It’s not just new businesses like Brandt Industries that are looking to cut their property tax bill.
Hundreds of McLean County property owners this fall challenged the assessed value of their properties, which determines their tax bill. This year that included dozens of student apartments, hotels, banks, and shopping centers—some of the county’s largest property taxpayers. They want to shave tens of thousands of dollars off their tax bill, money that school districts and other taxing bodies depend on.
To avoid unpredictable revenue losses, Unit 5 this fall negotiated a compromise agreement with First Site and other apartment owners who were looking to cut their tax bills on 26 different apartments. It locks in the assessed value on those properties through 2022. A second agreement is in the works with Young America Realty, which has challenged the values of at least 15 properties this year.
“Whenever those assessed values decline or dip, that affects our revenue. That means teachers in the classroom. That means larger class sizes. It’s important to protect that local property tax base,” said Curt Richardson, attorney for Unit 5, which gets 60 percent of its revenue from property taxes.
The First Site and Young America agreements are not the first of their kind—and they won’t be the last. State Farm Insurance reached a similar agreement with taxing bodies for its properties in 2010. The former Mitsubishi Motors manufacturing plant and the Clinton Power Station have been involved in their own tax disputes.
In light of the recent tax breaks approved for Brandt’s new manufacturing plant, agreements like these raise an interesting question for other McLean County taxpayers: Which property owners are big and important enough to get to negotiate an agreement with local taxing bodies?
How Appeals Work
This year, the owners of 883 properties in McLean County appealed their assessed valuation, which is supposed to be one-third of a property’s market value and is used to calculate the tax bill. That’s actually fewer appeals than in recent years; there were 1,642 appeals in 2009, the height of the Great Recession.
Most appeals come from homeowners who think their assessed value—determined by their assessor—is too high. The higher the assessed value, the higher the tax bill. The dollar amounts are so low that taxing bodies don’t raise a stink when the cases go before the county’s three-member Board of Review.
But for larger commercial properties seeking a reduction of $100,000 or more in assessed value, those taxing bodies are asked if they want to “intervene” in the appeal. With more money at stake, they often do.
That’s what’s happened for the past three years between Unit 5 and First Site. The dispute began in 2015, when the Normal Township assessor, noticing that the assessed values were too low, re-valued 57 different apartments (including many owned by First Site), said Assessor Rob Cranston.
“Around Illinois State University, with all the new housing going up, the scale of that housing is quite upscale. So the assessor and the property owners don’t necessarily agree on what the value is of those upscale properties, so we’re seeing a lot of contentious appeals regarding what they’re worth,” said Robert Kahman, supervisor of assessments for McLean County, who oversees the Board of Review.
The stakes are high for Unit 5, which is one of many local taxing bodies strained by flattening revenues and inconsistent funding from the state.
One example: First Site’s 1010 Lofts on Main student apartments in Normal—the former site of a movie theater—has an assessed value of $3.4 million. That means it pays $289,364 in property taxes annually to nine taxing bodies, most of it ($169,542) for Unit 5 schools, records show.
This fall, First Site asked for the property’s assessed value to be reduced to $2.4 million, which would cut its overall tax bill by $85,380—including $50,026 lost by Unit 5.
That’s just one property. Unit 5’s First Site agreement covers 26. (That agreement set the 1010 Lofts assessed value at $2.7 million, a compromise between the two sides.)
The First Site agreement also allows for the properties to be revalued if certain events occur, such as a decline of 1,100 or more students at ISU, Illinois Wesleyan University, or Heartland. The properties can also be revalued if State Farm's workforce drops below 14,000, according to the agreement. Presumably those events would trigger a decline in value for Bloomington-Normal apartments.
Worth The Fight?
Because Unit 5 hires outside counsel to help with appeals, these agreements are a good option because they can help the district avoid years of legal costs, said Richardson. Each property can be appealed every year, and cases can take more than one year to resolve, trapping the district in a state of “perpetual litigation” with the same taxpayers, he said.
And if Unit 5 lost a big appeal, the district might have to refund the taxes, he said.
“With obtaining (legal) representation and litigating those each year comes a lot of expense,” Richardson said. “We would rather spend that tax money on our students and in the classroom.”
Knowing the tax bill won’t change year to year also provides stability for Unit 5’s budgeting process and for the apartments owners who need to set rents, said Richardson. The First Site agreement resolves appeals retroactively dating back to 2015, setting values through 2022. And because the agreement will raise the values of some of the properties, Unit 5 will actually see $15,000 in additional revenue each year of the deal, said Richardson. (First Site owner Jeff Tinervin did not respond to requests for comment.)
Unit 5’s school board approved the agreement Oct. 25. The Normal Town Council will vote on it Dec. 4, said town spokesperson Dan Irvin. Heartland Community College has already approved it.
Unit 5 expects to reach an agreement with Young America soon. Messages left with Young America owner Ralph Endress were not returned. His attorney declined comment.
Cranston, the assessor, is not involved in those agreements. He said all three parties have different priorities: The assessor wants to determine what a property would sell for. The taxing body generally is focused on the tax revenue. And the taxpayer is focused on their tax bill.
“I do understand the taxing bodies’ perspective, and the taxpayer’s perspective, on these settlements. They just do not mesh real well with the objectives of my office,” said Cranston.
The local property tax appeal process has even become an issue in the Democratic race for governor. Candidate Chris Kennedy criticized the process as overly political in comments earlier this year, a subtle shot at House Speaker Mike Madigan, whose law firm does property tax work.
Eastland Mall’s Tax Bill
Eastland Mall could be next in line for a similar agreement.
The mall is the county’s third-largest taxpayer, sending $1.4 million annually to local taxing bodies—including $871,284 to District 87 schools.
The mall’s owner, CBL Properties, appealed their $16.9 million assessed value this fall but has since withdrawn it, records show. The struggling mall is working on an ambitious redevelopment plan—with new tenants already announced—though many stores remain vacant.
“Over the past year, a number of in-line stores at the mall have been forced to close; some filed for bankruptcy,” CBL wrote in their initial appeal to the county’s Board of Review.
CBL withdrew its appeal because “we have determined that the issues involved in the status of the mall require an extensive review,” CBL attorney James Regan wrote Nov. 28. “We wish to withdraw the 2017 appeal with the understanding that we will be able to arrive at a resolution of the mall’s assessed valuation that serves the interest of McLean County and CBL.”
District 87 Superintendent Barry Reilly said it’s possible that Eastland Mall’s assessed value could decline in future years, given its recent struggles.
“The good news is they understand that’s a big deal and withdrew their appeal (this year),” Reilly said. “But I could see that coming back in the future.”
Eastland Mall spokeswoman Melissa Cavanagh declined comment.
Those agreements can present a dilemma for taxing bodies, Reilly said.
“While we don’t like to engage in those types of agreements because it tends to limit or lower the amount we’d expect to get it, it’s sometimes beneficial because it keeps it from going down much worse should an appeal process go through and no compromise is reached,” he said.
Other Business Appeals
Also included among this year’s larger commercial appeals:
- The Chateau hotel in Bloomington. The owners sought a $633,451 reduction in their assessed value, citing a struggling local market for hotels with increased competition. The owners say they’d need to spend at least $2.6 million to modernize the 180-room hotel to meet the requirements to join a franchise brand such as Choice Hotels or Hilton. This appeal is pending.
- Commerce Bank at 302 Fairway Drive in Bloomington. Citing comparable sales, the bank sought a $534,338 reduction in assessed value. On Nov. 27 the bank reached an agreement with District 87 and other taxing bodies to reduce the value by just $146,562.
- Walmart, the county’s No. 7 largest property taxpayer, sought to reduce its assessed value on its Normal location and Sam’s Club property by a combined $1.4 million. The company said “brick and mortar stores are seeing tremendous negative influence of the e-commerce industry,” and argued the “values are not reflective of the market.” Walmart, the assessor, and the Board of Review recently reached an agreement that will reduce the assessed values by about half that ($676,560).
Taxpayers can appeal Board of Review decisions to the state’s Property Tax Appeal Board (PTAB).
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