Home > Society > Too Funky for Its Own Good

Too Funky for Its Own Good

Friday, 4 August 2006 Leave a comment Go to comments

Business is booming in Andersonville, but that’s not enough when you’re staring down a 70 percent property tax increase.

this is my neighborhood! why???

By Ben Joravsky
July 14, 2006
EIGHT YEARS AGO Sean Sheridan and his wife, Trina, opened the Wooden Spoon, a storefront kitchenware shop at 5047 N. Clark. Now they wonder whether they can continue to stay afloat. It’s not that business is bad—“quite the contrary, it’s bustling,” Sheridan says. But property taxes are killing them. “We’re looking at our taxes going up almost $5,000 next year—that’s almost doubling,” says Sheridan. “We look at these bills and we think, how can anyone make it?”
Many businesses owners in Andersonville are asking the same question as they open the reassessment notices they’ve recently received from the Cook County assessor’s office. Marsha Engquist says she may have to close the Lake Shore School, her day care center at 5611 N. Clark, which has been in business for more than 50 years. Ray Pesavento, who owns several buildings in Andersonville, says he may have to cease renting only to local businesses and bring in the national chains. And just last week Debbie Tunney, who ran the Ann Sather on Clark for almost 20 years, closed its doors, in part because of property taxes.

The Wooden Spoon

Robert Murphy
“It’s a terrible policy to overtax things you want more of—like home ownership, entrepreneurship, and local-owned businesses,” says Ellen Shepard, executive director of the Andersonville Chamber of Commerce. “But that’s what we’re doing with the property tax.”
Andersonville’s troubles are just another manifestation of a major downside to the booming real estate market. As real estate prices rise, so do assessments. The city could offset the bite by cutting the property tax rate, but there’s little chance of that: it needs the revenue. The problem is that property tax is tied to a wealth that doesn’t really exist. Many residents couldn’t even afford to buy their property at today’s prices.
Shepard fears that rising taxes will destroy Andersonville’s “ideal” community of diverse and locally owned ethnic restaurants, boutiques, and specialty shops. Certainly landlords and merchants are feeling the pressure. “There’s not much you can do when your property taxes go way up,” Pesavento says. “You either raise the rents, which drives out businesses, or you raise your prices, which drives away customers. It’s not much of a choice.”
At hearings and meetings, politicians talk about helping the besieged home owner. But merchants say the rising taxes are tougher on them—in most commercial buildings, retailers, not property owners, pay the property taxes. The taxable value of commercial buildings is set at a higher rate (38 percent) than residential property (16 percent), and while there’s a home owner’s exemption ($4,500 as of next year), commercial property owners are out of luck on that score as well. Suppose you have two pieces of property, a house and a storefront, each valued at $100,000. Of the house’s value, $16,000 is taxable. For the store it’s $38,000. These figures are multiplied by the “state equalizer,” a number determined by the Illinois Department of Revenue; a recent rise has it at 2.7320. Deduct the home owner’s exemption from the $43,712 you get on the house and with a tax rate of 6.21 percent the property tax on the house is $2,435. On the store it’s $6,447.
The standard explanation for the different rates is that merchants can pass the tax hikes on to their customers. “Commercial owners can increase prices,” says 44th Ward alderman Tom Tunney, who as the owner of the Ann Sather chain knows a thing or two about commercial property taxes. “Residential property owners don’t have that option.”
But as Debbie Tunney, Tom’s sister, points out, there’s only so much merchants can squeeze from their customers, and according to a study by the chamber of commerce, property taxes in Andersonville will go up well over 70 percent next year. Some properties have it worse than others. For instance, Thybony Paint Store at 5440 N. Clark is looking at a $40,000 tax bill, up from $12,270—a leap of 226 percent. Engquist’s day care center can expect a hike of $10,000, from $14,482 to $24,894. Debbie Tunney was looking at a tax bill of $43,348, up more than $28,000 from her previous bill of $15,244.

“I love this restaurant and I love this community,” she says. “But no business is able to handle that kind of hit.” Instead she says that she’s turning it back over to her brother and that he plans to reopen it in August. “I said, ‘Tom, you’ll have a hard time making a profit with those taxes.’”
Many of the Andersonville merchants plan to appeal their assessments with the county’s board of review. But this is an aggravating and time-consuming process. Most will have to hire tax-appeal lawyers, who take 33 percent of whatever reduction they win. And of course there’s no guarantee that they will win.
A few years ago the Cook County Board promised relief for merchants by adopting a new property tax classification that enables certain commercial buildings with no more than six units of apartment housing to be taxed at the residential rate of 16 percent. But that change has led to some weird inequities. “You’ve got situations where the bakery pays at 16 percent because it has a few apartments upstairs while the bookstore next door pays at 38 percent because it doesn’t have apartments upstairs,” says one tax-appeal expert. “It doesn’t mean the bookstore can afford to pay more than the bakery. It’s just that one happens to rent in a building with apartments and the other doesn’t. It’s so frickin’ unfair.”
The irony is that rising property taxes are threatening the businesses and people who made the area worth moving to in the first place. “We’re sitting on a gold mine of property value,” Engquist says, “but that doesn’t do me any good unless I want to sell. I want to run an affordable day care center.” “I can’t afford these kinds of taxes,” Sheridan says. “Here’s the future for Andersonville: banks, Starbucks, and multinationals.”

Advertisements
Categories: Society
  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: