Local Taxing Bodies Find Profit in Cooperatives

At lunchtime on a windy Wednesday in December, the movers and shakers of a northern Chicago suburb met at an elementary school with two attorneys and a couple pizza pies. You could call it a property tax pizza party, though the pizza came after the paperwork.

It was time for the Property Tax Appeals Cooperative (PTAC) meeting, a semi-annual gathering for local taxing bodies in Niles Township that began in 1998.

The cooperative, which includes about 15 school districts, public libraries, park districts and village governments, is trying to ensure that they get all the local tax money they believe they deserve. Groups such as Niles’ PTAC hire attorneys in the area to oppose businessowners’ property tax appeals. When banks, shopping malls, or car dealerships appeal their assessed value in hopes of receiving a refund, the resulting refunds hurt the taxing bodies’ bottom line. 

Think of the attorneys as local taxing bodies’ advocates and tutors on everything related to property tax.

“The purpose of the cooperative is to share the costs of intervening in property tax appeals to prevent businesses from receiving refunds,” Scott Metcalf, one of the coop’s attorneys from Franczek Radelet, P.C., said in an interview with Patch. “For the past 40 years, local taxing bodies have been able to intervene at the state's Property Tax Appeal Board (PTAB). And since they are all sharing in potential refunds, they also share in the costs of attorneys.”

Taxing agencies can also file “under-valuation complaints” for some businesses to try to increase the money returned on a property’s tax bill. When taxing cooperatives believe a business’ assessed value is less than it should be, they can bring it to the attention of the Cook County Board of Review to ask for a more accurate valuation. The end result if the board agrees with the coop is higher contributions to the county by that property owner.

Tallying up costs and benefits

Members of the cooperative at the December meeting received two spiral-bound, laminated manuals, “Salient Issues Update” and “Cooperative Board Meeting,” which included settled cases, open cases, bar graphs and articles – all pertaining to the news of the day on property taxes.

“The total cooperative savings tally up at $4.7 million,” said Michael Hernandez, the Franczek Radelet attorney at the meeting, referring to the 2009-2010 savings report in one of the booklets. Joel DeTella from the coop's other law firm, Sraga Hauser LLC, also attended the meeting.

This $4.7 million is the amount of money that taxing bodies avoided refunding. Appeals first go to the Cook County Assessor’s Office, and if they are appealed again, move on to the Cook County Board of Review. After property taxes are paid, they can also be appealed at the Property Tax Appeal Board or in Circuit Court.  Oftentimes, businesses and cooperatives can agree on a settlement.

Metcalf, who has been in the property tax field for a decade, said the tradition of local taxing bodies' cooperatives has evolved in recent years. Currently, the firm Franczek Radelet P.C., who both Metcalf and Hernandez work for, works for three or four such cooperatives.

“Over time I think the number of appeals has been steadily increasing,” said the 39-year-old Metcalf. “The last two years the appeals increased dramatically.”

Membership costs for the cooperative depends on the type of organization and their particular appeals. The legal fees are split among the agencies based on each one’s share of the tax bill.

"The cost break-down changes everytime," said Martin Paltzer, the Niles Township school treasurer, who serves as the bookkeeper for the coop. "We have a method of dividing up the cost determined by the members."

For the six months ending in November, the legal fees for the coop rang up more than $53,000 and property appraisal expenses totaled almost $57,000.  On an individual level, Niles Township High School District 219 paid the most with about $57,000, while the Village of Skokie government was at the bottom of the pay fees with $25.

Paul O’Malley, the assistant superintendent for business services of Niles Township High School District 219, said the district is pleased with its participation in the group, and that the profit outweighs the costs. “The cooperative is beneficial because it offers an economy of scale; the cost varies according to challenges we have.”

On the topic of challenges, taxing bodies aren’t the only ones with mentors to help them wade through the tax appeal process. Township assessors get together about nine times a year as members of the Cook County Township Assessor’s Association (CCTAA). Learn about what the township assessors do together to wrap their minds around the system with and an interview with  CCTAA's president.

Putting the tax burden into context

As the meeting wrapped up, the attorneys added context for the current numbers on property tax bills, and what it means for the organization leaders.

Hernandez and DeTella explained that even if commercial assessed value decreases as a response to the poor economic climate, the total tax burden that must be paid through property tax bills remains the same. The effect would be that residents would have to pay more of the tax burden through their property taxes.

“There’s a cataclysmic shift going on dealing with foreclosures,” Hernandez said. “People are seeing values of property taxes decrease and taxes increase.”

And since the first installment of tax bills for 2010 arrived one month late, citing a backlog in assessments, taxpayers must pay their bills by April 1 rather than March 1 this year.

The local taxing bodies receive their payments one month late as well, and must figure out how to front costs for that month.

They had to do this last year, as well. In 2010, the second installment of property taxes, which are due by county statute in September, did not arrive in mailboxes until November and therefore were due in December. According to township officials, the cost for paying bills from reserve or loaned funds equaled about $3 million per each month delayed.

“It’s good to be involved in the collaborative process because all schools face similar issues,” said O’Malley.