Under the analysis written by bond analyst Steve Willson published Wednesday, there has been a vibrant debate.
Let’s put it up where more people will see it.
Here is what Robert Williams said at one point:
Steve: The “alternative explanation” is that the Illinois real estate market IS recovering, which you’d know if you had spoken to any knowledgeable real estate brokers.
Real estate sales volume and prices have been rising for the past two years; we are still nowhere near pre-collapse values, which puts us in pretty much the same boat as THE REST OF THE COUNTRY.
Our property taxes are stratospheric because the bulk of SCHOOL DISTRICT funding comes from its community’s property taxes, to the tune of 73 percent of every tax dollar.
Yet, maintaining the quality of our schools is one of the reasons that real estate sales values rise in the first place.
And the sole redeeming feature of our obnoxiously high property tax bills is that WE CONTROL THEM.
The rates and levies and assessments are set by people we elect from our communities, and the tax dollars STAY in our communities, without being diverted to Springfield, Cook, and Chicago (as with our income tax). Want your property taxes to go down?
RUN FOR YOUR LOCAL SCHOOL BOARD and vote “no” to EVERY tax referendum on the ballot (including the ones that promise “No Rate Increase”)…
Naturally Willson replied:
To Robert Williams: You made two points.
- The first is that house prices here in McHenry County are recovering.
- The second is that our taxes are unusually high because McHenry County homeowners bear an unusually high portion of the total cost of our schools.
Let’s look at the facts, starting with house prices.
The S&P Case-Shiller National Home Price Index peaked in February 2006.
It bottomed in February 2012, down 34%.
Since then it has risen 35% and today is still 10% below its peak.
The Detroit index has risen 57% since it hit bottom and today is only 18% below its peak.
The Chicago index has risen 23% since it hit bottom and today is still 23% below its peak.
S&P does not publish a home price index for McHenry County, but the Illinois Association of Realtors tracks sales data.
According to their data, median single Family House prices peaked in McHenry County in 2006.
Then they dropped 48%.
Since the bottom in 2012, prices have risen 17% and today are still 39% below the peak.
So, not only are we doing worse than the nation as a whole, we’re even doing worse than Detroit!
We’re also doing worse than the average for the Chicago metropolitan area, and by a lot.
Now let’s examine school financing.
Leaving out Chicago, the average school district in Illinois receives 65% of its funding from local property taxes. (Source: ISBE)
As you noted, here in McHenry County, the average is 73%, so we are all of eight percentage points higher than the average.
That hardly accounts for our tax rate being twice the national average and among the top 1% in the entire nation.
And as I pointed out, school districts in McHenry County spend between $9,000 and $18,000 per pupil and yet their test scores and graduation rates are essentially identical, adjusted for demographic differences.
So clearly we could spend much less and still maintain quality schools.
I hope that this information satisfies you.
If I can be of further assistance, please let me know. And if you have a different “alternative explanation” or any other data that might rebut what I’ve said, please post it so we can all see it.
Thank you again Cal Skinner for posting articles on the blog that keep our property taxes issue in the forefront of people’s minds & replies.
Alot of people on this blog continuously post about the township & county board, when the biggest tax abusers in the county are the school districts.
Time for armchair critics to get off their butts & go to school district meeting & let them know they need to dial back the spending, big time !
Instead of replying to this comment, check to see when the next elementary & high school board meeting is & call some neighbors to go with you.
Whining, criticizum, & waiting for someone else to do something, isn’t going to create change or get the job done.
We are coming for you folks spending our tax dollars in the school districts too.
Way overdue for taxing groups to realize they can’t just keep levying the taxes they have & not belly up to the accountability bar.
Teacher unions are now recruiting candidates for next spring’s school board elections.
Anyone, have a net worth on Mikey Madigan And Cullerton?
whoops bad grammar there.
Steve: You won’t get any argument that SCHOOL TAXES in Illinois are out of control.
Our property taxes ARE obnoxiously high, approaching number one in the nation.
But where does Illinois fall in OVERALL tax burden relative to real estate recovery?
In other words, how do we compare to other states in terms of the cumulative tax load of income tax, property tax, and sales tax on the individual, vs. real estate market recovery?
Forbes says that since the sunset of the State’s onerous 2011 income tax rate increase, Illinois now ranks 38th out of 50 for OVERALL tax burden on the individual (in other words, we’re the THIRTEENTH highest in the country):
http://www.forbes.com/pictures/emeg45efhjf/no-38illinois/
Know who’s worse off than we are?
WISCONSIN with the nation’s FIFTH highest overall tax burden, and New York with the FIRST highest overall tax burden in the country.
Yet, current Wisconsin median home prices have recovered to the point that they are just -5% from their 2007 levels, current New York median home prices are UP by almost +13% from their 2007 levels, and Illinois lags at -18% from 2007 levels.
How can we explain this baffling paradox, given the “fact” that taxes are the primary driver of real estate values?
Could it be that OTHER factors are of equal or greater importance?
Factors like business climate, fixed and variable costs, job growth, availability of financing, state and local regulations, infrastructure, education, and state and local leadership? And that while taxes do have some impact on market values, these other factors are the REAL chokepoints that make or break a real estate market?
Discuss among yourselves…
To Robert Williams:
Thank for continuing this discussion. It’s important that ideas be disputed in order to make sure there are no errors. You are keeping me on my toes.
Let’s review what’s happened so far and then discuss your newest point.
Originally, I demonstrated that the difference between a 4.0% property tax rate and a 2.5% property tax rate on a $300,000 home was the equivalent of $60,000 to $100,000 in value.
My conclusion was that high taxes are the primary and differentiating cause of the slow recovery in house prices here in McHenry County, that having to pay thousands more in taxes every year here, in McHenry County, than elsewhere, is the main reason our home values have failed to recover.
You never argued that my calculations about value were incorrect.
I assume that by your silence you are conceding that point.
You then contended that McHenry County had recovered just like the rest of the nation.
I refuted that completely with numbers from the S&P Case-Shiller Index and the Illinois Association of Realtors.
You failed to respond.
I assume you are conceding that point.
Next you contended that property taxes in McHenry County were the result of an unusually high reliance on property taxes here.
I disputed that with proof that differential in reliance on property taxes is modest and by demonstrating that there is a tremendous variance in what school districts in McHenry County spend per pupil without a big difference in outcomes, proving there is much room to cut taxes for education.
It appears we are now in agreement on that point.
Now you wish to compare McHenry County with other states. Fair enough.
But your evidence is about “Illinois”, not about “McHenry County”.
Your conclusion would follow from your evidence only if the state were homogenous, if what was true for Illinois as a whole was true for McHenry County.
My whole contention is that McHenry County is unusual, even here in Illinois, for the level of its property taxation.
There are many drivers to real estate value.
Here in Crystal Lake, we have lots of positives: low crime, good schools, parks, etc.
It’s why I moved here.
So with all of those positives, why has McHenry County not recovered as much as other parts of the Chicago metropolitan area?
What is different here than elsewhere in Illinois?
Not the sales taxes.
Not the income tax.
Not “state leadership”.
What is the ONE THING that is different?
The property tax.
Were you aware that property taxes on homes in Chicago are about half of what we pay here in McHenry County?
That’s right: HALF.
As for cross-state comparisons, you are correct, we have to consider the total tax burden.
And you may be correct that the total tax burden in some parts of Illinois is lower than in other states, including Wisconsin.
However, once again, I’m not talking about the whole state, I’m talking about McHenry County.
The proper question is:
As it happens, I’ve actually researched that area extensively and my numbers show that the AVERAGE Crystal Lake homeowner could move to a nice suburb of Milwaukee and cut their total tax burden by $5,000.
You can find my numbers on this blog.
So, let’s summarize:
1) My original contention was that our higher-than-average property taxes are equal to $60,000 to $100,000 in value loss.
Uncontested.
2) You argued that McHenry County has recovered just as much as the rest of the nation.
Disproven.
We are worse than not only the nation as a whole, but even the rest of the Chicago metropolitan area.
3) You argued that the cause of our high taxes was an unusually high reliance on property taxes for the schools.
Disproven and conceded.
4) Your new argument that the total tax burden in Illinois is not higher than average.
I rejected that argument as a non sequitur because it assumes the situation here in McHenry County is the same as elsewhere in Illinois, which I have disproven.
I look forward to your further responses to my contentions, or new arguments.
Not that I disagree on property taxes being high, but I agree with Robert.
I’m not sure that property taxes are the culprit for the drag on the recovery in housing prices in McHenry County.
Property taxes have been high for quite some time, so if that’s the case, then why didn’t this keep housing prices down when they were surging higher before the economy collapsed.
There are many other factors that could have played a major role (business conditions etc…).
Haven’t there been a few manufacturing firms that have closed their doors over the past number of years in McHenry county?
Maybe a lack of job opportunities has also made a large impact.
Also, for people who work in the chicagoland area, home prices are much higher the closer you get to chicago (Barrington, Palatine, Arlington Heights etc…).
Even though the tax % might be a little lower there, it is based on a higher property value so you would still be paying a higher dollar amount and would have to pay more for a comparable property.
This article from the northwest herald states that 2/3 of the people living in McHenery County work outside of McHenry County.
http://www.nwherald.com/2013/02/14/residents-take-to-roads-rails/aga5alx/
So there must be some benefits to living in McHenry County over living in the areas where people work.
To YoungManSummer:
When I moved to McHenry County, property taxes were not much out of line. And the population in the nation, the state, and the suburbs were increasing rapidly.
Slowly, inexorably, taxes kept going up and up.
The situation was aggravated when the housing market crashed and yet certain local governments continued to increase property taxes by the maximum amount permitted by law.
Today property taxes are outrageously high.
And the demographics changed.
Like every other product, the price of housing is a function of supply and demand.
When demand was going up because population was growing, prices went up.
When demand flattened, price competition heated up.
As the total cost of housing in our area (cost plus taxes) was higher than elsewhere, our recovery was slower than average.
It took years for the taxes to become unreasonable and years for the tax increases to have their full effect on house prices because housing turns over slowly.
As for your comment about prices being higher closer to the City, you are correct; some people value the location enough to be willing to pay for it.
It is one of the factors that goes into a decision about where to buy.
But, again, that wouldn’t explain why McHenry County has recovered more slowly than other areas of Chicago because distance hasn’t changed over time.
Taxes, however, have.
Here are specific data to refute vague general assertions defending McHenry County obscenely high property taxes as inconsequential, or positing that Illinois total tax burden is somewhat mild in comparison to other States.
http://www.fool.com/investing/general/2016/04/03/residents-in-these-8-states-are-getting-creamed-by.aspx
Residents in These 8 States Are Getting Creamed by State and Local Taxes, Study Shows — The Motley Fool
Residents in These 8 States Are Getting Creamed by State and Local Taxes, Study Shows
The report compares state and local tax paid in comparison to national average.
Citing data compiled by Wallethub, 8 highest tax burden states are listed below, with the percentage figure representing the percent that burden is above national average.
The analysis included state and local taxes (property, income, sales and excise and vehicle property taxes).
Model assumptions: average American household had a median annual income of $53,889, owned a home valued at $175,700, and owned a car valued at $23000
Source: WalletHub
Here are the top tax burden states:
Illinois: $7,836 paid in annual state and local tax returns (35.8%)
Nebraska: $7,466 (29.4%)
Wisconsin: $7,316 (26.8%)
Connecticut: $7,262 (25.9%)
Rhode Island: $7,255 (25.8%)
New York: $7,211 (25%)
Michigan: $7,054 (22.3%)
Ohio: $6,991 (21.2%)
( Compare to national average of approximately $5,770 paid by the median U.S. household.)
Note that this report used the lower state average property tax rate rather than McHenry County unique 4% property tax rate.
This property tax disparity would raise the property tax burden another +\- $3000, making the total state and local tax burden for McHenry County residents fitting that model around $11,000 annually.
That comprises a 20% state and local tax burden on median income households.
That isn’t a matter for academic discussion, that is a struggle for survival.
Here is an academic study which strongly suggests property higher than average property tax rate is negative correlation to home values
http://www2.census.gov/ces/wp/2013/CES-WP-13-04.pdf
Furthermore, a very specific and not at all subjective factor:
When a home goes up for sale, an average community can count on an average pool of buyers able to qualify for a conventional mortgage.
In Woodstock Il, with a 4.6% property tax rate, a median income earning household cannot qualify for a conventional mortgage, solely and only due to the property tax payment being 300% of national average on a similar priced home.
(Conventional mortgage requires no more than 30% of household income be paid on principal, interest, home insurance, and Property Taxes.)
Median income earners being disqualified as potential buyers literally cuts demand in half.
Susan, Im not arguing that property taxes are inconsequential.
Im debating the claim that they are the entire reason for the under-performance of property values in McHenry County.
Im also not debating whether or not property taxes are high in McHenry County, they are.
We obviously know that property taxes are high in Illinois in general as well.
Steve points to how property taxes were growing for a long period of time in McHenry County.
Housing prices were also growing for a long time period and saw a substantial amount of appreciation in the few years before the housing bubble.
The positive change in housing prices and positive change in property taxes would be a positive correlation.
Also, following the collapse people had an option to appeal their property taxes based on a lower property value.
So if the dollar amount of taxes paid was higher for many prior to the housing bubble, why wasnt this a drag on housing prices throughout the early 2000’s?
I would argue that there are also possibly other factors that have had an impact on the under-performance of McHenry County property values throughout the recovery.
Even the study you referenced discusses the difficulty in understanding the relationship between property taxes and housing values.
Regarding your example of someone buying a home in Woodstock, a mortgage payment would be even higher for a comparable home in most other nearby counties.
Property values in nearby cities like Barrinton, Palatine, Arlington Heights and Chicago are much higher.
You are speaking in generalities, ignoring the specifics of Steve Wilson’s analysis.
The questions you raise about relative tax rates and relative properly values are answered in his first post on this topic and again in this post.
As for mortgage payments, you are comparing apples to trolley cars.
My assertion was that on a median value home, a median income household could not qualify for the conventional mortgage, due to the additional property tax required here.
Put the two together and here is what you get:
potential home buyers are faced with a choice of where to purchase.
They can buy anywhere else,or here.
Here they will be making a major investment in an asset that will depreciate relative to having made that investment elsewhere.
Also, they will be paying thousands of dollars more per year (a significant percentage of most household incomes) for the privilege of owning this negative store of value.
Are there any offsetting benefits to mitigate the poor investment quality and much higher than average cost of living here?
No.
The social service provision quality does not correlate to the extraordinary higher costs and downward value pressure.
What facts of Steve Wilson’s are you referring to?
Most of what I have read has been in generalities and hypothetical scenarios.
I didn’t see a scatterplot of changes in housing prices in McHenry County vs changes in property taxes.
My point is that the claim here that the housing under-performance in McHenry County is all due to property taxes may not be the entire case.
As we have discussed, property values prior to the collapse were rising along with property taxes.
That would indicate a positive relationship.
Im asking why this wasn’t a drag on housing prices before as it supposedly is now according to your theory.
How am I comparing apples to trolley cars?
When people budget for a mortgage, they are looking at the total amount of the payment.
As you pointed to earlier taxes,principal,interest and mortgage insurance.
So if someone is looking to buy a home somewhere, they arent going to find a cheaper payment looking in Barrington, Palatine, Arlington Heights etc. for a comparable home.
The lower tax rate will be more than offset by the higher value of the home.
Also, that tax payment would now be based on a higher property value.
I did see Steve’s information regarding the difference in payment based on taxes in Mchenry County vs 2.5%.
Most of the surrounding counties may have a slightly lower tax rate, but property values are higher, so you aren’t going to have a lower mortgage payment.
Also, the higher value of those properties will most likely offset the percentage difference in tax rates.
You are speculating on what will happen in the future by saying that the asset will be deprecating vs buying somewhere else.
Read the data on Steve Wilson’s first post.
That will clear up your misconception about relative performance in mchenry county vs. the rest of America.
As you surely know, rising values which underperform other rising values are net losers, as purchasing power is destroyed
As you do not present evidence to support your theory that extraordinary high property tax rates are NOT capitalized into home values, we can define your position as speculation.
The plummeting EAV in Woodstock over the past ten years, most notably in the past five years, and comparing to a rising trend across the nation, indicates that home value depreciation relative to everywhere else will continue.
Finally, please address the specific scenario described as to the disqualification of half the population of potential buyers of median value homes due to median household income bring insufficient to pay property taxes.
I never made any claims on McHenry County vs the rest of America.
I am discussing McHenry County vs surrounding areas.
I am also not saying that property taxes have no impact on home values.
I have stated that there may be other factors that also have an impact, such as less job opportunities due to manufacturing firms closing their doors etc…
Even the study you referenced discusses the difficulty in understanding the relationship between property taxes and housing values.
You are speculating on future values.
Trends do reverse.
Regarding your example, my point is that people aren’t going to be able to find a cheaper mortgage payment in other nearby areas due to more expensive housing.
Steve made a comment above on people paying for a preference on where to live.
And then said that wouldn’t explain why McHenry County has recovered more slowly than other areas of Chicago because distance hasn’t changed over time.
Taxes, however, have. I am saying that McHenry County under-performing other areas may be do to other reasons as well, because even though other surrounding areas have a lower property tax %, the the value you have to pay for a home is much higher.
Paying taxes on a higher amount could potentially offset any difference in the rate.
To YoungManSummer:
I believe in making decisions based on the preponderance of the evidence.
I think you probably do, too.
And when I argue that taxes are the overwhelming cause of the housing price differential between McHenry County and other areas, I do so because the evidence leads me there, not because I have a particular axe to grind.
And the evidence is strong.
We DO have a major price differential, it HAS persisted for years, and the BIGGEST and most obvious difference between McHenry County and other areas is… the property tax differential.
So that seems to be the most logical answer.
Further, the idea that the price difference is caused by the property tax differential is consistent with basic economic principles, especially those of supply and demand, and opportunity cost.
And the estimates I derived are consistent with where prices ought to be IF house prices had fully recovered and IF taxes were similar, which provides further evidence.
Beyond that, as Susan referenced, there is a body of economic research on this specific topic that demonstrates, and I quote from one of the studies, “rates of property tax capitalization are near 100%”.
In other words, the literature, unsurprisingly, validates the basic economic principles.
It says people, on average, logically take account of property tax differentials in pricing houses.
I would suggest, therefore, that if you want to argue there are other SIGNIFICANT causes for our persistent low house prices, then it is incumbent upon you to
(a) explain why basic economic principles do NOT apply in this situation,
(b) refute the evidence presented,
(c) posit an alternate explanation, and
(d) provide evidence for the alternate explanation.
Respectfully, so far neither you nor Robert Williams have done that. T
he alternate explanations have consisted of,
I mean that last, by the way: “respectfully”. I believe you’re arguing in good faith, YoungManSummer.
And your tone has been reasonable, which I appreciate.
That’s not always the case on this blog.
So when I dispute with you, please believe that I do so for the purpose of seeking the best answer.
If you have data that you would like to put forward, or counters to the arguments I have made, I will listen, evaluate and respond.
Thank you.
What you have failed to account for is explained in your assumption that the lower priced homes will retain their purchase price value.
In the past five years in Woodstock, EAV has continued to fall sharply while the rest of America ( and the area within Illinois where tax rates are below 3% such as Cook County Chicago at around 2.3% tax rate on residential property) have enjoyed rebounding home values.
As you know, price inflation on all things occurs year after year, the natural trend of home prices should be upward just to track normal price inflation.
That makes the situation all the more gruesome for Woodstock residents who cannot afford $4000 taxes on a $100,000 home…and the home was $175,000 when they bought it.
Where can they go?
Home price inflation has made the conversion factor negative for these residents: must sell in the hole and buy high elsewhere.
Who can afford that?
There are fewer qualified buyers for homes, due to the 30% of income maximum being breeched by anomalously high tax rates.
Few buyers, less demand, no support for prices of homes.
The foreclosed homes in Woodstock have been bought up by rental property investors.
There is anti-incentive for such owners to fix up such properties, in that the lower the value the lower nominal tax they must pay.
So the argument that buying a lower priced home in a higher tax rate area somehow evens out does not hold up, when factoring in the tens of thousands of dollars in home equity lost each year.
Steve, I am not arguing the economic theory based on supply and demand.
I understand that at some point as property taxes continue higher people will look to move elsewhere.
This would result in lower demand and driving supply higher.
However, if you look at surrounding areas where are people to go?
The analysis you laid out shows that someone in a lower tax area can afford a higher value home and have the same mortgage payment.
However, my point is that the difference in value vs surrounding areas would offset the rate differential.
For example, the below link shows the median priced home sold in Arlington Heights was $282,500 vs $185,000 for crystal lake.
Another link shows property taxes rates at 2.69% for Arlington Heights vs 4.11% for Crystal Lake.
http://www.trulia.com/real_estate/Crystal_Lake-Illinois/
http://www.trulia.com/real_estate/Arlington_Heights-Illinois/
http://www.chicagotribune.com/ct-compare-your-property-tax-rate-database-20151111-htmlstory.html
Tax payments would result in $7,599 for Arlington Heights vs $7,603 in Crystal Lake based on those values.
The dollar amount you would have to pay would be pretty much the same but your overall mortgage payment is going to be higher due to the higher value of the home.
So, if you are going to be paying a higher overall mortgage payment in surrounding areas, why would that explain Mchenry counties underperformance vs surrounding areas.
I know this is one example, but my point is you are not going to have a cheaper mortgage payment moving somewhere else.
If it was such a better deal to live in one of the surrounding areas, then why are 2/3 of the people living in Mchenry choosing to live here and not where they work?
Also, for those that do live and work in Mchenry County, don’t you think business conditions may also have had an impact related to economic theory.
More job opportunities leading to more people looking to move here driving up demand vs businesses closing their doors resulting in people seeking to move elsewhere driving up supply.
Silgan plastics and Modine have both closed their doors as an example.
This would result in receiving less tax revenues from businesses.
The analysis you provided shows how one can afford a higher property value in a lower tax area.
I don’t see how your example proves there is a relationship with housing value appreciation.
For example, let’s say two places start at the same tax rate at 3% and have the same property value at $100,000.
Due to economic variables in city A, housing prices appreciate by 20% compared to city B where property values stayed flat.
So now property A is worth $120,000 and property B is still worth $100,000.
If the dollar amount of taxes you have to pay remains the same at $3,000 because both places decide against raising taxes, then city A property tax rate is now at 2.5% vs city B which remains at 3%.
You wouldn’t be able to look back and say due to property tax rates, this is where city B should be because of where current tax rates are in city A.
My point is there may be many other variables also having an impact.
Steve: AH-HAH!
There it is.
I thought you were referring to ILLINOIS in general, not McHenry County alone.
However, you need to remember that McHenry County’s real estate market suffers from one problem your analysis does not mention:
Unfunded and underfunded mandates from state legislation drive a lot of local property tax spending.
Example #1 being the biggest fiscal problem in Illinois, pensions.
Local property tax dollars fund IMRF, downstate police, and downstate fire pensions in McHenry County.
————
Locally elected boards and trustees have to follow state collective bargaining law.
Collective bargaining law is where public sector pay hikes originate.
The salaries and benefits is generally the #1 expenditure in government (the McHenry County Conservation District is an exception as they have purchased a lot of land by issuing bonds).
————
There are many other examples.
Local control by taxpayers is pretty much a myth riddled with holes.
It’s a rigged game right now.
Most of the local control is by state legislators, public sector unions including union lobbyists and leaders, and administrators.
And a lot of what occurs is not transparent.
For instance in collective bargaining, the public sector unions have a change document, the administration / board has a changed document, but no change document is issued to taxpayers.
The Illinois General Assembly, with all its problems, at least provides the public with legislative changes clearly marked with underline for additions and strikethrough for deletions.
There is no such document issued to the public for collective bargaining agreements.
So it’s impossible for the public to understand all the changes from one collective bargaining agreement to another.
That’s just one of many examples.
The taxpayers are being kept in the dark on purpose.
To Robert: I enjoy your sense of humor.
So any state legislator that claims they are for transparency, lower taxes, and local control would sponsor a bill that:
1. Every single collective bargaining agreement (cba) in the state is posted on a central website.
2. The website would be indexed and organized in a way it’s easy to locate any particular cba, be it a state agency, county, local, etc.
3. The cba would include the base agreement plus any appendixes, salary schedules, stipend schedules, salary schedules with TRS if applicable (school districts), salary schedules without TRS, addendums, memorandums of understanding, letters of agreement, side letters, riders, and any changes, additions, and deletions.
4. In addition to the cba, a change document would be issued for each cba. The change document clearly marks changes from the previous agreement, for instance, following the ILGA syntax, underline for additions, strikethrough for deletions.
5. All cba’s would be indefinitely archived, no deletions allowed.
Does Jack Franks call that union busting too?
So who is going to some light on the collective bargaining black hole.
If pensions benefits & retiree healthcare benefits had been frozen since the pension sentence was added to the Illinois Constitution on December 15, 1970.
If collective bargaining agreements had been transparent as listed above since December 15, 1970.
Then perhaps, maybe, all pensions could be paid in full.
That didn’t happen, so it’s not possible to pay the hiked pensions at reasonable tax and service levels.
As it is, the pension sentence should be repealed in its entirety via constitutional amendment; then pension & retiree healthcare benefit hikes can be scaled back.
And the above collective bargaining reforms should be enacted.
Then maybe we have a shot at reasonable property taxes and other taxes.
As it is, there’s little to no talk of such reforms; instead they legislators are nibbling at the fringes with more minor reforms that won’t result in sustainable pensions or taxes; so exactly how are we supposed to have have reasonable property taxes or any other tax in Illinois.
Who in the right-mind would want to live here?
Those deriving insider-only benefit from the higher-than -average diversion of public funds to the exclusive benefit of privileged insiders.
Steve, I am not arguing the economic theory based on supply and demand.
I understand that at some point as property taxes continue higher people will look to move elsewhere.
This would result in lower demand and driving supply higher.
However, if you look at surrounding areas where are people to go?
The analysis you laid out shows that someone in a lower tax area can afford a higher value home and have the same mortgage payment.
However, my point is that the difference in value vs surrounding areas would offset the rate differential.
For example, the below link shows the median priced home sold in Arlington Heights was $282,500 vs $185,000 for crystal lake.
Another link shows property taxes rates at 2.69% for Arlington Heights vs 4.11% for Crystal Lake.
http://www.trulia.com/real_estate/Crystal_Lake-Illinois/
http://www.trulia.com/real_estate/Arlington_Heights-Illinois/
http://www.chicagotribune.com/ct-compare-your-property-tax-rate-database-20151111-htmlstory.html
Tax payments would result in $7,599 for Arlington Heights vs $7,603 in Crystal Lake based on those values.
The dollar amount you would have to pay would be pretty much the same but your overall mortgage payment is going to be higher due to the higher value of the home.
So, if you are going to be paying a higher overall mortgage payment in surrounding areas, why would that explain Mchenry counties underperformance vs surrounding areas.
I know this is one example, but my point is you are not going to have a cheaper mortgage payment moving somewhere else.
If it was such a better deal to live in one of the surrounding areas, then why are 2/3 of the people living in Mchenry choosing to live here and not where they work?
Also, for those that do live and work in Mchenry County, don’t you think business conditions may also have had an impact related to economic theory.
More job opportunities leading to more people looking to move here driving up demand vs businesses closing their doors resulting in people seeking to move elsewhere driving up supply.
Silgan plastics and Modine have both closed their doors as an example.
This would result in receiving less tax revenues from businesses.
The analysis you provided shows how one can afford a higher property value in a lower tax area.
I don’t see how your example proves there is a relationship with housing value appreciation.
For example, let’s say two places start at the same tax rate at 3% and have the same property value at $100,000.
Due to economic variables in city A, housing prices appreciate by 20% compared to city B where property values stayed flat. So now property A is worth $120,000 and property B is still worth $100,000.
If the dollar amount of taxes you have to pay remains the same at $3,000 because both places decide against raising taxes, then city A property tax rate is now at 2.5% vs city B which remains at 3%.
You wouldn’t be able to look back and say due to property tax rates, this is where city B should be because of where current tax rates are in city A.
My point is there may be many other variables also having an impact.
I do not follow the logic of how one can afford a higher tax rate on a depreciating asset.
Situation AH vs. CL represents a snapshot in time without regard for how the price disparity came about, or the steepening curve of tax rate rise to come.
In year one of ownership the homes are $282,500 v $185,000
As CL capitalizes the negative value of a tax rate above American Midwestern norms, home equity is lost at a more rapid rate than AH which is only slightly above norm.
So tax rate trend will be to rise in the higher tax rate location.
Year two the AH home value may be up slightly due to normal overall inflation while the CL home capitalizes the full 1.42% tax rate and loses $2627 in actual value.
Now, as you noticed, businesses close.
You must concede that to a business, enormous property tax rate disparities would be a driver in location decisions?
The taxable EAV is driven down by commercial and industrial property devaluation.
Commercial and industrial properties can and do seek tax abatements or threaten to leave or close up shop.
Additionally, new businesses are offered TIF money/Enterprise Zone property tax holidays and tax abatements.
On the residential side, foreclosed properties bought at huge discounts by rental property investors aggressively seek lowered assessment.
Taxable EAV plummets, and the tax burden falls more and more on homeowners unable to gain small annual lowered assessment re-evaluations.
Now you have community of homeowners with falling property values and rising nominal tax payments.
These homeowners are trapped:
All the variables that you mention show up as reflected in the tax rate and affecting the tax rate.
In your second scenario, what do you project for years 2, 5, and going forward?
Whatever caused the rise in City A means that demand for housing must be higher there that city B, no?
So then, what would induce the purchase of city B homes over city A homes?
In city B, What if homeowner needs to move?
Won’t The scarcity of buyers relative to City A exacerbate the downward pressure on city B home prices?
Remember, now you are asking potential buyers to pay 3% on a lower value property…the extra half point tax is not going toward a store of value ( home equity), it is going to pay for services no better than City A services which cost the same nominal amount.
Your models only factor in one year in the life of a depreciating asset relative to normal home appreciation elsewhere.
That would suggest that safety of investment in a home here relies on ignorance of potential buyers to the anomalous tax rate and its negative effect on home values going forward.
Susan, the point of the example was regarding Steve’s scenario he provided.
He showed that one can afford a higher valued home when then pay a lower tax rate.
I was illustrating that you cant just look back and say due to property tax rates, this is where city B should be because of where current tax rates are in city A.
In my example, lets say a big company came into city A (google etc..) and had a bunch of job openings.
So yes, increasing demand for housing.
People wanted to work there and started buying homes driving up the price.
This would also lead to a increase in the cost of commercial property as well.
As I was saying, after the prices appreciated city A had a lower tax rate.
However, the dollar amount of taxes paid is the exact same.
So, if things continue in city A and houses keep appreciating eventually you will shrink the amount of people able to afford a home based on the overall mortgage payment. What are people to do that cant afford that mortgage payment and cant get a loan?
They can look to move to a surrounding area where home prices are cheaper such as city B.
They will be paying the same dollar amount in taxes but will have a lower overall mortgage payment.
This would then create demand for housing in city B raising home prices.
Now if the tax level was to remain the same, the tax rate would fall as the deliminator(housing values)increase.
Also, I thought Steve pointed out that housing has recovered in Mchenry County (appreciating) just at a lesser extent than surrounding areas and the nation as a whole.
Your opinion seems to be that housing values in McHenry County will be a depreciating asset due to the higher tax rate.
If this is so, why are the investors buying homes?
They must be expecting some sort of return on their investment.
If it was such a better deal to live in one of the surrounding areas, then why are 2/3 of the people living in McHenry choosing to live here and not where they work?
Im not arguing that taxes are not high in McHenry County.
I am just saying there may be many other variables affecting home prices as well.
That should say denominator*
1. Google wont come to Woodstock at 4.6% property tax rate. Google will demand TIF money, and tax abatements.
This will drive tax rate higher as increasing demand for social service provision (school, fire&rescue, police, etc) drive levy higher.
Google workers, not being ignorant of the negative capitalization effect of 4.6% property tax rate, will seek higher-end home purchase elsewhere.
Or, Google will build housing on-campus for workers and these residences will not share in property tax burden as they are in a TIF or Enterprise Zone or whatever other insider advantage they are accorded.
2. Examine your own argument.
You are not contending that people get homes at a bargain value, just lower priced homes (old, deteriorated, and over assessed relative to the foreclosure-purchased-rental-investment-properties).
You are populating City B with struggling households who can barely afford the mortgage payment year one.
Year two, as levy increases (and believe me my friend, increase it does)the nominal tax increases.
Other non-Google businesses threaten to leave without tax breaks.
EAV drops (not because home value assessments at large have caught up with reality, but because businesses and large scale residential rental real estate investors have the means to appeal and win lowered assessments).
Tax rate rises.
3. People are TRAPPED here, due to the home value loss (or diminished appreciation relative to other areas, which destroys conversion value–home in city A cannot be converted to home in city B except for a huge additional, UN-affordable cost input).
4. what you are describing, and this is happening in WOODSTOCK, IS THE CREATION OF A SLUM.
Homes values will be devastated to the point that blocks can be bought up cheap and finally re-gentrified, years from now.
Is this what you are advocating?
The people who remain in Woodstock who are not trapped are public workers, with public guaranteed pensions, COLA 3% or higher.
10% of Woodstock D200 tax base is directly employed by or receives public money contracts from school district.
If you look at BLS reports published frequently, you will see the amount of mean or median household income typically allocated to pay property tax.
In America it averages below 4%
In Woodstock, for median income households living in median value homes, it exceeds 12% of household income.
Surely you can see the effect this has on discretionary spending, and savings for college education of children or personal retirement?
Those who are not lucky enough to have public employment with multi million-dollar present value pension guarantees (that is the 90%—and there are strong indications that public jobs are awarded with a bias toward nepotism and patronage.
See Miller family and County Clerk husband as reference) MUST save for their own retirements.
So excessive property tax payments are like burned up dollar bills each year.
Worse, they are like erosion factors on any residual home value.
They are like exploding burning dollar bills, money that could be spent or saved for personal storage of value instead become corrosive payments which steal both spending and saving ability, and burn through home value.
Susan, you are twisting around my argument.
The point is as properties become more and more expensive eventually people are not going to buy there and look somewhere else.
Commercial too.
My point was that in City A, it will not only be people who cant afford homes but people looking for a better value.
Prices are not going to appreciate into infinity.
Eventually, people will look to move to a surrounding area.
This could possibly explain the 2/3 of people living in McHenry County who do not work here.
You are now bringing in further assumptions with the demand for social service provision.
Where did I say people are buying old and deteriorated homes?
You can definitely buy comparable homes in McHenry County to other surrounding areas.
People have the option to pay the same dollar amount in taxes, but can now buy a lower priced comparable home and have a lower overall mortgage payment for an equivalent home.
People budget based on their overall mortgage payment as you pointed to before taxes, principal, interest and insurance.
“Is this what you are advocating?”
Again, you are completely twisting around what we are taking about here.
I am not arguing that taxes arent high.
You and Steve are arguing that the entire underperformance in McHerny couny compared to surrounding areas is due to the difference in tax rates.
The paper you provided even discusses the difficultly in understating the relationship between property taxes and home values but now wee are going to contribute the entire underperformance to this factor?
Do you really believe that business conditions in McHerny County are the same as surrounding areas and that manufacturing firms closing in the county etc have not also had an impact?
Such as Silgan Plastics closing its doors in Woodstock.
Do you really believe the only difference between McHenry County and surrounding areas is the tax rate?
That is a pretty major assumption.
You have yet to present evidence that relative extraordinary high property tax rates are NOT the cause of relative home price value deterioration in Woodstock or McHenry County.
You have evaded directly answering specific questions with specific answers.
I am beginning to doubt the intellectual honesty of your motives.
What is it you project for the future property values of CL vs. AH, and why?
Your arguments consistently fail to address plight of the home buyer who bought years ago,or the plight of current home buyers who face similar value destruction coupled with rising taxes in the future.
One of the single biggest things McHenry County residents in the 63rd Representative District can do to lower property taxes is to vote Jack Franks out of office and thus make Michael Madigan sweat a little more.
We are not arguing over that, we are arguing over tax rates being the entire reason for the underperformance of McHenry County vs surrounding areas.
But who knows, maybe taxes will decrease and/or the trend reverses and appreciation in McHenry County begins to outperform. The spread most likely won’t widen forever.
The intellectual honesty of my motives.
Are you serious?
I have no agenda here.
You have not provided evidence that tax rates are the entire reason for McHenry County underperformance.
Do you not think business conditions have an impact, which we have already discussed?
“What is it you project for the future property values of CL vs. AH, and why?”
We have already discussed this.
My point was that Arlington Heights home values aren’t going to appreciate into infinity vs surrounding areas.
People are eventually going to seek value elsewhere.
1. As we discussed already,business conditions and property tax rates are inextricably linked.
Businesses suffer when tax rates are far higher than elsewhere (where competition might locate and enjoy lower overhead).
Then businesses will demand tax abatement and TIF money.
This reduction of EAV causes tax rates to spiral higher.
Your failure to address the years before and years after effects of high tax rates on homeowners renders your argument irrelevant.
Nobody buys a house for one year.
And you again fail to provide logical bases for a downward price bias to reverse.
We have already discussed the destruction of buying power of homeowners whose property values fail to keep up with normal inflation.
Let’s assume that your argument is correct and that property tax rate has no bearing on home values.
Taken to the extreme, this suggests that homes could be given away for free to those willing to pay the property tax amount in any given year.
Now let us model a community with a current ratio of teachers, government workers, doctors, nurses, retirees, etcetera.
Year one.
Let us assume the normal 33% of household income is paid to property tax, but with no regard for building equity interest.
The house was free, and will be free to the next “owner”.
Year two.
Inflation has occurred in similar percentages to the past decade: healthcare insurance premiums far exceeded inflation, and Doctor/nurse/ retiree income has stagnated.
Government employees household income is same: retirement contributions are paid for them through public taxes and guaranteed for life with a 3% COLA.
Healthcare insurance premiums are paid for them by public tax money and guaranteed for life.
Doctors and nurse, however, must pay their own health insurance premiums ( for inferior coverage, with no lifetime guarantee) and must fund their own retirement savings, entirely at risk of interest rates and market performance.
Not too many years must pass before the non-public employees will not be able to afford to pay 33% of household income in your property tax.
Do you see why?
What started in year one as 8% of household income ( according to BLS) for healthcare has ballooned to 12%.
Retirement savings requirements have ballooned with normal inflation while salaries have not.
Fixed income retirees won’t last long at all in this environment demanding a fixed 33% of household income, while OTHER percentage of household income demands grow to exceed 67%.
What happens then?
Well, the doctors and nurses and retirees must move out.
Who will take over their “free” homes?
The total taxation revenue can only support so many government employees.
Unless your town retains 100% population paying those gigantic tax payments, the rate will go up, right?
Fewer people splitting the same tax burden?
The same thing would apply to commercial property Susan.
It is going to cost much more for commercial properties in surrounding areas (Arlington Heights, Chicago, etc…) and the dollar value of the taxes is going to be the same or higher due to a much higher property value.
This would result in a overall higher amount of overhead.
“Your failure to address the years before and years after effects of high tax rates on homeowners renders your argument irrelevant. Nobody buys a house for one year.”
You completely missed the point of the argument.
That was not what was being argued and we already discussed this.
“And you again fail to provide logical bases for a downward price bias to reverse.”
I have already discussed this multiple times.
You have failed to answer many of my questions.
Business conditions having on impact on property values.
Why 2/3 of people in McHenry County are choosing to live here when they work in other areas if you are going to get such a better deal in other areas.
I am done debating with you Susan.
I am not going to interact with someone who is trying to question my integrity or “intellectual motives” and twist around my arguments to fit there narrative.
I have nothing but good intentions here.
To YoungManSummer:
Once again, I appreciate your willingness to pursue the discussion, and I believe you are defending your position in good faith.
Let’s stop and examine this discussion so far objectively.
I put forward the following proposition:
This hardly seemed contentious to me.
It assumes that most buyers are rational enough to consider taxes when they buy a house.
Even if most buyers were not rational, we know that loan officers take account of taxes in determining the maximum amount of mortgage payment that a borrower can afford, so there is a systemic procedure that enforces such consideration.
I calculated the expected price difference that would be expected if this proposition were true.
The amount was very close to what would have been expected.
I pointed out that my argument was based on well established economic principles.
When you asked for statistical evidence, I pointed you in the direction of academic studies that show 100% of the value of the property tax differential is incorporated in housing prices — 100%!
Then, and excuse me for saying this, but after asking me for statistical evidence, bluntly, you cherry picked one example that really didn’t fully support your point.
How about if we leave it at this:
Rather than arguing over the exact amount, let’s agree that the overwhelming preponderance of the evidence indicates the most significant cause is our higher than average property taxes.
The good news is, this is a factor we can affect.
As you may know, I have started an organization called the McHenry County Good Government Association.
I intend to seek people to run for local office who will pledge to cut property taxes by 2½% per year until the aggregate property taxes here in the County equal 2½% of market value.
If local governments do this, then, by my calculations, in ten to twelve years, we should reach our goal.
Let’s be clear:
And since property taxes actually account for much less than 100% of the revenues of every single government in the County, what I’m REALLY asking for is total cuts of less that 2½%.
The schools should be able to achieve these cuts without laying off a single tenured teacher, nor would I ask them to do so.
Most people think the problem with the schools is teacher salaries.
In fact, the vast majority of school budgets go for things other than teachers’ salaries.
And there is tremendous variance among the school districts right here in McHenry County on what is spent on everything BUT teachers — especially what is spent on administration.
Does my plan mean our schools will fail and our children grow up illiterate?
Hardly!
Some school districts right here in McHenry County get by just fine spending $9,000 per pupil per year.
Others spend $18,000 or more.
Yet test scores are highly similar, especially when adjusted for demographic factors.
Clearly there is room to cut.
In fact, all the school districts but one — the lowest cost school district — should be able to make major cuts without affecting service.
In fact, the onus should be on the school districts to explain why they spend more than the most efficient local school district.
But all I’m asking for is a 2½% reduction in the property tax levy each year until we reach parity.
Remember that the school districts here all raised taxes by the maximum amount permitted by law year after year even as enrollment declined.
Average class size has shrunk far below what it was just a few years ago, so what was good a few years ago should be good again.
Most of them have built up huge fund balances, far beyond any justifiable need.
In short, they have over-taxed, and it’s time that they stopped that practice.
I have one final suggestion that will seem absolutely radical to anyone in government, but is standard in business:
Imagine that:
As we discussed with AH /CL comparison, there is evidence and logic supporting the continued outperformance of the lower tax rate community.
And as you fail to address the question, I assume you are agreeing that the destruction of property value to slum levels is not a problem.
Please make me understand how overpaying an annual tax (cost of carry) on an investment which is diminishing in real dollar value is equivalent to paying a similar annual tax on an investment that is rising in value or at least keeping up with inflation?
I really want to understand, and I just don’t see the logic.
Can you explain it some other way that I can understand?
Just answer this:
Is 10% acceptable? 25%? 50%?
Free homes with no limit as to how much the tax bill might be next year?
“I assume you are agreeing that the destruction of property value to slum levels is not a problem.”
Give me a break Susan.
Stop trying to twist everything I have laid out for you. I have already discussed this.
Steve I appreciate everything you have laid out above.
As I said before, I was arguing the statement that tax rates were the entire reason for the underperformance vs other areas.
“I calculated the expected price difference that would be expected if this proposition were true. The amount was very close to what would have been expected.”
I know the Arlington Heights example is just one, but I think we are in agreement that property values in surrounding areas are much higher.
I pointed out in the Arlington Heights example that the amount of tax dollars are going to be the same and your overall mortgage payment is then going to be higher due to the higher property value.
Also, the point of the city a vs city b example is that you cant just look back and say that property values in one city should be where there are in another simply due to the lower current tax rate in the other.
Your example just shows that one can afford a higher property value in a county with a lower tax rate and have the same mortgage payment.
My point was that in many of the surrounding areas the price differential is going to be enough to offset the difference in tax rate and you are going end up with a higher overall mortgage payment.
Again, why are 2/3 of people choosing to live in McHenry county when they work in another if it supposedly such a better deal in surrounding areas?
I agree that the higher and higher taxes are they are going to at some point reduce demand for housing.
My argument is not about taxes being high.
I agree that they are and would obviously be happy to pay less in taxes.
“Please make me understand how overpaying an annual tax (cost of carry) on an investment which is diminishing in real dollar value is equivalent to paying a similar annual tax on an investment that is rising in value or at least keeping up with inflation?”
Hindsight bias here.
One would not know they are buying a deprecating asset.
Again, why are investors buying properties as you pointed out.
They obviously wouldn’t be if they are expecting it to depreciate.
I apologize for questioning your motives, but I was chafing at a seeming lack of empathy for the many people I know suffering greatly as home values have been devastated and tax burdens have grown inexorably higher — to amounts so high that people are in disbelief when told–over the past ten years.
This goes to your question ‘why do people stay here’?
Many are stuck.
I’ve described that at length earlier.
Businesses in Woodstock are given many tax breaks in response to threats ( or other factors, who knows) so the EAV is that much lower, the tax burden spread over fewer and fewer homeowners.
Businesses coming here will NOT drive down tax rates because they will not contribute property taxes to the taxing bodies.
Your arguments all seem to come from a base of knowledge and experience of an area that has tax rates Within Normal Ranges.
Mine are based upon personal experience and extensive research of an area with property tax far in excess of WNR.
I’m telling you that once the normal tax range boundaries are breached, economics and property values don’t behave the same way.
Commercial property receiving special abatement and tif money cannot be used in comparison to old tired out of favor commercial areas, and residential is in its own private hell as the path of least resistance for extraction of public funding.
Rental property investors are buying homes below $100,000 and renting out above $1000/ month.
You CAN look at the history of relative underperformance Steve provided and acknowledge the correlation.
You only showed the same mortgage payment in year one.
The mortgage payment has risen here and risen as taxes keep going up.
Your model isn’t realistic.
I agree with you Susan.
I feel bad for them as well.
I am just saying that the other terrible thing about it is that housing outside of McHenry county is even more expensive.
And I agree, many are stuck.
As for why would one maybe look at investing in housing.
In 2008, one shouldn’t have looked at the stock market and said why I am buying depreciating assets.
I should sell everything.
Just as right now, one should not be saying, ok, coast is clear, lets start buying equities again because they are outperforming inflation.
“You only showed the same mortgage payment in year one.
The mortgage payment has risen here and risen as taxes keep going up.
Your model isn’t realistic.”
I am not debating that.
I am saying that a mortgage payment in surrounding areas is going to be even higher for a comparable home.
I disagree.
The ‘mortgage payment’, including rising property tax obligations, rises and is pressured to rise higher in higher tax rate towns.
4.11% wasn’t born yesterday, it got there by a steady rise, year after year.
Homes are supposed to be more rational behaving, stable investments than stocks.
Mortgage home loans are at lower rates and considered lower risk than loans for speculative ventures.
But you are simply stating that homes might go up, without supportive rationale.
You city a&b model presumes that racetracks will stay at current rates, and that has not been the historical case in our highest tax rate county.
There have been an academic report, as well as logical rationale presented here why high tax rates beget higher tax rates.
I have not heard any compelling reason why home prices here will suddenly perform better than in the past relative to lower tax rate communities, or why overpaying for the same social services is somehow justified.
You are completely ignoring the fact that $2627 (tax rate differential on lower priced home) the first year (and that amount and more each subsequent year) is completely wasted.
When $7599 is paid in tax for the AH home costing $282,500, the buyer receives the same social service provision for the money.
So CL is wasting the amount of difference between a $185,000 home in AH vs the one in CL.
If mortgage rates are around 4% now,it is as if the CL homeowner is paying an 8.11% mortgage interest rate, while the AH home owner is paying a 6.69% mortgage interest rate.
The AH owner is getting additional $97500 of home equity value in return for his annual payments.
I don’t disagree with your last point.
I am just saying if taxes stay the same and prices continue to appreciate, the tax rate is going to decrease.
The denominator is getting larger.
However, properties will become more and more expensive.
People are going to budget off their mortgage payment, which eventually would become less affordable for many.
Prices cant continue into infinity.
Not to bring up a different state, but property tax rates in California are actually low compared to rest of the nation.
However, housing prices there are insanely more expensive.
Just because tax rates are low, doesn’t that mean people are going to go rush in a buy an insanely expensive property.
One couldn’t get nearly a comparable home for the same price.
I am saying I don’t think it is a plausible presumption that taxes (levy) will stay the same and home prices will appreciate.
I don’t see how it is possible.
(Except to the extent that rising inflation raises all boats.
(I maintain that other boats will float while our water laden vessel will barely stay above water.
(Also I believe commercial real estate gets special property tax breaks and that affects the value of that property relative to residential property in same taxing district.)
I agree with you, its probably not.
It was for the sake of simplicity.
Fine, lets says taxes are increasing by inflation, while home values are appreciating by more.
This would still result in the tax rate going lower.
I know someone in this situation who works in Boulder, Colorado.
The economy has been doing very well over the past few years.
Google is opening an office there etc.. and home prices have increased substantially.
They cant afford a home there so are looking in surrounding areas.
If they are able to find a lower priced property in a surrounding area that they can afford and the tax rate is 1%-2% higher, do they buy the home or continue to rent?
There is a trade off there.
In that case better to rent, I would say.
But is Colorado a low property tax state to begin with?
I would guess yes, with all that new mj revenue.
If Boulder is below 1% and other areas still below 2%, because the national average is around 1.5%, I would think that still counts as ‘wnr’ and may appreciate due to demand more than the additional .5-1% negative capitalization lowers value.
Another exclusion I would endorse is when one can buy homes so crazy cheap due to distressed conditions,that buy vs rent net payment pays out within a few years.
But I doubt that is the case anywhere near Boulder.
Colorado sounds wonderful to me right now!
PS I heard Woodstock was getting a medical mj facility soon.
Unfortunately sales taxes don’t inure to schools and it will likely be sited in a TIF, so no new property taxes for schools either.
No relief in sight for our 4.6% property tax rate, unless school district 200 cuts spending.
And they refuse to do so.
On the April 1, 2016 edition of Against the Current, Dan Proft interviewed Ted Dabrowski of Illinois Policy Institute.
ATC: Is Math an Opinion? IL Policy’s Ted Dabrowski on Public Sector Salaries and Pensions
An excerpt from that interview:
“Ted Dabrowski: I think the big issue that’s going to continue to drive change are the property taxes. We’re seeing places, like you said, Matteson, and nearby – Southland – communities, where the tax rates on property, so the effective tax rate on a home is about 4-5% of the value.
So if somebody would have tried to buy that house today would have to pay the cash for that home, they’d have to pay the value for that home, and within 20 years, because of taxes, they would have repaid for that home again.
Dan Proft: So for most people with a 30 year mortgage, they pay for their home twice.
What you’re saying is in Illinois and a lot of regions you’re going to pay for your house the third time because of the property taxes.
Ted Dabrowski: Exactly, and that’s why people are starting to walk away from their homes in the Southland area.
So you got a place where the manufacturing companies have gone.
You see the big swaths of land just empty, and you’re starting to see now these nice big homes that have collapsed in value, and people walking away because they can’t afford it anymore.
Between the mortgage and a second mortgage being the property taxes, they’re leaving.”
http://www.upstream-ideas.com/ideas/atc-math-opinion-il-policys-ted-dabrowski-public-sector-salaries-pensions
http://www.youtube.com/watch?v=too8mc8abH4
What is “a medical mj facility?”
Colorado does sound great.
Haha, that has worked out well for them.
That is unfortunate (not being able to use the sales tax revenues).
Cal – I believe she is referring to a medical marijuana facility.
Yeah man.
MJ. Weed. Reefer.
Green Gold.
Money growing on trees.
All we ever see is Higher TAX rates and lower Values, because if they can’t get it out of you one way they just change the multiplier to get it from you this way!
and they think we are stupid! to not notice this.
Stop the fleecing of the McHenry County Tax payers!
this includes the suing of each STATE LOCAL Gov. entitities
I think the waste of one million dollars was ludicrous yet no one steps up to the plate to voice anything, just the ones who gained from it ALL!
with their hands out, laughing all the way to the bank…
Sickening…
To Steve Wilson:
Please provide more information about the McHenry County Good Government Association as it becomes available.
Thank you, Scott Gessert -Woodstock
What we should be looking at…is the per capita dollars paid in taxes compared to other counties….
that gives us the true cost….
next we need to determine (rate) the deliveries from county to county….
and if we can, reduce it to a per capita benifit value.
That would give a better idea of where we stand along side our (other county) peers…
That benefit will be subjective at best..
However, Steve has a great point when looking at school districts.
You can easily access those numbers..
and I think the record shows we are not getting a bang of any kind for our buck.
In government we tract so many things but we never seem to consider or want to track why some units of government can deliver better then their peers in other counties……
No one wants to conduct cost/benifit analysis…
administators don’t want to give you that infomation…
if you want it you have to dig….
I think both Steve and YMS have valid arguments.
The equation is like the Gordon Model.
It depends on the givens which are always time sensitive.
Certainly, Higher taxes push down the buying power and thus the ability for one to purchase real estate…
just like interest rates and capital gains impact the valuation of stock in the Gordon Model higher taxes and interest rates will negatively impact real estate value. (without consideration of other market influences, which, when are in our favor should never be levered as a reason to co-relatively…raise our taxes…)
Are we delivering what the county needs at the most efficient cost/tax rate….
I am certain the answer is NO.
So now I want to look for where we are not delivering efficiently and more importantly….
those areas where perhaps we should not be “delivering” at all…
Sheriff Prim’s administration has demonstrated exatly that…
I am sure there is more we can do.
However, without people willing to run for the local School boards for the RIGHT reasons….we will continue to pay pay pay….
The correlation of levy increases and property valuation enjoyed prior to 2006 is really because elected officials were brainwashed into believing that they had to capture EAV increases or “lose it forever”…..
So yes we are taxed at an inflated rate because when the real estate market corrected (yes, that is what happened…a correction) we end up with horrendous tax rates…….
that drives me a little crazy…
we have politicians clamoring for commercial and idustrial growth to help reduce taxes…
but come November and December they raise leies so they don’t “lose it forever”….
If we are capturing the growth in the levy we will never REDUCE your taxes…
Indeed, there is an example on the forefront which illistates this…
look in the news today and stop When you find a taxing authority desperately searching for ways to spend the tax monies it has already accured….