Democratic primary candidate for Cook County assessor: Frederick ‘Fritz’ Kaegi

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On Jan. 26, Frederick ‘Fritz’ Kaegi appeared before the Chicago Sun-Times Editorial Board. We asked him why he’s running for the Democratic seat for Cook County assessor in the March 2018 primary:

My name is Fritz Kaegi. I’m running for Cook County assessor. I’m a lifelong Democratic voter and supporter, and I’ve been involved in Social Venture Partner Chicago, supporting nonprofits fighting the cycle of poverty. I’ve also been involved in Leadership in Greater Chicago.

My top priorities are to make our assessment system ethical, transparent and fair. First of all, we want to run a model that will be more accurate and less regressive. Second of all, we are committed to transparency. For the first time, we want to tell folks in Cook County how we came up with their assessments so that we are doing right by everyone, especially folks who don’t appeal. And the third thing we’re doing, we are not taking appeals from property-tax appeal lawyers. We are committed to eradicating pay to play from the assessor’s office.

The Chicago Sun-Times sent the candidates seeking the nomination for Cook County assessor a list of questions to find out their views on a range of important issues. Frederick ‘Fritz’ Kaegi submitted the following answers to our questionnaire:

QUESTION: The Cook County assessor’s office has been accused of undervaluing homes in poor areas and overvaluing homes in wealthy areas. Is that a fair criticism? If so, how would you ensure a more fair approach?

ANSWER: The criticism of the current Cook County Assessor is justified. The incumbent has long been been known for creating an ethical cloud over the office. Law firms specializing in assessment appeals (and practicing before his office) provide the majority of his campaign contributions, creating a flourishing pay-to-play environment. Over the years, voters have also heard a lot about nepotism, political favoritism, and political discrimination in the office. Further, there has been extensive media coverage about the current assessor’s moonlighting as a lobbyist for the video poker and liquor distribution industries.

This year, many have learned about the shocking systemic bias and inequities created by the assessor’s work. The ProPublica/Tribune research published this year was only the culmination of many years of research showing that wide swaths of the county–largely to the south and west of Chicago and southern suburbs, but in many other places as well, especially where immigrants live–were substantially overassessed. The reporting also detailed the prevalence of an arbitrary and opaque system of hand checks where analysts adjust numbers and variables on individual property assessments.

Assessment reductions obtained by law firms specializing in property appeals (and largely funding the current Assessor’s campaign) largely go to downtown commercial property owners. Residential taxpayers have been carrying an increasing share of property taxes paid in the county. In the county today, there is wide recognition that the office is producing assessments that are biased toward the powerful and wealthy. Following this extensive reporting, the County Board, City Council, gubernatorial candidates, and community organizations and activists have added to popular awareness of the unfair practices of the Assessor.

This is all happening in a context of rising property taxes and general discontent with incumbents. People are highly dissatisfied and are ready to make a change. As Assessor, I will begin:

• Cleaning house to eradicate pay-to-play and nepotism
• Under the current administration, the Cook County Assessor’s Office has become synonymous with pay-to-play, corruption and old-school nepotism. And it has cost regular taxpayers dearly. That will end when I am elected. I will bring fairness, transparency and the highest ethical standards to the Assessor’s Office while ensuring that the staff reflect the diversity of the county itself.
• Modernizing the Assessor’s Office to Improve Services for Taxpayers
• As assessor, I will make sure all employees who handle assessment undergo a professional assessment education program. That means only highly qualified, well-trained staff will be assessing the value of taxpayers’ homes–no more unqualified family members or cronies on the payroll.
• Building a Diverse, Qualified Workforce that Reflects Our Communities and Protects Our Values
• As assessor, I will implement a robust diversity hiring plan that ensures the Assessor’s Office hires highly qualified personnel that mirrors the county’s rich racial and ethnic diversity and is also equipped to meet our communities’ unique linguistic and cultural challenges. I will focus on maintaining a culture of inclusion and diversity in the office.
• Fixing the broken system for taxpayers
• The current administration has been beset by scandal after investigative journalists proved the assessment system has been grossly over-assessing working families, while letting the wealthiest property owners off the hook. I will fix the broken system that disproportionately impacts low-income, minority homeowners.

Frederick “Fritz” Kaegi

Political/civic background:

• First United Methodist Church of Oak Park, Member, since 2010
• Social Venture Partners Chicago, Investment Committee member, 2015-2017
• Social Venture Partners Chicago, Partner, since 2014
• Oak Park Youth Baseball and Softball, assistant coach, since 2014
• CFA Society of Chicago, member and charterholder, since 2013
• Leadership Greater Chicago, Finance Committee, 2015-17, and Program Committee, 2013-15
• Leadership Greater Chicago Fellow, 2012-2013
• First United Methodist Church of Evanston, member, 2009-2010
• Broadway United Methodist Church, member, 2006-2009
• Local admissions interviewer, Haverford College, 2003-current
• Local admissions interviewer, Stanford Graduate School of Business, 2003-current
• Chicago Council on Global Affairs, member, since 2003
• Chicago Sister CIties, Moscow Committee, 2002-2014

Occupation: Full-time candidate for the office of Cook County Assessor

Education:BA from Haverford College, MBA from Stanford University

Campaign website: www.fritzforassessor.com

QUESTION: If you agree there have been inequities in past assessments, do you have a plan to help property owners who have suffered from unequal assessments?

ANSWER: First, the Assessor must not take donations from tax appeal attorneys. Second, I will make sure that every tax assessment–residential, commercial, or industrial–will be handled in a transparent and fair manner.

Transparency means being able to tell Cook County residents how the assessment on individual properties was calculated–something that the office currently does not provide. I intend to make data and valuation standards (including underlying algorithms) available to outside parties so that the office’s methods will be accountable to the public. I believe this kind of transparency will in itself help reduce regressivity by making the office more accountable for consistency and uniformity to all taxpayers, not just the ones who appeal.

Fairness requires that assessments uniformly reflect market prices and conditions for all properties in the County, such that property owners face the same ordinance assessment rate (10% for residential, 25% for industrial and commercial) regardless of property value, income, neighborhood, or political status. The Assessor’s current model is over 25 years old and generates intolerable structural systemic bias against neighborhoods in favor of large commercial properties downtown, especially since the majority of the value from assessment reductions via the appeals process are made on downtown commercial property. We can incorporate available data, models, and software–including using the RW/University of Chicago model that is currently accessible to the Assessor’s Office–to do this job better.

For example, the West Ridge community area (i.e., the areas adjacent to Devon Avenue) sticks out in a recent analysis by the Chicago Tribune and The University of Chicago’s Center for Municipal Finance as being the most over-assessed part of the North Side. Community residents and business owners are paying more than their fair share. This takes money out of the pockets of residents and results in the displacement of households and unwarranted costs on businesses.

Implementing the better, more uniform model that is available would result in lower assessments and keep more money in residents’ pockets, benefiting everyone in the community. We can incorporate available data, models, and software–including using the University of Chicago model that is currently accessible to the Assessor’s Office do this job better. All of these changes can be accomplished within the office under current law. No new laws or ordinances are required. What is required is a change in leadership of the office.

QUESTION: Compared with other states, Illinois relies heavily on property taxes. Though raising or lowering property taxes is not a decision made by the assessor, do you have thoughts on how Illinois could reduce that over-reliance? Would you support a progressive income tax to reduce the reliance on property taxes?

ANSWER: The Assessor’s office is a vital economic player in the Chicago area’s economy, determining how $14 billion in annual property tax levies are divided amongst us. We rely on these taxes to finance key government services like education and healthcare. The tax one owes is supposed to be distributed based on the market price of one’s home; making this office essentially all about economic equity. Yet, the current Assessor has created a festering pay-to-play environment that confers most of its benefits on downtown corporate property owners, all while pushing greater obligations onto outlying neighborhoods. The result is an untenable level of inequity that slowly destroys entire communities. By ridding the office of corruption and nepotism, we will create a property tax assessment system that is equitable and fair. Creating an even playing field will allow communities to better utilize their resources to restore their own economic viability, which in turn can create a ripple effect that has the potential to provide a vital economic boost to surrounding areas.

More broadly, we believe that property taxes are a regressive way for government to finance itself. It is inherently inequitable for local property prices to determine spending on education and other public goods. We will articulate our firm belief in the need for progressive income taxation, plus equitable sharing of these revenues with municipalities and school districts, to finance government spending in a less regressive way. The Assessor does not have power to legislate change on these issues, but the office can forcefully testify to the need for that change.

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QUESTION: Some property tax classifications are intended as development incentives. Do you think these incentives are appropriately granted? Do you have ideas on how to recapture tax breaks from companies that fail to meet the goals of the incentives?

ANSWER: We currently have property tax development incentives to encourage investments in commercial activity in areas where it otherwise would not take place. The incentives typically require investors to make specific investment and hiring commitments, and require authorities to take care that these investments would not take place but for the incentives’ lower applicable rate. Local municipalities cooperate with the assessor’s office in granting these incentives, and the assessor’s office can withdraw the incentives if the investors’ undertakings are not being upheld.

I think it is appropriate that these incentives exist to encourage beneficial economic investments that would otherwise not take place, especially since the lower incentive rates bring the assessment rate for commercial and industrial investments merely to parity with residential rates. I think it is extremely important that the standards for evaluation, support, and enforcement of these incentives be transparent and uniform. It is equally vital that standards be upheld and enforced, lest the investors taking on their investment and hiring undertakings in good faith be driven out by bad actors that make promises but do not uphold them.

Current application and enforcement of these rules has been troubling. Some municipal leaders believe that if they alienate the assessor, they will be selectively punished through a lack of support for projects requiring these incentives. Some investors also perceive favoritism in how it views certain municipalities and investors. Aldermen and reporters alike have noted a very troubling lack of transparency in both specific undertakings by investors, and in how these undertakings are being enforced over the decade-plus time period they are in place. The boundaries of areas that are eligible for these incentives may be out of date. It is unclear how the office analyzes whether the incentive is truly required.

The assessor’s office has the important power to withdraw these incentives if they have been improperly granted, or if investors’ undertakings are not being upheld. I would be ready to take this action in these types of cases. Enforcement is important to protecting investors who act in good faith.

QUESTION: Are too many appeals filed each year with the assessor’s office and the Board of Review? If so, what would you do to reduce that number?

ANSWER: In Cook County, we have a truly anomalous prevalence of appeals, and tolerance of a situation where that prevalence is rising. Although we are still gathering comparative data from other large jurisdictions, we believe that in most large metro areas of the United States, appeals represent not only a single-digit percentage of total parcels, but a low single-digit percentage. In Cook County, this prevalence is over twenty percent and our current assessor has made it his goal to increase the number of appeals even further. Many Cook County residents do not realize how anomalous this whole state of affairs is.

I am resolutely committed to focusing the work of the assessor’s office on getting valuations right the first time. We’ll accomplish this by using a better model that is more accurate and will use more robust data and algorithms to back up its results. Our commitment to transparency–telling the public how assessments are arrived at–will focus the work of the office on delivering just assessments from the outset, not merely for those who make an appeal. We believe that current practice of the assessor–that is, garnering most of his campaign contributions from those whose business is built on appealing assessments–rewards an unjust system and ignores the interests of those who don’t appeal. This is why I will not take donations (as a candidate and as assessor) from property tax appeals lawyers who practice before the office. All of the above should drive down the number appeals, and the incentive to appeal. Changing the “appeals culture” that prevails in the Chicago area may take years but I am committed to making a dramatic break from it.

QUESTION: Would you take money from lawyers who practice in front of your office?

ANSWER: I will not take any contributions from attorneys who appeal tax bills.

QUESTION: What would be your policy with respect to hiring relatives?

ANSWER: When we began our campaign, I committed to fully implementing all Shakman requirements– and going beyond them to give the taxpayers of Cook County the confidence they deserve in a property tax assessment system that is fair, equitable and transparent for all. Cook County’s is largest assessor’s office in the country, and needs staffers that are qualified and committed to reforming the assessment process. Cook County has the diverse talent needed to fix this problem and we are committed to building a diverse, qualified workforce that reflects our communities and protects our values. Berrios’ corruption, nepotism and patronage places an unbearable economic burden on working families already struggling under the Trump and Rauner administrations’ backward economic policies.

QUESTION: Is it a conflict of interest for officials who are elected to represent the public to go before the assessor and ask for lower property taxes for their legal clients, thus raising the share of taxes for everyone else?

ANSWER: There is an absolute conflict of interest for officials who have sworn to uphold the best interests of the public and stand before the assessor’s office to request lower property taxes. Lawyers and law firms specializing in tax appeals (often partly owned by local politicians) finance the Assessor’s campaign and deliver assessment reductions that largely benefit downtown commercial property owners, all the while increasing assessments on those who are less powerful. The status quo focuses on encouraging people to appeal, which only makes things worse for the vast majority of those who do not file appeals.

QUESTION: If a downtown building is sold for, say, $800 million, why shouldn’t it be assessed at that amount?

ANSWER: The bedrock principle of assessment is that a building is worth whatever informed parties agree to in an arms-length, voluntary transaction. Market conditions drive this (reflecting interest rates, market risk, and valuations relative to other assets), and take precedence over rules of thumb that past practice might lean towards. If a downtown building sells for $800 million, the parties to the transaction are likely highly informed institutional investors and that is the very best basis for valuing the building. It is crucial that the assessor’s office universally, rather than selectively, apply this principle so that parties cannot claim that the office is selectively singling them out while giving others a pass.

I am committed to using the very straightforward valuation techniques that institutional investors and capital markets use in evaluating large commercial properties. Every downtown commercial real estate transaction generates an implied multiple of annual rents that can then be applied to all other downtown properties, and checked against those other properties’ rent rolls and published market vacancy rates. There is no reason why this can’t be done annually so that all downtown properties are subject to the same methodology.

QUESTION: Let’s say you get a call from a ward committeeman who politically supports you. The committeeman tells you of an individual who has worked hard for you and would like to be considered for a job. What do you say?

ANSWER: As stated above, I am fully committed to the implementation of the Shakman decree requirements. Political patronage has contributed to the problem that we are seeing in the office and as Assessor, I will immediately eliminate the practice.

QUESTION: The County Board in 2017 trimmed funding for all county offices headed by independently elected officials. Is the funding for the assessor’s office sufficient to permit the office to function effectively?

ANSWER: Unfortunately, the total lack of transparency at the Assessor’s Office makes it impossible to answer this question with confidence. Most troubling is that the office does not reveal how it calculates assessments, so we do not know what data inputs or algorithms it is applying, and what resulting remedies need to be made on the data and systems side of the office. This is true for both residential and business properties.

We know that there is a better valuation model available and already owned, but not if data is robust enough to deliver fairness to taxpayers. We have not been able to obtain a proper, up-to-date organization chart, so it is difficult to understand what many people in the office actually do. Also, we have not received progress updates on the ongoing Tyler and Oracle system implementations, and do not know what remaining work needs to be done to take the office out of the mainframe era. We believe this coming election will constitute a thundering popular mandate for having a fair assessment system, and the appropriate IT system and data to make it function properly.

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