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| Andrea
Raila, Senior Tax Consultant of Raila & Associates, Inc. Real Estate
Tax Consultants.
Thank you for the opportunity to testify before this Advisory Board. My name is Andrea Raila. I'm president and senior tax consultant for Andrea Raila & Associates, a private consulting firm that for ten years has concentrated exclusively in the field of real estate taxation. We assist taxpayers in researching and preparing property tax appeals. Our firm actively educates the public on how they can appeal property taxes on their own, without using a lawyer or other professional assistance. We also advocate for public policy reforms that can make the tax and appeals system more fair, equitable and transparent. I have four years of government experience as a Cook County Board of Review case decision-maker and one year of service within the City of Chicago Department of Revenue's "Taxpayer Advocate Office". Now in the private industry, I have represented taxpayers before appeal boards in Cook, Will, DuPage and Lake Counties. I have been a long time advocate for an open and understandable statewide property tax system. I hope I can bring to this Advisory Board an insider's and an outsider's perspective to your consideration of legislative changes to the funding formula that will reduce Illinois' over reliance on property taxes used to fund public education. In 1989 Cook County collected over $4.2 billion in real estate taxes. In 1998 property taxpayers turned over about $7.8 billion in taxes. This is an 86% increase in only 10 years! And the number of tax appeals before Cook County appeal boards doubled from 36,000 in 1984 to 72,000 in 1998. Additionally, in Cook County the cost of legal services in tax appeals can be excessive. Lawyers' fees are often exorbitant, reaching as high as 50% commission on taxpayers' savings. Smaller businesses often cannot afford 50% contingency fee arrangements and some small businesses, even those with obvious tax inequity claims, are often refused service by law firms. Taxpayers are fed up with the property tax appeal process in Cook County. Cook County has the largest, most complex taxing body and appeal system in the country. The number of errors and inaccuracy inherent in a large system make for increasing work for tax lawyers and consultants. Cook County's property tax system, particularly in the initial assessment stage, tax appeal processes, tax refund & tax sales systems are plagued with administrative problems and government employees in those areas are over loaded with public criticism and resentment. Public confidence is at its all time low. Cook County has seen an exodus of companies that cannot get sufficient tax relief through the appeal process or county tax "incentive" programs. Attached is documentation that clearly illustrates our need to find a new funding formula for public education. Briefly:
Finally, Cook County homeowners fed up with ever increasing real estate taxes have organized a binding referendum petition drive that would cap Cook County's triennial reassessments at 5% for homes lived in for 5 years (see petition). Cook County homeowners and businesses have lost their confidence in the property tax formula for funding education. They have clearly taken steps to promote change. I urge the Advisory Panel to promote legislation that would change the funding formula and reduce the percentage of property taxes used to fund public education. There is a growing tide of Cook County businesses and homeowners imposing their own changes on the tax mix by relocating and utilizing binding referenda. Considering that Cook County has almost 50% of the state's property tax base, passage of new education funding formula legislation is urgently needed. Thank you. Taxes usher
a business out of Cook County, Until a couple of years ago, Henry Maday was running a wholesale greenhouse on about eight acres in Calumet City, a business he'd had since 1964. In 1994, his property tax bill based on the Cook County tax assessment, was more than $97,000. Today, Maday has transferred the entire business to Crete in Will County, about 12 miles away. There he has 20 acres with new greenhouses. His 1998 tax bill was a little over $14,000. "It got to a point where it was unfeasible to stay [in Calumet City]," said Maday, who has protested his taxes for 15 years. "I couldn't stay forever; I couldn't afford to operate that way." Maday has been trying to sell the Calumet City land, but the sale hasn't gone through yet and he is liable for the taxes. Despite the fact that he's torn down all the buildings except for a farmhouse he still lives in, his estimated 1998 tax bill (payable in 1999) is $99,016. That's based on the assessor's estimate that his land has a market value of more than $1 million. That valuation is being appealed on the grounds that the pending sales contract on the land is for only $450,000. Maday's tax bills in Cook County are "not only exorbitant but confiscatory," said Andrea Raila, a tax consultant who is handling Maday's appeal. Raila is trying to get most of the land classified as vacant. For the last several years she has been trying to get an agricultural classification for the land, which was listed as commercial because Maday ran a small retail sales operation there. Raila argues the tax code supports her claim. Maday's business is much more profitable in Crete. "There's a lot less overhead, and we're only 15 minutes further south. We're two miles south of Cook County, and that's just far enough." Maday, a former president of the Chamber of Commerce in Calumet City, said the south suburbs are "really suffering" from the burden of property taxes. The south suburbs, with a declining tax base as industry moves out of the area, lower residential property values than elsewhere in the county and the high cost of services due to poverty and crime, are the most-heavily taxed in Cook County. The party under contract to buy Maday's Calumet City property is, incidentally, a cemetery operation. And cemeteries are generally exempt from real estate taxes. Houlihan Implores Special Commission To Aid Cool County's Southern Suburbs Governor's Infrastructure Task Force Urged To Assist Redevelopment Efforts April 13, 1999 (Springfield, IL) - Citing stagnate property values and double-digit tax rates, Cook County Assessor James M. Houlihan today asked the Governor's Infrastructure Task Force to assist efforts that would provide relief to Cook County's beleaguered south suburbs. Illinois Governor George Ryan created the task force in an effort to conduct a full-scale review of Illinois' infrastructure problems. "South suburban residents and business owners are desperately in need of relief," Houlihan told the eight-member task force. "Homeowners are unable to pay property tax bills with double-digit tax rates, businesses are enticed to relocate in neighboring counties that offer more reasonable property taxes and once thriving communities are struggling to provide the most basic services. Illinois' overall infrastructure cannot be considered healthy as long as this condition in the south suburbs persists." Houlihan focused his efforts on explaining the economic conditions of five southern townships - Bloom, Bremen, Calumet, Rich and Thornton. Of 32 Cook County municipalities with growth rates in assessed valuation less than the county average, 22 are located in the south suburbs. Several municipalities, including Ford Heights, Phoenix, Harvey and Robbins, endured double-digit population losses from 1980 to 1996. Chicago Heights levies the highest municipal tax rate in Cook County at 20.4%. The five townships also claim nearly 50% of all delinquent parcels in Cook County-although they comprise only 1/6th of the total number of suburban townships. The delinquencies translate into a loss of more than $35 million in annual property tax revenue. In order to alleviate these problems, Houlihan suggested the creation of a pilot revitalization body to streamline the tax reactivation program in order to expedite relief to economically depressed suburbs as well as encourage necessary development in many of the communities. On a countrywide level, Houlihan is also considering plans to increase the current assessment level on vacant property in an effort to spur development. 'The five townships have nearly 25,000 parcels of vacant land, more than half of Cook County's total vacancies. "This task force is an appropriate venue to discuss the plight of the south suburbs because the area is in need of infrastructure reactivation," Houlihan explained. "This reactivation may serve as a catalyst to stimulate long-term prosperity for homeowners and business owners. If we are successful, this pilot program could serve as a model to apply in other economically disadvantaged areas throughout the region and state." The Tax Policy Forum, a policy group formed by Houlihan last year to deliberate improvements to the Cook County property tax system, also recommended a reduction in the assessment levels on commercial and industrial property. The proposed reductions are intended to remove disincentives to business development in Cook County and institute assessment levels more similar to surrounding counties.
Re: Build-to-Suit Proposal for Messrs. Duane & David Polkinghorne and Propheteer, Inc. Dear Duane: We are very pleased to make this revised proposal to Messrs. Duane and David Polkinghorne and the Flexo Accessories Co., Inc., and DMS, Inc. It is based on a preliminary construction cost proposal and estimates obtained from Leopardo Construction dated 3/3/00 incorporated herein by reference, and contains certain assumptions about interest rates and other soft costs. Before a lease is signed these costs would need to be verified and perhaps the rental quotes contained herein would be adjusted upward or downward accordingly. This proposal is non-binding and imposes no obligations on any of the parties. Any lease transaction or land transaction is entirely subject to executing legally binding contracts acceptable to the parties and their respective attorneys.
This proposal is subject to the following conditions: (1) the terms and conditions of mutually acceptable lease form including a personal guarantee from Duane and David Polkinghorne; (2) final approval of plans, schedule and cost of construction; (3) final approval of these business terms by LZCP Investors LLC; and (4) Landlord's approval of financial condition of Tenant and guarantor. If the above terms and conditions are of interest we request that Messrs. Polkinghorne provide financial information on their companies and themselves. We can structure a letter of intent along with a good faith deposit and proceed with preliminary design and lease drafting.
August 29. 2000
Dear Ms. Raila: The following information may be helpful in understanding the ownership of this property, and the identity of the tenant.
In accordance with your request I am enclosing the following documents;
At the time we purchased Universal the company was in an extreme rate of decline. Sales were less than two million dollars - they were 3.5 million dollars as recent as two years earlier, and over seven million dollars in the early 1980's. Our first priority was to stop the decline of sales and the loss of customers. We elected to remain at this location and to make limited improvements to the facilities. We received the benefit of two City programs - the vacation of the alley which separated the Kedzie and Troy parcels, and the installation of a new electric service. At the present time our total employment of permanent full time employees is 30 which includes 23 factory workers. The factory jobs involve light manufacturing requiring substantial training because of the specialized nature of the products manufactured. Our average wage including all benefits is $22.63 per hour. These employees are from the areas surrounding the plant. The present taxes do not reflect the value of the property, and the reassessed values are substantially in excess of the value of the property. We can not absorb these increased taxes in the operating expenses of Universal. In addition we are at a point that additional facilities are required. We can not justify improvements to this property with the prospect of even higher taxes. By comparison the following are our taxes at two other Hyspan locations.
Hyspan has made a substantial commitment to Chicago in the past five years in the form of employment opportunities and capital expenditures in spite of what we consider to be excessive taxes that are totally disproportionate to the property value. The proposed increase to $57,400 can not be absorbed by the company, and the prospect of even higher property taxes on much needed additions and improvements to the property clearly limits the viability of this location. We will appreciate your assistance in reducing these taxes to a level consistent with the value of this property. Please contact me if we can provide any additional information. Access to the property can be obtained by contacting the plant manager, John LaMagdeleine, at 773-277-0700.
Dear Community Leaders, Enclosed is a petition for a binding referendum that would cap Cook County triennial reassessment increase at 5% for homeowners who have lived in their homes for 5 years. Illinois citizens have the right to initiative and referendum. See page 123 of the Illinois Handbook for Government - Section 8-12). We encourage your members to circulate this binding petition which would place these important property tax reform issues on the March 2002 ballot. We need 260,000 registered Cook County voters to sign the Taxpayer Amendments petition. Petitions may be signed by any registered voter in Cook County (signers do not have to live in the same district or city). Please return petitions to the address on the bottom of the petition. If your group would like a speaker out to explain these Taxpayer Amendments please call CFAT at 312-573-0308 or Taxpayer Action at 312-654-8888. In the past 10 years Cook County property taxes have increased 85%. The Illinois property tax system takes more money from taxpayers than any other tax levy except the federal income tax. There is something you can do. Join CFAT Citizens for Fair Assessments and Taxes Organized in 1990, CPAT is a coalition of Cook County homeowners, retail and manufacturing property owners, property managers, and citizen activists that have advocated successfully for many reforms to Cook County's is complex property tax system. CFAT's campaign 2000 objectives are: Cap Cook County's triennial reassessment increases. Allow taxpayers to represent themselves or retain any person other than an attorney to represent them in local county tax appeal matters before the Cook County Board of (Tax) Review.
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