The use of Business Property Tax Incentives in Cook County, Illinois

Abstract

The authors use data on all business parcels and property tax incentives in Cook County to analyze the use of business tax incentives from 2012 through 2014. By law, Cook County commercial and industrial parcels are assessed at 25 percent of market value. Under certain conditions, however, these business parcels can be granted special assessments reduced to a lower fraction of market value (usually 10 or 12 percent) for more than 10 years from the date of the designation. These special assessments, assigned as incentive “classifications,” effectively reduce the tax payments of these parcels by 50 percent or more. More than 2,000 commercial or industrial parcels received special assessments that substantially lowered their property tax liabilities each year. These assessment reductions decreased county-wide property tax collections by approximately $250 million in 2014, which is 5.3 percent of the $4.7 billion of commercial and industrial property taxes that local governments (including school districts) billed in Cook County. Industrial assessment reductions decreased industrial property tax revenue by 20 percent or less in most municipalities, but in a few municipalities the incentives reduced industrial revenue by one half or more. Most municipalities that used commercial assessment reductions lowered commercial property tax revenue by 10 percent or less, but a small number reduced commercial property tax revenue by 30 percent or more. Nearly 50,000 commercial or industrial parcels were located in either Tax Increment Financing (TIF) districts or Enterprise Zones (EZs), making the owners of these parcels eligible for development assistance such as access to land at reduced cost, parcel-specific or larger-scale infrastructure improvements, and sales and income tax reductions. A substantial number of these parcels received property tax assessment reductions as well. Total property tax redirections from local taxing authorities to TIF districts were more than twice the amount of industrial and commercial incentives in Cook County at $644 million in 2014. The data did not allow the authors to analyze the benefits firms obtained due to locations in EZs. The magnitude of incentive use and the interaction of different incentive programs suggest the need for increased scrutiny of their use and greater coordination of their administration.