Data centers could score a break under next assessor
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Cook County Assessor Fritz Kaegi has pushed back on suburban data center owners who, he believes, have undervalued their properties to achieve lower taxes.
- But Pat Hynes, who beat Kaegi in the Democratic primary to run for assessor, tells Axios he would take a different approach — one that could lower taxes for data centers, leaving a greater tax burden on homeowners.
Why it matters: A recent Tribune-Illinois Answers Project collaboration showed that tax breaks for data centers are already contributing to high costs for some residents.
- Its analysis found that homeowners in Northlake, for example, would pay an average of $2,000 less per year in property tax if it weren't for the valuation reductions and tax breaks that data centers enjoy in the town.
Zoom in: Kaegi's office has assessed data centers at hundreds of millions more than their owners suggest.
- Appraisers for a Microsoft data center in Northlake, for example, valued the property at $250 million. Kaegi's office, however, assessed it at $873 million by considering upgrades, equipment and personal property that allow it to operate as a data center and contribute to its value, the Tribune reports.
- Kaegi's director of valuations, David Lehman, believes assessments should also consider how much a data center's renters pay per kilowatt used. That's standard operating procedure for assessors in data center-heavy Virginia, according to the International Association of Assessing Officers (IAAO).
- But Hynes does not agree.
What he's saying: "Data centers have complicated assessments because these properties combine taxable real estate with personal property, which is not subject to property taxation in Illinois," Hynes tells Axios.
- As for considering how much tenants pay in "kilowatt rent," Hynes says, "Our office will challenge any valuation not supported by the evidence. We will not rely on power capacity alone as a substitute for a legally supportable valuation."
The other side: "State law requires us to assess property at its fair cash value based on industry standards. Power capacity is the agreed-upon metric among market participants when estimating the value of data centers," Kaegi's office tells Axios.
- "Our actions follow the County's recommendations for more accurately assessing large commercial properties, including data centers. Our hope is that the next administration will continue these efforts to reduce property tax burdens for homeowners."
Between the lines: When Kaegi won his seat as assessor in 2018, he ran on a platform of rebalancing a system that he believed favored influential commercial landlords at the expense of homeowners.
- During the Democratic primary, Kaegi said Hynes was "bankrolled by the real estate industry," accepted 115 donations from property tax lawyers and took "$300,000 from big developers, attorneys and appraisers," as well as MAGA supporters.
- When presented with these allegations, Hynes' office wrote back to Axios, "Assessor Hynes' administration is focused on ensuring that assessments are fair, accurate, lawful, & defensible."
What's next: Hynes faces libertarian candidate Nico Tsatsoulis in the election for Cook County Assessor on Nov. 3. No Republican candidate is running.
- The IAAO's Justin Eimers tells Axios that the association hopes to put out standard guidance for assessing data centers later this year.