When your real estate tax bill arrives you focus on the amount that has to be paid, then maybe you settle in and read the rest of the small print. Though not the most reader friendly document, it does have valuable information.  Market values turn into assessment values.  Assessment values are equalized and tax rates and exemptions are applied to determine your tax bill.  Simple?  Not hardly so.

The State Equalization factor, aka, the multiplier, aka the equalizer is one of those least understood and hardest to explain numbers in the formula for determining a real estate tax.  Our attempt today is to give you some insight into its creation.

What is equalization?

Equalization is the application of a uniform percentage increase or decrease to assessed values to bring the assessment levels (on average) to a uniform level of the market value.  Ok, let's stop right there and restate this in English.

Every County's assessment in Illinois should be 1/3 of its market value.

In Illinois we have 102 counties.  County assessment officials on a statewide basis are collectively called chief county assessment officers.  In Cook and St. Clair counties the assessor has primary assessment responsibility.  In the 17 commission counties, which have no township level government, the supervisor of assessments has primary assessment responsibility.  In the other 83 counties, township or multi-township assessors have primary assessment responsibility.  These assessment officers begin the numbering process of determining a property's market value.  That market value is used to determine what portion of the total tax burden each property owner will bear. 

Valuation is a complicated process and there are many assessment officers who have differing opinions of market value.  There are also inherent difficulties of the assessment process (e.g., pressures to keep assessments low, lack of time and resources to do a thorough job, ministerial errors, outdated valuations, and changes in economic conditions.)

Our state constitution requires that taxes on real property be levied uniformly by valuation and resulting legislation determined that the assessed valuation of real property in each county, in aggregate, to be 1/3 (33.33%) of fair cash value.   There are some exceptions to this pervasive rule such as farm acreage, but suffice it to say, garden variety non- farm real property in Illinois has to be assessed at one-third its fair cash value (market value). 

Cook County, by local ordinance, has levels of assessments other than 1/3 for residences and other non-farm real property.   Although different at the onset, Cook County assessments ultimately must be uniform with other Illinois property before the real estate tax bills are published.  Equalization brings Cook County properties in line with all others situated outside its borders. 

How can this be accomplished?

Since the target for all jurisdictions is to have an assessment level of 33.33% in the aggregate, there are two types of equalizations that take place (one within each county and one statewide.)  Our legislature has charged the Illinois Department of Revenue with equalizing assessments on a county-by-county basis (statewide).   The purpose of the state multiplier is to equalize assessments between counties to eliminate inequities.

The computation of each county's state multiplier is complex and involves a statistical analysis of the three previous year's property sales.   

By simple example the result of a "multiplier" can be demonstrated by comparing different assessment levels between two counties with similar overall market values.

County A has a total of 15 properties with an overall market value of $10,000,000 with an assessment level of 33.33%.  Its assessment for all properties is 3,333,333 and satisfies the statutory requirement of assessing all properties at 33.33% of market value.

Market Value                                                    $10,000,000

Times an assessment level of                             33.33%

Equals an assessment of                                   3,333,333

County B has 15 properties with an overall market value of $10,000,000, but has an assessment level of 25%.  

County B's assessment has to be multiplied by 1.33333 in order to satisfy the statutory requirement of assessing all properties at 33.33% of overall market value and have uniformity between counties.

Market Value                                                    $10,000,000

Times an assessment level of                             25%

Equals an assessment of                                   2,500,000

Requiring a multiplier of                                      1.333333

To equalize the assessment at                           3,333,333

Note: the last reported multiplier in Cook County (2011) was 2.9706. 

Our Quick Links provides a publication from the Illinois Department of Revenue that discusses the equalization process.

The market value, the assessed value and the multiplier are measures to focus on in addition to the amount of tax you see on your real estate tax bill.  They are cornerstones for determining the tax.  Let us help you determine if your measures are fair and equitable.

Next month we'll talk about the Levy, not the kind where we drive our Chevy!