The Center for Municipal Finance found that Cook County’s inequitable Scavenger Sale doesn’t work. Now, the state is poised to reform it and unfair property tax codes across Illinois.

In the fall of 2019, leaders at The Chicago Community Trust and Cook County Land Bank Authority reached out to Christopher R. Berry, then the director of the Center for Municipal Finance at the Harris School of Public Policy (CMF). Both were familiar with Berry’s research on the impact of property tax inequities.

Chris Berry
Professor Chris Berry

“People at the Land Bank and the Trust were interested in what happens to people who can’t pay their property taxes,” recalled Berry, the William J. and Alicia Townsend Friedman Professor at Harris and director of the Mansueto Institute for Urban Innovation. “They were concerned that the Cook County property tax sale system caused vacancy and blight and created barriers to neighborhood revitalization efforts. That’s not an aspect of the system that anyone had really studied before. They urged us to look into the system here.”

Supported by a grant from the Trust, Berry and the Principal Researcher at CMF, Maxwell Schmidt, got to work.

About four years later, Gov. J.B. Pritzker has signed a bill that will, among several changes to the Illinois Property Tax Code, speed up the time it takes to move tax-delinquent property in disinvested communities to productive use—reform that was grounded in and sparked by CMF’s research.

“What our work did was allow us to take an evidence-based perspective and show that it wasn’t just anecdotes or observations that indicated the system wasn’t working,” Berry said. “Our research showed that it is in fact not working and allowed us to pinpoint exactly the ways in which it is not working. That evidence was compelling enough to persuade the media, public, and policymakers to want to act on it.”

CMF trained its analysis on Cook County’s Scavenger Sale, the end of the line for property that has racked up years of unpaid property tax bills. Once it has reached that status, a property’s tax debt and the right to acquire the property are sold to the highest bidder at an auction held every two years.

The problem, CMF found, is that the system, which has been in place since the 1940s, fails to achieve its goal of placing the property back in normal market use. The first of CMF’s two studies on the issue, released in 2021, found that only 7 percent of thousands of properties in the county’s Scavenger Sale since 2007 have returned to the private market.

“As a result, the Scavenger system has become a sort of limbo that few properties escape,” the report stated. “Meanwhile, the number of properties in the system continues to accumulate, growing from 4,266 properties in 2007 to 28,466 in 2019.”

Those properties collectively total more than 3,500 acres of unproductive land in Cook County.

High property taxes, disinvested neighborhoods

The reason the Scavenger Sale is ineffective, Berry said, is that distressed properties in the system are concentrated in some of the most economically disinvested neighborhoods in Cook County. Market demand for them is weak.

“So, expecting that we can solve the problem by auctioning off these properties in a weak market-demand environment is unlikely to work,” he said. “We studied a number of jurisdictions across the country and found that it really wasn’t working anywhere.”

Particularly disheartening was evidence the Center found that so many Scavenger Sale properties were in communities of color. Among the reasons Berry noted are that tax bills on properties in the neighborhoods already are artificially high due to assessment inequities. Also, residents often work in less stable jobs with lower incomes. Those factors make property owners in the neighborhoods vulnerable to economic shocks and increase the likelihood that they are unable to pay property taxes.

While CMF was releasing its findings and continuing to research the issues, The Chicago Community Trust organized forums where the Center made presentations about its research. Attendees included Matt Kreis, general counsel at the Center for Community Progress, and crucial City of Chicago and Cook County figures, including Bridget Gainer, (MBA, ‘02) chair of the Land Bank. Established in 2013, the Land Bank acquires, holds, and transfers property to advance the productive use of abandoned and tax-delinquent land.

The goal of the forums, Berry said, was to generate ideas about how to fix the system.

Trust logo
The Chicago Community Trust organized forums where CMF made presentations about its research.

“The Trust played a really important role here,” he added. “It not only funded the research but was very engaged at a higher level in seeing this research as one component of an effort for change.”

Another key player was Cook County Treasurer Maria Pappas. After being presented with a draft of CMF’s report, her office embarked on a parallel analysis that reached similar conclusions about the ineffective Scavenger Sale system. Both analyses drew media attention.

The Trust organized a coalition of experts and community developers, including land banks, to draft comprehensive reforms to the property tax code in Cook County and other areas of the state that include Rockford, Peoria, Decatur, and Kankakee. Advocates collaborated on a bill that State Rep. Kam Buckner (D-Chicago) and State Sen. Celina Villanueva (D-Chicago) sponsored.

Included in the reform are changes to the Scavenger Sale in Cook County and property tax sales throughout the state that would allow counties to work with municipalities and land banks to act on abandoned or vacant properties much faster—potentially cutting in half the time it takes for the county to address ownership and expedite its return to productive use.

In addition, the legislation would cut Cook County’s yearly interest rate on delinquent property taxes to 9 percent—from its current rate of 18 percent, a move that would drop the number of properties hitting the auction block. Another key change would tighten a loophole that allows tax buyers—many of which are out-of-state hedge funds and other financial institutions—to back out of the sale on minor technicalities and be repaid with interest.

The bill passed both chambers of the state legislature and was signed by Gov. Pritzker on Aug. 11.

An inspiring trajectory

Ianna Kachoris
Ianna Kachoris, MPP'02

Ianna Kachoris, (MPP ’02) Senior Director of Policy & Advocacy at The Chicago Community Trust, said the Center for Municipal Finance provided vital evidence to support changing the tax code. The effort complements The Trust’s ongoing commitment to closing the racial and ethnic wealth gap.

“We would not have been in a solid position to press for the bold reforms we did without the evidence presented in the CMF team’s research,” she said. “This is evidence-based policy combined with the on-the-ground expertise of developers and residents at its best.”

Berry and Schmidt were “really important thought partners” in the strategy to make the tax code more equitable, Kachoris said.

Bridget Gainer and two consecutive executive directors at the Land Bank, Rob Rose and Eleanor Gorski, a 2018 UChicago Civic Leadership Academy (CLA) fellow, “also deserve a lot of credit for bringing the problem to our attention,” Kachoris said. In addition, research, advocacy, and expertise from Pappas’ office were critical, as were the efforts of Michael Davidson, the Trust’s Senior Director of Community Impact leading the foundation’s neighborhood investment work, she said.

“We’re really proud of the way everything came together and what we accomplished,” Kachoris said.

Berry said scholars “can sometimes overestimate the role that our research plays in the world.

“I think in this case, you had a system that many if not most of the participants could see was screwed up,” he added. “But they didn’t have an evidence-based perspective to lay out exactly why and how. The research… took the intuition of practitioners and provided evidence that their intuition was correct in a very compelling way.”

The trajectory—from problem to research to brainstorming solutions to creating policy—is somewhat rare in public policy, he said.

“Even when evidence does influence policy,” Berry said, “it often is in more indirect ways that are hard to know about. What I like about this case is that it’s a more or less linear trajectory that we can trace from research to impact. It’s a great example for our students.”