total debt equals more than a third of the entire property value in the city.
The goal of the study, according to Pappas, is “to help people understand that when they purchase a piece of real estate in Cook County, they are also purchasing a long-term credit card.”
As governments turn to property taxes to help address debt, more people will move away, she argues. “The greater the increase, the greater the exit. So, we are going to have to look at other sources of funding,” Pappas said.