The south suburbs need help to fix serious problems. Blighted corridors of vacant and abandoned properties plague communities. High property taxes scare away businesses and drive residents from their homes.
We’ve become numb to a lack of basic services. A water main break has shuttered public schools again in Dixmoor? Ho-hum, it must be Tuesday. University Park residents can’t drink the water because of high levels of lead? Somebody ought to help them.
The downward spiral has progressed for decades. Throwing money at the problem is hardly the solution. Huge sums of state and federal grants would be about as effective as dumping truckloads of cash into a bottomless pit.
Structural change is needed. Many homeowners in Matteson, Park Forest and other towns pay $10,000 or more per year in property taxes. Where is the money going?
A new study by researchers with the Cook County treasurer’s office has identified a big hole in the bucket. Vulture capitalists are transferring wealth from Blacks in the Southland to their pocketbooks and it’s all perfectly legal.
“Hedge funds, private equity firms and real estate investors have made millions of dollars by exploiting a little-known loophole in Illinois’ property tax law, siphoning nearly $280 million away from schools, parks, libraries, fire departments and other government agencies during the past seven years,” begins the 43-page report by Treasurer Maria Pappas’ office.
I hope the Legislative Black Caucus is paying attention. Lawmakers representing the south suburbs ought to help their constituents and communities by closing that loophole.
The property tax system is big and complicated and there’s no way to fix it, right? Wrong. The truth is lobbyists have leaned on lawmakers to rig the system. Just because it’s legal doesn’t make it right.
Slavery was legal in America. The extermination of Jews during the Holocaust was legal in Germany. Cook County’s property tax system is legal, but it wrongly takes money from poor Black folks and gives it to rich white people.
Here’s how this particular legal scam works. Let’s say a homeowner is unable to pay the $10,000 property tax bill on her $100,000 home. The county is required to put delinquent taxes up for sale. Mind you, it’s not the property itself that goes on the auction block, it’s the unpaid tax bill.
Most of the time — 95%, according to Pappas — people keep their homes by paying their back taxes, plus interest. But when they don’t, investors who bought the unpaid taxes can take title to the property.
But you see, tax buyers have no desire to own property in Harvey, Riverdale, Robbins or anywhere else in the south suburbs, for that matter. They want to back out of the sales and just collect the interest owed for the time they held the unpaid tax bill.
Here’s the loophole: Interest charges can run as high as 54% in just three years. If a buyer bought an unpaid tax bill for $10,000 and gets back his original investment plus 54% interest, that’s $15,400. Cook County taxpayers are making up that difference.
What lets tax buyers back out of sales so easily? Mistakes. Tiny errors, often created deliberately by the buyers themselves, force judges and others in the system to take wealth from Black property owners in Markham and Dolton and give it to white dudes with offices on LaSalle Street.
This is because of a law known as the “sale in error” statute that lobbyists helped write in 1951 and revise in 1983, according to the Pappas study. Tax buyers can weasel out of property acquisitions by purposefully misidentifying an address as being on “Wood Avenue” instead of “Wood Street,” for example.
Oops! I meant to write that the tax bill I bought was $9,863.17, but silly me, I goofed and wrote down $9,863.14. That 3-cent error lets me walk away from the deal. Now give me a check for the initial purchase of the unpaid taxes plus 54% interest, thank you very much.
What happens to the property? It often goes back into the system and the unpaid taxes get sold over and over again, according to the Pappas study. The treasurer’s office also erroneously sells unpaid tax bills on properties that should never have been taxed in the first place because they are exempt. Examples include churches, schools and even highways.
The loophole hurts schools, municipalities and other taxing districts that never collect a dime in taxes from properties with delinquent bills. In theory, private buyers are supposed to acquire properties and start paying taxes. The entire purpose of the tax sale is to return dormant properties to tax rolls and make them productive again.
But when tax buyers weasel out, those taxes go unpaid year after year. Taxing bodies that are deprived revenue from idle parcels have to collect more money from other taxpayers to make up the difference.
Cook County municipalities that divert the most money to tax buyers are Chicago, Calumet City, Harvey, Chicago Heights, Markham, Dolton, Riverdale and Park Forest, according to the study.
Like all good studies, the Pappas report does an excellent job identifying the problem and spelling out solutions for how to fix it. Researchers concluded the assessor, sheriff, the clerk of the circuit court and the treasurer herself should provide more accurate information to the public. That will help notify owners when they are in danger of losing properties due to unpaid taxes.
While administrators are to blame for some mistakes, it’s up to state lawmakers to close the loophole that allows tax buyers to exploit the system.
“For years, wealthy investors and others have been drawn to Illinois to take part in property tax sales,” the report’s authors concluded. “Investors flock to Illinois because it is like no other state in the country — it has a generous sale-in-error statute, parts of which the tax buyers helped to rewrite.”
The treasurer’s office since 2017 has urged lawmakers to consider three different proposed bills to change that sale-in-error statute, according to the report.
“Each of those three attempts went nowhere,” the authors wrote. “This study’s findings show that now more than ever the law needs to be revamped.”
Pappas wants the law changed to require tax buyers prove an error was material and caused financial harm. She wants to ban sales-in-error that are allowed due to insignificant clerical mistakes. She wants to tighten requirements for tax buyers to get interest when they back out of sales and lower the interest rates paid by the county, among other changes.
Pappas’ office deserves credit for identifying one aspect of an unjust system that deprives Black families in the south suburbs of opportunities to accumulate generational wealth through appreciation of home values.
Ted Slowik is a columnist for the Daily Southtown.