Property tax sticker shock hits this week

By now most Cook County residents should have received their property tax estimates for 2012 – or will yet this week. The news for most homeowners will not be good. That’s because the Legislature eliminated the Homestead tax credit back in July.

County Auditor-Treasurer Braidy Powers said the impact to homeowners will not be uniform.

“It’s going to vary all across the board. There are going to be increases, there are going to be decreases in individual cases because of class changes or valuation decreases. We had pretty much across the board decreases in land values, this year of about 10%, so some people with a lot of land will have a decrease in value. They have enough land that would lead to a decrease in their taxes, actually. All the way to some properties will have increases of over 100%.

“Typically it’ll be somebody who lost the Homestead credit at least in the low to mid-range value of a house and also if they’re not in the City of Grand Marais because the new law doesn’t hit hard if you’re already paying a high tax rate. If you’re paying a low tax rate, it hits you harder.”

The quirk in the new formula means mid-range properties will be hit hardest and top end values hardly at all.

“Anything close to $76,000 up to, say, $300,000 are going to take a significant hit because that’s where the highest credit was…and will now be gone. If you’re somewhere over $300,000 – in $300,000 to $400,000 or anywhere above that, you didn’t get a large credit to begin with because it’s a decreasing number as you’re value goes up so aren’t going to lose as much.

“Anybody who got the Homestead market value credit loses that. It hits harder if you’re a lower value property that had a large Homestead market value credit. It doesn’t hurt as bad if you’re over $300,000 in value because you didn’t get a large credit to begin with, so you don’t have as much to lose.”

Powers said many tax increases used as examples in the media are averages and don’t adequately explain differences in valuation increases or decreases, tax rates, the presence of seasonal properties and other nuances in the formula.

“I’m just simply leafing through a few examples that we pulled off and here’s .5, 1.9, 1.5, 2.4, 3% increases – these are seasonals and commercial I’m talking about. Now I’m getting into something with homesteads and I see 32.7, here’s a seasonal at 14.4, a commercial at 4.5, a seasonal at 10.5 a homestead with 6.9, a rural vacant with non-homestead with 41.9, a homestead with 7%, homestead with 120%, homestead resort commercial with 130%, homestead with a minus 9.2%, a homestead at minus 9.9.”

Owners of homestead properties will still receive the benefit of the exclusion, but it will be less than they received under the credit.

“What they’re doing is a certain portion of your taxable market value is excluded from the local property tax and it’s on the same basis as the credit was calculated. The maximum credit used to be $304. Now the maximum exclusion is $30,400, so it’s the same formula, but a different scale. I assume the idea behind it then, was if you were in what we’d call a high tax rate area – if you had a tax rate of 100%, this market value exclusion has the same benefit as the credit did.

“There’s no tax district in Cook County with a rate as high as 100%. Most of them are in the high 40%; Tofte in the mid to high 50%, Lutsen is a little less than that, Schroeder, less than that. Most of the unorganized area would be in the high 40 percentile. So it’s less than half the benefit because the tax benefit is less than half of the 100%.”

The upshot of all this is that many property owners will pay more, but the county as a whole will lose revenue.

“The state used to reimburse the counties for the Homestead credit. We actually got a check to pay for that credit that went to homestead. And that’s eliminated, so even though the benefit, the form of it, has changed to homestead, there’s no money coming to off-set that, so it’s just a cut in revenue. That looked like about 3% -- it’s been around $280,000 county-wide.

“What the state is saving, what’s been reported, is around $260 million around the state in payments they made to counties. Actually in the last two years during the budget battles, they’ve cut that so we haven’t actually received all of that $280,000 in the last couple of years.”

Powers said as bad as this may seem to residents, the difference between a property receiving the Homestead exclusion and what a seasonal-recreational property owner will pay is still significantly different.