Breaking down Cook County property value noticesMay 05, 2023 10:34AM ● By Editor
By Jim Boyd - May 5, 2023
Editor's note: This piece was sent to Braidy Powers, James Joerke, and Bob Thompson for accuracy and fact verification before publishing.
In my neighborhood out west of Grand Marais, there’s been lots of tax discussion following the property value notices the county assessor’s office sent out recently. Someone said we need to tell the county to stop doing these large value increases. Someone else said that if the county keeps this up, we’re going to be taxed out of our homes.
Neither of those commonly heard statements reflects reality.
On the first, assessor Bob Thompson has no choice. Bob is licensed by the State Board of Assessors and must follow tax policy directives from the Department of Revenue. The department’s manual for these duties runs to 621 pages. Bob does a good job or Bob doesn’t have a job. Our County Board employs Bob, but it has minimal ability to direct his work.
As for how assessed values are calculated and the impact they have on tax bills, I was going to attempt to explain how it all works in simple words that someone might read and understand. But I can’t. Not without risking my health and that of readers. There are too many variables that must be considered simultaneously. Have you ever seen a murmuration of starlings? Thousands rise up and fly as a group first this way, then that, up and down, left and right. It’s beautiful but extremely complex. The processes for determining property values and tax rates are similar.
I think this complexity is one reason why people are so suspicious: The property tax system is a black box to which very few -- policy wonks every one -- have a key. To wit: Bob Thompson’s video this year explaining how this works. It starts out well, but when you get to the sales ratio bit and scattergrams, Bob dives into the deep end of the nerd pool and loses roughly 98 percent of us. He’s not trying to be obtuse, but it’s almost impossible not to be. Oh, and I am definitely a nerd, so I’m not badmouthing Bob here.
This complexity is why taxpayers need to put considerable trust in those they hire to do these tax jobs. And I think our current crew has earned substantial trust. In my two decades of observing Cook County government, it has just gotten better and better. I serve on the county’s Budget Advisory Committee, and we spend a great deal of time examining and challenging county administrators on everything they do that involves spending money.
While I cannot explain how all of it works as a system, I want to illustrate some of the variables that make a short, punchy explanation impossible:
Our tax bill is made up of many levies – schools, county, hospital, city of Grand Marais, townships, special taxing districts, state of Minnesota, and fiscal disparities. The county collects them all but levies only one. And any of them can change significantly year-to-year because of circumstances unique to their purpose.
Averages and percentages: The average property value for 2022 increased by 32 percent in Cook County. My assessed value went up $81,500. My neighbor’s value went up $73,700. My tax went down. His tax went up. How is that possible? Well, his property is worth quite a lot less than mine (smaller house, smaller lot), so his value increased more than the 32 percent average and mine increased less. Yes, I know: Makes your head hurt. There were other variables at work as well:
Improvements. My neighbor invested quite a lot in upgrading his property, which boosted its taxable value. I made none.
Price on property sales in our taxing district. This hit us both. My value increase reflected mostly the huge jump in sales prices nearby.
Homestead exemption. The state excludes part of your assessed value from taxes. The amount declines as your value goes up. In 2022, I lost the last $6,000 of my exemption. My neighbor lost $7,000.
Quintiles. Bob is required to physically inspect properties every five years. So while assessed values are adjusted every year, he and his crew do physical inspections on a quintile rotation; 20 percent get inspections annually. If your property was undervalued previously or you made improvements that went unrecorded, you might see a large value increase.
What is the Legislature doing? A boatload of changes are being considered in St. Paul that could dramatically affect county property taxes. They include an expanded Senior Property Tax Deferral Program, an increase in the homestead exclusion, and an increased value exclusion for disabled veterans and for agricultural homesteads. Also being considered is a lower tax increase threshold for the special property tax refund. Whether these provisions make it will be known in a few weeks. Then the county can start calculating its impact on the property taxes for 2024.
PILT. Both state and federal governments make Payments in Lieu of Taxes to Cook County. The huge swaths of property they own here are exempt from local taxes. So they make payments to compensate. But the amounts they pay vary considerably from year to year. The feds and the county are at loggerheads over in=lieu payment for BWCA property. Auditor Braidy Powers has been sequestering part of the federal PILT payments each year in case he has to pay part of it back. If that dispute remains unresolved this year or is decided in favor of the feds, that could gouge a $600,000 hole in county revenue available to fund the levy. Taxpayers could be required to fill that hole.
Wages. A compensation study last year resulted in an increase of roughly $1 million in wages paid to county employees. More than half that cost was covered by fund balances. It’s almost never a good idea to use fund balances to pay for recurring costs, so this year, that cost may need to get paid by current revenues. Or perhaps the state will bless us with unexpected aid, as it did last year, to the tune of $2 million.
There are a number of other variables also at play, but I hope you get the picture of our murmuration of tax variables. I can tell you that county administrator James Joerke works very hard to keep the levy at a reasonable level. He’s conscientious, and he wants to keep his job.
We need to ask questions and challenge valuations or levy increases that seem unjustified. But we need to start with a strong trust in those we have hired or voted into office to do this work for us. That part is actually pretty simple.