The Fredo of the Kennedy Family |
In the case of Hyatt Center, for tax purposes the building is valued at $160 million by Berrios, but it has a mortgage of $385 million––a solid indication in Kennedy’s* Kennedy was asked today if he knew why properties are assessed primarily on the income they generate rather than on sales prices and mortgage costs…
view that the building is underassessed, shifting costs to homeowners “in the bungalow belt, and, as a result people are losing their homes.”
Kennedy said his solution bases assessments strictly on property sales, rather than on the “income” basis Berrios uses.
Berrios had no immediate response, but in the past he has suggested that the law requires him to base assessments on how much money a building makes rather than how much it last sold for, which can vary wildly at any point in time depending on market conditions.
Kennedy did not specify whether he would propose legislation to change the system, but said Democrats who long have controlled the General Assembly “did nothing to fix this system.”
Kennedy’s idea may not be as desirable as it sounds. Real estate values tend to be extremely volatile in the commercial market, and taxing bodies such as schools and City Hall need stable sources of finances.
I would say that it’s not surprising that occurs around the city. Joe Berrios ignores that data. He says the property’s sales value shouldn’t inform the valuation. He says that the mortgages shouldn’t inform valuation. The fact is every mortgage on anything big is recorded at the Cook County Recorder of Deeds’ office. The information is already in the hands of the county. Why we’re not using it to properly assess our buildings is a question best asked of Joe Berrios.* From the Cook County Assessor’s office…
Mr. Kennedy demonstrates a woeful lack of knowledge about the assessment process in general, and Illinois law in particular, for commercial buildings – including buildings his family either controlled for decades or still controls.*** UPDATE *** Oh, man, this is so bad for Kennedy. From the assessor’s office…
Because commercial buildings exist solely to generate income, current income is the primary factor in the value of such buildings – as Illinois courts have stated for some 70 years. Sale prices are not primarily driven by a building’s current value. Transaction prices in these buildings are highly speculative and based on future income expected by buyers investing in buildings. They often include significant non-real estate components.
A mortgage for such a building can be based on that speculation and a discounted cash flow analysis but the Assessor, by law, cannot speculate on future income or non-real estate factors.
Mr. Kennedy was quite happy with the current-income-approach-to-value before, during and after his sale of the Merchandise Mart. The prohibition on speculative price valuation in property assessment has been bedrock of Illinois law for 160 years. He should actually become informed on the laws of this state.
To base individual assessment on a sale price is known as “sales chasing.” Sales chasing is prohibited by decisions of both the United States Supreme Court and Illinois Supreme Court as violations of equal protection under the law and the Article IX Illinois Command of uniformity in assessments.
The Cook County Assessor’s Office assumed Mr. Kennedy would not have the temerity to state a false number, but he did. His claim is wildly inaccurate. The Hyatt Center at 71 S. Wacker is actually valued at approximately $382 million, not the $160M Kennedy falsely stated.
It is not uncommon for large commercial buildings to have multiple Property Identification Numbers (PINs). Evidently, Kennedy checked only two PINs. There are, in fact, seven PINs totaling $382M for the property at 71 S. Wacker (Hyatt Center). Clearly, he does not know how to even calculate a current, accurate assessed value.
By the way, the $382M is the Cook County Board of Review’s figure, reduced from the original, higher Assessor’s Office figure of $396M.
In addition to his failure to properly calculate value, Kennedy demonstrates a woeful lack of knowledge about the assessment process in general, and Illinois law in particular, for commercial buildings. That includes buildings his family either controlled for decades or still controls.
Because commercial buildings exist solely to generate income, current income is the primary factor in the value of such buildings – as Illinois courts have stated for some 70 years. Sale prices are not primarily driven by a building’s current value. Transaction prices in these buildings are highly speculative and based on future income expected by buyers investing in buildings. They often include significant non-real estate components.
A mortgage for such a building can be based on that speculation and a discounted cash flow analysis but the Assessor, by law, cannot speculate on future income or non-real estate factors.
Kennedy was quite happy with the current-income-approach-to-value before, during and after his sale of the Merchandise Mart. The prohibition on speculative price valuation in property assessment has been bedrock of Illinois law for 160 years. He should actually become informed on the laws of this state.
To base individual assessment on a sale price is known as “sales chasing.” Sales chasing is prohibited by decisions of both the United States Supreme Court and Illinois Supreme Court as violations of equal protection under the law and the Article IX Illinois Command of uniformity in assessments.
- Posted by Rich Miller
I’m not sure a deep dive into property taxes was a good idea for Kennedy.