* 5/26/26 - City That Works - Property Taxes are too high. What should we do about it?...............
Buzz Sawyer
Property Taxes are too high. What should we do about it?Part 2 covering the the Cook County Treasurer’s latest report.
First, a reminder for two upcoming events that we’d love to see you at (and for our new events page here):
June 14 | Unlocking Our Potential: Discussing Housing Reform in Chicago: Chicago Growth Project is hosting a forum on the housing policies shaping our city’s future, from 4-7pm at Midwest Coast Brewing. Attendees will include Cong. Mike Quigley, State Senator Sara Feigenholtz, Ald. Red Burnett, and Democratic nominees Paul Kendrick (State Representative) and Drake Warren (Cook County Commissioner). Register here. A couple weeks back, we covered the Cook County Treasurer’s report outlining exactly how and why property taxes in Cook County have gotten so much higher over the past thirty years. To briefly recap, we can mostly boil it down to two factors.
The obvious next question, which we haven’t covered yet, is what we should do about all of this. That’s what we’ll get into today. Fixing the property tax systemBroadly speaking we can group solutions to property taxes being high into three buckets. The first of these is dealing with the property tax system itself. This is where the Treasurer’s report focuses most of its attention, and it’s a good place to start. The report’s first recommendation, and the obvious first step, is to close the various carveouts to the state’s PTELL limits. The report references two primary loopholes - the CPS pension levy and TIF district closures. Both are good ideas. With respect to the CPS levy, it’s a bit weird to me that CPS has multiple different levies with different terms, instead of one larger levy, and it’s probably a good idea to change this so the entire levy is subject to some growth constraint. At the same time, however, it’s difficult for me to imagine this working well for the district unless we can pair it with some other reforms to ensure the pension system ends up adequately funded (we’ll come back to this later). Meaningful TIF reform is a much less ambiguous good choice here. As currently constructed, there’s an argument that PTELL actually incentivizes more TIF districts to be created. While they’re outstanding, surplus revenues distributed from TIF districts are exempt from PTELL limits, and when they eventually close, the additional value of properties in the TIF districts can get added back to the tax base without impacting PTELL as well. That ends up producing a much larger tax levy than you’d end up getting without the TIFs in existence. The report is a bit lighter than I’d like on outlining TIF reforms. Their main recommendation, which I think is a good idea, is to remove the PTELL exemption for property values added back to the tax rolls when TIFs close. But I think we need to go a lot further here. As a start, we should try a lot harder to sunset TIFs that are no longer needed to kick off a cycle of redevelopment. When TIFs exist longer than they are needed, our property taxes end up higher than they ought to be. That is bad, and it’s something that politicians who want to reduce property taxes need to think about harder about. The Red-Purple Modernization TIF is the clearest example we’ve already written about - and City Council should do this as soon as they can! - but we ought to take a closer look at others too, and figure out which are worth sunsetting more quickly. I’m not sure we continue to need a TIF to support the redevelopment of Fulton Market, for example. Beyond that, I think it makes sense to more broadly increase restrictions on the use of TIF. As one example, I think it probably makes sense to have some kind of caps on what share of a municipality’s tax base can fall within a TIF district¹. Does it really make sense for over one-third of the City of Chicago to have their tax values frozen to support development subsidies? I’m pretty skeptical. Instituting an explicit cap, so creating new districts would require sunsetting some other ones, seems like a good idea. There’s no shortage of other changes² we can make here, but suffice it to say I think any meaningful property tax reform package needs to include real TIF reform as a component. It is worth acknowledging that the city needs to spend money to invest in basic infrastructure, and there are plenty of good projects that have been funded by TIFs. But that’s an argument for the project, not the funding source. Instead of relying on what essentially qualifies as a backdoor tax increase for Chicago taxpayers, we should make better use of the capital budget and economic development bond to fund necessary projects. That has the added benefit of being available citywide - rather than being restricted to individual, pre-approved districts. The other big recommendation they make is to institute an income-based ‘circuit breaker’ program to protect homeowners from becoming overly burdened by property taxes. As implemented by some other states, a circuit breaker program³ is a policy where the state reimburses homeowners for any property taxes paid above a certain percentage of their income. I think it’s worth noting that this doesn’t actually reduce overall property tax collections - localities still get their money - but it does ease the burden of those property taxes on lower-income homeowners. On the other hand, to reduce that burden, it has to create a new one: the state effectively deprives itself of a lot of income tax revenue it would otherwise receive to provide this tax relief to homeowners. Fixing RevenuesThe second bucket is revenue. I think it’s particularly noteworthy that the taxing bodies who have done the best job holding the line on property taxes - like Cook County and the Chicago Park District - are also those bodies who have the most diversified revenue bases (the County primarily through sales tax revenue, and Parks through fees from recreational programs and events like Lollapalooza). If you’re less reliant on property tax revenue alone, it’s easier not to jack property taxes up every year.
As it relates to revenue for municipalities, most of the report’s recommendations boil down to more support from the State of Illinois. The biggest example is increasing the share of state income tax revenue that Springfield distributes to local governments via the Local Government Distributive Fund (LGDF). Prior to 2011, the state shared 10% of income tax revenues with local governments. When Illinois raised the state income tax rate from 3% to 5%, that share was cut (as I understand it, the intent was for the incremental points of income tax to go wholly to the state). As of last year, the LGDF was roughly 6.47% of all income tax revenues, though Governor Pritzker’s 2027 budget proposal called for a reduction to 6.23% (keeping the distribution flat in nominal terms, but reducing it as a share of all income tax revenue). That strikes me as a step in the wrong direction, and lawmakers that care about reducing homeowners’ property tax burdens should push back on that. The other major recommendation the report makes, which we’ve outlined before in multiple forums, is for the state to take on more of CPS’s pension costs, just as it does for every other district in the state. Unlike some other requests from the City, this is *not* special pleading - and we wish the Chicago delegation would take a harder stand on this issue. Doing this would reduce the financial burden of the largest property tax levying entity in Cook County, which would help reduce pressures to raise taxes further. If you’re thinking a step ahead, you’ve probably considered the fact that the State of Illinois is also not swimming in extra resources, so if we’re just shifting costs from localities to the state we’re still going to have to find new revenues at the state level to pay for things. Good thinking! The report outlines many of the usual options that get brought up, such as a millionaire’s tax, expanding the sales tax to services, taxing retirement income, or simply raising the existing flat income tax rate. Some of these taxes are likely better than hiking property taxes further, and some of them are likely worse. We’ll try to spend more time on these various options in the coming months, but I do think it’s important to remember that shifting costs to the state is not in fact a free lunch. People who live in Cook County are also people who live in Illinois. Cutting SpendingThat brings us to our final bucket: at the end of the day, if you want taxes to go down, we just need to spend less money. The trick is doing so in a way which minimizes downsides to the public. One obvious (if not super needle-moving) opportunity is in consolidating local governments. To start, many townships should probably be eliminated. Evanston Township, for example, existed as a distinct entity from the City of Evanston with its own set of responsibilities to residents. Residents voted to dissolve the Township in a March 2014 referendum, saving Evanston taxpayers nearly a million dollars a year by 2016. Other Cook County townships like Oak Park, River Forest, and Berwyn (which all share coterminous boundaries with their respective villages/cities) probably ought to do the same. Beyond just townships, Illinois has more units of local government than any other state in the country (the Civic Federation has a great explainer here), and we ought to figure out what other opportunities we have in Cook County to eliminate duplicate functions wherever possible. Secondly, as CPS is by far the biggest property taxing entity in Cook County, they also provide the biggest opportunity for spending reform to have an impact. As the report mentions - and as we’ve alluded to before - over half of all CPS schools are deemed underutilized by CPS’s own standard, and over 30% are operating at less than half capacity. It is very difficult not to conclude that CPS is spending money to maintain more buildings and staffing infrastructure than it ought to, particularly given the fact that district enrollment is over 100,000 students lower than it was at the beginning of the 21st century. Dealing with this is going to require some really hard conversations, but right-sizing our facilities has to be on the table. Thirdly, there’s significant room for cost discipline across the rest of Chicago and Cook County local governments as well. We’ve already covered the Ernst & Young and Budget Working Group reports on structural reforms for the City of Chicago in detail, but suffice it to say there are plenty of efficiency opportunities that the city can and should pursue in coming years. Many of these topics - like procurement reform, fleet management, or central office staffing levels - almost certainly apply for the city’s various sister agencies, as well as for the other municipalities in Cook County as well. Pursuing similar reform initiatives should be a priority for other entities as well. The Bottom LineYou cannot hold the line on taxing if you’re not able to hold the line on spending. That’s not to say a lot of these other ideas aren’t really good. I’m a huge advocate for TIF reform, and some kind of income-based property tax circuit breaker strikes me as a good way to provide targeted protection for low income homeowners. But ultimately this is going to come down to whether our local governments are able to manage their own budgets more efficiently. If they can do that, we’ll all be in a better place. If they can’t, we’re just rearranging the deck chairs on the Titanic. A City That Works is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. 1 In Wisconsin, for example, no more than 12% of a municipality’s property value can be subject to a Tax Incremental District. 2 In no particular order: tighter standards for creating a TIF district in the first place; shortening the lifespan of a TIF district; making it more difficult (or eliminating the ability) to extend the life of a district; mandatory periodic reviews during the life of a TIF district to confirm whether it should be sunset early; phasing down the TIF capture rate over the district’s life (instead of 100% capture for the full term); affirmative sign-off from overlapping taxing bodies (e.g. school districts) to create a new TIF. 3 As I understand it, the archetypal example here is Minnesota’s Homestead Credit Refund, which has been in effect since the 1970s. As of 2025, the program allows homeowners with an income below $142,490 to claim a refund of up to $3,310 based on how much they pay in property taxes as a percentage of their income. You're currently a free subscriber to A City That Works. For the full experience, upgrade your subscription.
© 2026 A City That Works
|
