Strip Searches Taxing to Property Owners

The hot topic at last Tuesday night’s Rogers Park Builder’s Group Director’s meeting was property taxes.

Over the past few days, members have been receiving our long awaited, but dreaded, 2nd installment 2009 tax bills from the Cook County Treasurer. (2009 bills are due in 2010.)

For landlords, property taxes are usually our second largest expense item behind our mortgages,  and, unfortunately, taxes are the least predictable - especially every third year when reassessments occur.

A substantial increase in taxes often makes the difference between a building generating a positive cash flowing or running a negative balance.

True enough, due to tax increases, this year many of us will face negative cash flows and further drop in property values for our properties.

One can understand the feeling of outrage.

“My taxes went up 124%!” proclaimed one of our newer members, a developer who had purchased one of the communities most troubled buildings and who had made substantial improvements - renovating units, yet maintaining affordable rentals for its low to moderate income residents. “This isn’t much of a reward for all of the effort I put into this building. Much of my hard earned profit will go directly back to the government!”

Another owner complained how the 44% increase she experienced is putting her in a cash flow bind. “I now will need to put an additional $4000 per month into my bank’s escrow. That is the money I’ve been accustomed to living on. I don’t know what to do. My lawyer says we exhausted all appeals.”

Our current assessor, who is leaving his job when his term expires this year, claimed he recognized the important role that apartment building owners have in providing affordable housing throughout the city, and therefore implemented a plan whereby he is reducing the assessment level for Class 3 properties (7 units or more) for three years, beginning with the 2009 tax year: 2008 - 20%; 2009 - 16%; 2010 - 13%.

Did these steps result in correspondingly lower taxes?

Hardly. This tax bill revealed that the lower assessment level on its own won’t give property owners genuine relief. Not only is the county clerk generating higher tax rates to raise the money requested by varying taxing districts,  but in the City, our increases are mostly attributable to a substantial increase in the county’s multiplier, from 2.9786 to 3.3701. (The Illinois Department of Revenue assigns a multiplier, or “equalization factor,” to bring the overall Cook County assessment level to the statutory 33.3% assessment level used in the rest of the State. Confused? I understand.)

Of course, we landlords are a tough lot. We weather continued storms: from outrageous gas price increases during various energy crisis, to insurance crisis post 9/11, to financing crisis at the present time. This particular storm will be rough for some property owners: lack of credit, coupled with the drain of exorbitant tax increases.

“In this market, we can’t raise our rents” observed another Builders Group member. “The city and county all know this. So, what makes them think that they can impose these huge increases on us?”

Of course, we all know that budget crisis facing all levels of government make increases like this unavoidable. So I ask, can we find any solace in all of this?

Can we at least be proud that we are the guys who are stepping up to the plate, paying for critical and essential city and county services?

Hardly.

Was it coincidence or simple irony rearing its head when a journalist friend of mine who covered Tuesday’s Cook County Board meeting told me about the big news coming from that meeting: the County Board unanimously approved a $55 million class action lawsuit filed on behalf of inmates and detainees of Cook County jail who were subjected to strip searches.

Yes. I said $55 million.

From 2004 - 2009, over 200,000 detainees and prisoners were subjected to strip searches. Jail administers implemented this policy for male inmates only a few years after the county paid $6.8 million in damages for a strip search complaint against female prisoners. Realizing that the county could be subjected to an even larger penalty,  the County Board voted14-1 to settle for $55 million.

Insurance will cover about $10 million, leaving the county responsible for coming up with the $45 million balance, of which $15 million will go to plaintiff’s lawyers. The county has already set aside around $20 million for this contingency, so they only have to come up with another $23 million, in a year where the County can expect a $285 million budget deficit.

Of course, its not really the county who is coming up with the settlement funds; we, the property owners who reside within the county, will foot this bill. Yes; money that you, as a homeowner, would like to use to buy groceries, send your child to college, or maybe to take a vacation, instead must go to the county, in part to cover this settlement. Money that we apartment owners might otherwise use to paint or repair an apartment, or money for our gas bills, or profit that we, as owners, seek to justify all of the sweat and toil that we put into owning and managing our properties, will go, instead, in part, towards compensating those subjected to some degrading process, and to their lawyers.

I am not in a position to comment on the legitimacy of the plaintiff’s claims regarding strip searches, though I submit that the Sheriff and jail officials should probably have known that conducting massive strip searches was not a good idea. In fairness, of course, prison officials must be dealing with many hardened criminals who go to great lengths to sneak weapons and contraband into the jail, perhaps causing officials to think that strip searching was necessary. (Think of the hell that jail officials pay if and when a prisoner escapes, especially if the escape is aided by tools snuck into the jail?) Under Sheriff Dart, the County has purchased and is now using the same kind of scanning devices that we use at airports. I am not sure if this technology was readily available a few years back, and I don’t know what they cost, but I imagine the county could have bought quite a few for far less than the $55 million cost of this settlement.

In conclusion, I pose a few questions:

1) Who is at fault here? As taxpayers we ought to expect more, and the Sheriff and other jail officials who implemented policies resulting in county taxpayers being on the hook for this kind of money should account for how this happened and suffer a consequence.

2) Is it a coincidence that the county sent out our property tax bills to us after the election? Similarly, is it a coincidence that the County Board, consisting of many members engaged in tough races, put the issue of this $55 million class action settlement on their agenda at the first County Board meeting conducted after the elections?

3) Where is the public outcry? Unless our public officials who approved this settlement hold the county administrators who implemented this policy accountable, such practices will continue, costing property owners and other taxpayers additional sums we can ill afford.

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