Cook County Treasurer Maria Pappas announce April 24 the passage of legislation that would help homeowners who fall behind on their property taxes and close loopholes tax investors have exploited at the expense of local governments.
State Sen. Ram Villivalam and state Rep. Kam Buckner, both Chicago Democrats, were original sponsors of the Property Tax Equity legislation.
The legislation would cut in half the aggressive interest rate charged in Cook County for late property tax payments, dropping from 18% a year to 9% a year. That change will save struggling property owners between $25 million and $35 million a year, with most of those savings benefiting Black and Latino communities.
“The vast majority of property owners who fall behind on their property taxes are in predominantly Black and Latino communities,” Pappas said. “These changes will prevent millions of dollars of generational wealth from being stripped from these households.”
Another significant piece of the bill would overhaul the state’s system for selling unpaid property taxes to private investors by closing a series of loopholes that they have exploited for years. These “tax buyers,” mostly hedge funds, private equity firms and real estate investors, have drained about $40 million each year from governments that serve predominantly Black and Latino communities.
Illinois law requires that unpaid property taxes be offered for sale to private investors. These tax buyers pay the taxes and receive a lien against the property. Most owners redeem the taxes, repaying the tax buyer with interest, plus court costs and fees. If they don’t pay up, the tax buyer can go to court to take ownership of their property.
However, most tax buyers do not want to own the property, so they use loopholes they helped write into a section of the property tax code known as “sales in error” to overturn the sale, often citing frivolous or insignificant reasons. If the sale is overturned, tax buyers get all of their money back from local governments, typically with interest. The property is returned to the delinquent property tax roll.
Using sales in error, tax buyers in Cook County have received refunds totaling about $277.6 million, including at least $27.7 million in interest, during a seven-year period from 2015 to 2022. Of that money refunded, about 87% was siphoned from local governments serving predominantly Black and Latino residents, impacting schools and public safety.
A third piece of the bill would make it easier to move abandoned residential properties back onto the tax rolls and into productive use more quickly by making changes to the biennial Scavenger Sale, which began in 1943 and is used only in Cook County.
The Scavenger Sale, a last-ditch auction of chronically delinquent properties, is a failure, Pappas said. The new law would allow local governments to take control of properties if they are not purchased in the Annual Tax Sale. Government could clear liens more quickly and put the properties into the hands of people and organizations to develop them.
The Pappas property tax and Scavenger Sale studies can be found at cookcountytreasurer.com.