Unfair Tax System Irks Businessman
By Mark N. Hornung in the Chicago Sun-Times

There has been a lot of talk about taxes in the current gubernatorial campaign.

Gov. Edgar is running on a platform of having kept his promise not to raise general taxes. Comptroller Dawn Clark Netsch is proposing to increase state income taxes to underwrite reduced property taxes and more spending for public schools. And Cook County Board President Richard J. PheIan is accusing Netsch of proposing the biggest tax hike in state history. None of this means much to Joe Hodges, a small businessman and father of three who resides in the south suburbs.

Hodges is the kind of guy who is needed in Illinois. A family man and risk-taker. Hodges invests in economically disadvantaged sections of the Chicago area.

He doesn't worry about making a killing. Hodges only aims for a modest return on his investment. But the way things are going in Illinois and in Cook County, that just isn't possible, especially in small, distressed towns such as Riverdale.

There are two causes: The State of Illinois forces local governments to pay for more than 50 percent of public school costs, and Cook County taxes real estate in an arbitrary manner.

'You can buy a building and start businesses, but because of property taxes you can't hold onto them," Hodges complains.

Hodges' ordeal began in April, 1992, when he agreed to purchase a two-story, 1,000-square-foot building at 201 W. 144th Street in Riverdale. The building contains a video store on the first floor and four apartments upstairs.

Because Riverdale is suffering though economic hardship, Hodges was able to purchase the building for $120,000. An appraisal done on behalf of Hodges lender established a market value of $155,000.

Hodges' instincts as a bottom-fisher were sound. In 1992, the property generated $29,936 in rental income. When interest and operating expenses were factored in, the building showed a pre-tax profit of $16,407, a modest return on the $120,000 investment.

Then disaster struck. As part of a broader township reassessment in 1992, the assessment on Hodges property more than doubled to $361,033 in 1992. The new valuation brought Hodges tax bill to $29,866 or 100 percent of the rental income produced by the property.

Hodges wasn't looking for a free ride. He figured on paying what most property owners like him do, about 25 percent of gross income.

Facing a massive financial loss for 1992, Hodges and his attorney complained to the office of Cook County Assessor Thomas C. Hynes. The assessor's office agreed to reduce the assessment to $176,527 for one year only. Even so, the new assessmnent produced a tax bill of $16,500, which wiped out Hodges' entire profit.

Things quickly went from bad to worse. In 1993, the property produced income of $38,360. But the building was reassessed by the assessors office at $386,230, a startling three times the original sales price. The new assessment produced a tax bill of $35,162, equaling, once again, nearly 100 percent of the property's income.

Hodges and his tax representative, Andrea Raila, complained to the assessors office again. Upon review, the assessor's office reduced the property's assessed value to $270,800, still more than double the 1992 sales price. And a new tax bill of $24,646 threatens to eat up 66 percent of all rental income and plunge the building into the red.

Marcia Maras, chief deputy assessor, says the increase reflects full occupancy in the building for the first time in three years. Information regarding 1993 income was not supplied, she says.

Next up for Hodges and Raila is a hearing before the Cook County Board of (Tax) Appeals. After what he's gone through, Hodges isn't hopeful. "The little man can't get a fair and impartial hearing," he says.