- Mar 21, 2016
Over the past few years, the Village Board and the Industrial Commercial Development Commission (ICDC) have reviewed many applications for Cook County’s 6b tax incentive program. As the Chair of ICDC, I along with my fellow commissioners have received feedback from applicants and from residents questioning the process. Many of the concerns raised indicate a lack of understanding of the history and guidelines of the 6b program. This article is meant to clarify the process.
The class 6b real estate incentive is a powerful economic development tool used to reduce the tax disadvantage that commercial and industrial buildings in Cook County have against those in the neighboring counties. To understand this disadvantage requires a little history and some basic facts. Illinois law states that all counties that classify property for the purpose of taxation are required to assess property at 33.33% of the fair market value. The collar counties follow this rule and assess all real estate equally at 33.33%. Cook County has created a more complex system of assessing property: residential properties are assessed at 10% while commercial and industrial properties are assessed at 25%. The state then applies a countywide multiplier to bring the counties total average assessment to reflect 33.33%.
As shown in the above chart, residential in Cook County and industrial buildings in the collar counties have a much lower tax than those of industrial properties in Cook County which puts border towns like Northbrook at a distinct disadvantage. An industrial building in Northbrook carries a tax bill of approximately $2.50 per square foot. An industrial building just north of Lake Cook road would have a tax bill of half that amount.
In the early 80s a significant number of businesses moved out of Cook County. The vacated properties were tough to fill as they were not only hampered by a higher tax bill but also functional obsolescence. In 1984, Cook County created the class 6b to stem the tide, lowering the assessment to 10% for the first 10 years, 15% in the 11th year, 20% in the 12th year before returning to the full 25% thereafter.
Properties in Cook County can qualify for this countywide program by three means; new construction, substantial renovation and “abandonment.” For new construction, the assessment applies to the land and the new building. For substantial rehabilitation, the incentive will apply only to the increase in value as a result of the improvements. “Abandoned” properties is now defined as having been vacant or no rent collected for a period of 1 year or if the local municipality finds “special” circumstances for approving. An example of “special” circumstances could be the building’s functional obsolescence such as lower ceiling heights, inadequate truck loading or parking.
Northbrook has an application process for the 6b incentive that goes beyond the County guidelines. Additionally, standards include no renewals of the 6b incentive, tying the program to a specific business to occupy the property and complying with all village codes and ordinances.
Northbrook has had many requests for the incentive and has both approved and denied them for all three of the categories listed above. Each time they consider the incentive, they thoroughly and critically evaluate the economic ramifications of the program as well as potential incidental benefits.