I am sure by now you have heard the news about the Chicago Bears meeting with the Mayor of Naperville regarding a potential stadium build. Why would they do this after paying $197 million for the Arlington Park Racecourse? Well, reports are that the McCaskey family is not thrilled with how the Cook County Assessor is valuing the property. The team released a statement noting that what would be the largest single development project in Illinois history is now at risk. As someone who works in real estate property tax, I wanted to dive into this a little deeper.
For those of you who do not live in Cook County or are unfamiliar with how the real estate assessment process works, the County is divided into 38 townships and reassessed once every three years. Cook County operates three separate groups of properties — the city of Chicago, the southern and western suburbs, and the northern suburbs. This allows the Assessor's office to work with one group every year, alternating which group is reassessed. For example, in 2023, the south and west suburbs are being reassessed. In 2022, it was the north suburbs being reassessed and in 2021 it was the city.
Cook County Assessor is making things difficult for the Chicago Bears
The Arlington Park Racecourse is located in Arlington Heights and within the Palatine Township. That township is part of the northern suburbs and was reassessed in 2022. Another important note is that Illinois is supposed to value the property as of January 1 (lien date) each year. Therefore, if a sale takes place in March of the same year, that sale should not affect the current-year assessment.
According to the Assessor's website, properties located in townships that are not scheduled for reassessment will only undergo reassessment if there is a change due to division work, permit applications, or other special circumstances. The "other special circumstances" part feels a little vague and opens the door for Fritz Kaegi (Cook County Assessor) and his staff to essentially make up their own rules.
The Chicago Bears closed on the Arlington Heights property in February 2023 — a full month after the current lien date and a full year and one month after the 2022 lien date. I cannot imagine that permits were applied for prior to the closing of the property. None are showing on the Assessor's site. However, the Cook County Assessor took it upon himself to raise the fair market value from $23,402,380 in 2021 to $182,192,272 in 2022. Remember, 2022 was the reassessment year, but the Assessor didn't have a valid reason to raise the market value other than knowing of a pending sale.
The problem with that is that pending sales can easily fall through. The Assessor is not supposed to "chase" the sale — especially when the sale hasn't closed and isn't finalized. Therefore, Fritz Kaegi used the public information from the sale, a sale price that was paid based on the future value of the property by the way and not current value, to raise the full market value.
From a tax standpoint, this property is assessed at 25% of the full market value, or $45,548,068. 2022 taxes are payable in 2023. The first installment tax bill is based on 55% of the prior year's (2021) value. However, if we estimate the total taxes owed for 2022 by using the 2021 tax rate, then we will see the 2022 taxes owed will be roughly $13,550,000. This is an increase of over $11.6 million in real estate property taxes owed or a 600% increase over the prior year. For what? A potential sale?
Can you now understand why the Chicago Bears would be upset? Can you understand why they are "looking" at other potential locations? Obviously, negotiating with other towns and cities is more than just due diligence by the Chicago Bears. This is a negotiating tactic. Kevin Warren and the McCaskeys are likely to want a TIF agreement of some kind or some other property tax incentive.
A TIF agreement stands for tax increment financing and is a tool that helps both local municipalities and private development. If you recall, the Chicago Bears had planned on fully funding their new $2 billion stadium but would need public funding to help with infrastructure and the rest of the entertainment project. A pre-development agreement was approved by the village last November that included seven options to help with funding the largest single development project in Illinois history.
Those options include tax increment financing, special service areas, special assessments, the creation of a business district and business district tax for the project, a parking tax at the project, and other taxes generated by the project. One other option could be payments in lieu of taxes. Essentially, a payment plan would be established and the Chicago Bears would make those payments in lieu of the taxes that would be owed based on the full market value set by the Cook County Assessor.
The thing is, both sides want an agreement to be made because it will benefit them both. Arlington Heights will see an influx of business investment and development while the Chicago Bears create one hell of an entertainment destination. Can you imagine the revenue?
It should be noted that the prior owners of the Arlington Park Racecourse filed a 2022 appeal with the Assessor. They were unsuccessful. An appeal is also pending at the Cook County Board of Review. Evidence was due in March and hearings look to have taken place in May. They should know any day now if the outcome of that appeal is successful or not. If not, then they can appeal again using the re-review process. Note: A settlement was reached lowering the value to $95 million for one year only.
The settlement at the Board of Review level can still be appealed further. They can file a lawsuit to the Circuit Court of Cook County or appeal to the Illinois Property Tax Appeal Board (PTAB). The problem with either of these judicial bodies is that it could take up to two years to finalize. Now, we have to wonder if the city of Chicago is pressuring the Cook County Assessor for these real estate property tax hikes. Was this the city's last-ditch attempt to keep the Chicago Bears in Chicago? You'd have to assume the Township and Village will fight to keep them in Arlington Heights.
Where do you think the Chicago Bears end up?