Cook County continues to increase the number of commercial and industrial properties eligible for reduced property tax assessments. Recently, the County amended the Real Property Assessment Classification Ordinance to add the “Temporary Emergency Economic Recovery Modification” program (TEERM) and the “Sustainable Emergency Relief” program (SER) for Class 6b properties. Both of these programs expand the Class 6b classification to include industrial properties that previously would not have qualified for this tax incentive. Cook County is also currently considering an ordinance that would create a new Class 7c “Commercial Urban Relief Eligibility” (CURE) program to benefit newly constructed commercial properties. These tax incentive classifications impact a taxing district’s tax base by reducing the overall tax base and shifting the assessment burden to other taxpayers in the community. Local taxing bodies are not notified about applications for the incentives and rarely find out about the reduced assessment until after it is implemented.
By ordinance, commercial (Class 5a) and industrial (Class 5b) properties in Cook County are assessed at 25% of market value. However, reduced assessments are available to certain commercial and industrial properties determined by the municipality and the County to be eligible for an incentive assessment. These commercial and industrial properties are provided a tax incentive by being assessed, in most cases, at 10% of market value for ten years, then 15% in the eleventh year, and 20% in the twelfth year rather than the 25% assessment level.
The Class 6b designation has historically been limited to industrial property that is newly constructed, substantially rehabilitated, or reoccupied after being vacant. The TEERM program now allows industrial property to qualify for the Class 6b designation after being vacant for one year, rather than the two years of vacancy previously required. The SER program effectively eliminates the vacancy requirement by opening the Class 6b designation to any industrial property that has been in the same location for ten years and can show evidence of hardship and demonstrate that the reduced incentive is necessary to continue operations and maintain staff at its current location. The County has yet to issue formal standards to assist municipalities in evaluating requests for these new incentives. Given the lack of objective criteria to guide authorities in issuing the new incentives, it will be worth watching how widely these incentives are implemented.
Also being considered is a new Class 7c designation for commercial properties. The CURE program would create an incentive classification for commercial property that is newly constructed, substantially rehabilitated, or reoccupied after being vacant, regardless of where it is located. Currently, the Class 7a and Class 7b designations are open only to commercial properties that are part of a “qualified commercial development project.” Such qualified projects must meet certain criteria, including being located in an area designated as a blighted area by a federal, state, or local agency. The Class 7c designation would not require the commercial property to be in a blighted area. Rather, the property owner would have to demonstrate only that the assessed value of the property has declined or remained stagnant, there is a reasonable expectation that the development of the property is viable, that the tax incentive will materially assist the development, and that the development will result in an increase in property tax revenue and employment opportunities. Unlike the other classifications, the Class 7c designation would last for only five years.
While economic development incentives like a TIF District require notice to affected taxing agencies, there is no requirement of notice when a property owner seeks an incentive classification. Rather, the property owner must secure a municipal ordinance or a resolution making certain determinations that indicate the municipality’s support for the incentive classification. A copy of that resolution is then included with other application materials submitted to the Cook County Assessor’s Office. Generally, approval by the County Board of Commissioners is also necessary to obtain an incentive classification. At no point in the process are taxing bodies (other than the municipality) entitled to notice. As a result, school districts and other units of local government must be vigilant and stay abreast of incentive activity in the community. In the current era of declining, or at best stagnant, assessments, being proactive and aware of what is happening in your tax base is essential.