Cook County treasurer calls for change in property tax loophole that costs residents millions
CHICAGO (CBS) – A little known property tax loophole is costing Cook County taxpayers hundreds of millions of dollars.
That's the finding by a team of researchers in the Cook County Treasurer's Office. CBS 2 political investigator Dana Kozlov heard from the office who said the area's Black and Brown communities are hit the hardest.
It's been going on for years.
Just who is profiting? Companies and investors who buy up tax delinquent properties and then basically get their money back, with interest. Lots of it, and taxpayers are footing the bill.
Cook County Treasurer Maria Pappas said one mall in Calumet City is just one of hundreds of properties helping so-called tax buyers get rich. The mall, like others, was put up in Cook County's tax sale because the owner was behind on paying property taxes.
Pappas said a tax buyer snapped it up, held on to it for a few years, and then demanded the money back. The buyer could do it because the county listed the mall as having zero square feet, a mistake that entitles the tax buyer to a refund with interest.
"They get all their money back from the government, plus between 12 and 54% interest," Pappas said.
In the mall buyer's case, that interest added up to $250,000 of taxpayer money. A lengthy study done by Pappas' employees found a property tax loophole, called "sale in error," gives buyers the ability to basically "return" the property at taxpayers' expense. They said in just seven years, it's cost taxpayers $280 million.
"But 87% of that $280 million was taken from mostly Black and Latino areas of the city, but predominantly the south suburbs," said Hal Dardick, a researcher with the Cook County Treasurer's Office. "They got hit really bad."
It impacts schools, police, fire and other municipal services. Pappas and her team said many of the properties are bought up and returned by hedge funs and other private investors.
"They have a group of researchers that look into all of this, and they're very sophisticated," Dardick said.
But Pappas and her team want to change that and plan to push state lawmakers to pass a law that would make it impossible for tax buyers to profit off a tax sale listing mistake, like they do now.
"The law is so egregious, impossible for Springfield not to change it," Pappas said.
That team in Pappas' office discovered this legal loophole as part of an assignment to uncover problems within the property tax system. They hope to get a law change before lawmakers in the spring.
