Yes, it is the most likely scenario.

And yet, the majority of people

still cling to the belief that if and

when assessments begin to fall in

response to the real estate market,

their tax bills will also go down. Please

don’t fall prey to this long held belief

because of the potential financial ramifications it can have on household budgets. So, how can this happen? And,

will assessments ever go down?

First, a little background information

for perspective. Real estate valuation

estimates for property tax purposes

always lag behind the current market,

a lag of 18 months from the assessment

date and 28-30 months from the

time taxpayers receive assessment

change notices. Why?

Illinois law requires all assessment officials, from township assessors to the

Illinois Department of Revenue, to

determine the valuation of property as

of January 1 of the tax year. So when

taxpayers are notified of their valuation

change in October or November,

those values are already 10-11 months

behind current market activity and

trends.

Contributing further to valuation lags is

the statutory requirement to use sales

that occurred during the three years

immediately preceding the January 1 assessment date. This works in the taxpayer’s favor during increasing markets

because assessments cannot catch up

to the market, but against property

owners in a down market because market values have to fall just to get to the

level of the assessments and then

fall even more to get below assessments

before they will be lowered. This

multi-year requirement tends to

smooth the effects of market swings

thereby providing a modicum of stability

to the assessment system.

Values for the 2009 tax year will be

determined as of January 1, 2009 using

sales from 2006, 2007 and 2008. The

question on most taxpayers’ minds is,

will assessments go down for 2009?

Let’s take a look at what has been

going on.

At the end of 2007, our office compared every arm’s length, fair market transaction that occurred in the township to the assessment placed on each of those properties during the 2007 general

reassessment year. (Distressed sales

such as foreclosures are not used as they

do not conform to the definition of fair

cash value required by law.) We calculated the sales ratios and found that on average, the sales were still approximately 3-4% higher than the assessments’ market equivalent. In other words, there was still an under-assessment problem despite the decline in market values during the last half of 2007.

Given the system outlined above, this

makes sense. Since assessments were

lagging behind the appreciating market

of 2003-2007, values would have to fall

some just to get to the current level of

the assessments. Assessments were

15% to 20% below the market during

the good years, in 2007 they were only

3-4% below market. The rate of

assessment increases slowed in 2008

to 2.79%.

Only in 2008 did sales finally reach and fall below current assessments with any consistency. But remember, when determining whether properties are over- or under-assessed for 2009, those 2008 sales will represent only a portion of the sales that will be used.

Actually, they will likely be less than 1/3rd of the sales since the number of properties sold in 2008 dropped off

dramatically relative to the sales volume in 2006.

Suppose, hypothetically, after studying the sales from 2006 through 2008 that the county applies a negative multiplier lowering the assessments on all property

in the township. Will taxes follow

suit? In all likelihood, the answer is no. Remember, the purpose of the assessment is to determine everyone’s portion of the tax burden. Look at the assessment as your slice of the tax pie. Changing everyone’s assessment using a multiplier, also known as an equalization

factor, adjusts assessments to the

appropriate level of market value but

does not change your proportion of

Only a change in spending will cause a change in the tax bill. If history serves as a gauge, the taxing bodies such as schools, park districts, municipalities, fire districts, townships, etc. will ask for increases in their levies from the prior year. When they do this, regardless of the direction or magnitude of the universal change in assessments, taxes will go up.

Let’s look at a simplified example to see how this works. Suppose there is only one taxable property, your house, and one taxing body, you pick the one whose services you want.

In year one the taxing body needs

$5,000 to provide you with their services. Since yours is the only property, your tax bill has to be $5,000.

In year two the real estate market

plunges and your property value falls

by 30% (or pick any percentage you

want) but the value is down significantly. What has happened is that the taxing body’s entire assessment base has gone down by 30% but your proportion of that base has not changed.

Your property still remains the only

taxable property. At the same time values have fallen, the taxing body determines it needs $6,000 (a 20% increase) to provide you with their services. What is your tax bill? It

has to be $6,000 because that is

what they asked for from the

property tax and you are the only

taxpayer. Your taxes are up even

though your assessment went

down by a significant amount.

In year 3 the real estate market

rebounds and values skyrocket

by 40%. Your assessment notice indicates this trend and your

valuation is up 40%. But the taxing body has found they only need $5,000 to operate this year. What happens to your tax bill? Your tax bill will go down from $6,000 to $5,000 despite the fact that your assessment went up 40%. Again, your proportion of the taxes didn’t change so the only action affecting your bill is the change in spending, in this case a 16.67% decline.

Whether it’s one property or 12,000 properties and 20 taxing bodies instead of one, nothing changes. As long as assessments increase or decrease in unison, the percentage doesn’t matter, your proportion of the tax burden does not change. The only thing that can change your bill, when all assessments have changed by the same percentage, is a change in spending. Tax bills in a declining market will not go down until

the taxing bodies all cut spending from the levels of the prior year.

2007 was our last general reassessment year (formerly known as the quadrennial). In 2008 West Deerfield Township did not reassess most property. Instead, the county multiplier adjusted all assessments to the appropriate level. This procedure will be followed again for 2009. The Chief County Assessment Officer and/or the Illinois Department of Revenue will study the sales and the assessments and determine whether a multiplier, changing all assessments equally, will need to be applied to the township’s assessments. As we have seen above, this action, whether it is an increase or a decrease to all assessments, will not affect your tax bill. Only a change in spending by the taxing bodies will cause a change in the actual tax bill.

What will the taxing bodies do in this

economy for tax year 2009? My office

does not know. Those questions need

to be directed to those entities. There will be a complete list of the taxing bodies you support through your tax dollars on the 2008 tax bill that will come out the first week in May 2009.