Trump Towers With Huuuge Tax Savings
Presidential candidate saved a whopping $800,000 in property taxes on his unoccupied penthouse because of a unique Cook County policy.
Over a five-year period, Donald Trump, the presumptive Republican presidential nominee, saved an estimated $800,000-plus in property taxes on his 89th-floor Trump International Hotel & Tower penthouse thanks to a Cook County government policy allowing hefty tax breaks for developers of new residential units that are vacant and for sale.
The developers' discount lowers property assessments by nearly 90 percent. It’s meant to encourage construction, especially during downturns in the real estate market, according to a top official in Cook County Assessor Joseph Berrios’ office.
County officials say the unwritten policy, which predates Berrios’ time as assessor, is based on their interpretation of state law, though other counties don’t give similar discounts.
Photo by Rich Hein | Sun-Times
Although the billionaire presidential hopeful isn’t the only beneficiary of the break, his tax savings stand out because of the size, the high value of the penthouse and the length of time – five years – it remained on the market.
“Trump was afforded the same development reduction based on vacant unsold units, which is granted to all developers in Cook County,” a spokesman for the Trump property says. “It was not created for Trump Tower.”
The 14,260-square-foot penthouse takes up the entire 89th floor of the building at 401 N. Wabash. At more than 1,100 feet above ground level, it’s higher than the John Hancock Center’s observation deck, with 16-foot floor-to-ceiling windows, five bedrooms, eight bathrooms and 360-degree views of downtown Chicago and Lake Michigan.
When Trump owned the condo, the assessor’s office initially set a fair market value of $11 million for the unit and its share of the land below. But, while it remained unsold, the assessor applied a 90 percent discount to the condo — though not the land. That reduced the “fair-market” value — used to determine the amount of property tax — to $1.4 million.
Trump’s property taxes on the penthouse ranged from $21,292 to $42,227 a year.
He sold it in December 2014 for $17 million to Sanjay Shah, founder and chief executive officer of Vistex, Inc., a Hoffman Estates technology company. At the time, Shah called it the most expensive residential sale in Chicago history, describing the penthouse as “one of the most extraordinary high-rise properties ever sold in the United States.”
The Trump Tower penthouse in Chicago provides quite a view. Photo by Marshall Gerometta | CTBUH - May 2009
With the sale, the county’s fair-market valuation for the penthouse rose to $12.2 million for 2015.
And the yearly property-tax bill skyrocketed to $223,502 from $25,710 the year before for Trump’s then-unsold unit.
The estimate of $800,000 in tax savings is based on what Trump would have paid without the discount, minus what he actually paid.
Photo by Marshall Gerometta | CTBUH - May 2009
Deputy assessor Thomas Jaconetty says that’s a false calculation because a higher assessment “would not have been legal.”
“The policy is based on our reading of the statute,” Jaconetty says.
Operating under the same Illinois assessment law, though, DuPage, Will, Lake, McHenry and Kane counties don’t give a developer’s discount. Instead, officials in those counties say they assess new properties based on the full value once they are ready for occupancy.
“I agree to disagree” with that approach, Jaconetty says.
The 14,260-square-foot penthouse takes up the entire 89th floor of Trump International Hotel & Tower. Photo by Marshall Gerometta | CTBUH - May 2009
If higher taxes were imposed, he says, “That would be a disincentive to develop the property.”
The tax incentive benefits the public in the long run by encouraging development, according to Jaconetty.
“The county ends up getting revenue that is enormously significant,” he says.
Jaconetty says he couldn’t “hazard a guess” about how many times his agency has given builders the discount Trump got other than it’s been given on “many, many” unsold units over the years.
The developers' discount isn’t automatically applied. The property owner first must file an appeal of the assessment — and do that again every year if seeking the discount for more than one year.
Photo by Marshall Gerometta | CTBUH - May 2009
Trump has hired Ald. Edward Burke and his law firm Klafter & Burke to handle property-tax appeals for the skyscraper, including the penthouse, the Chicago Sun-Times has reported, with Burke’s appeals reducing taxes on the building by more than $14.1 million since 2009.
Jaconetty says the assessor relies on sales records to assess property because values are difficult to determine until there’s a sale.
“The law does not permit us to value on speculation,” Jaconetty says. “Hard data comes from sales.”
Sales figures were available, though, for other Trump Tower units that sold more quickly on the floors just below the penthouse. As a result, new owners who paid Trump more than $5 million to buy units half the size of the penthouse paid, on average, $100,000 a year in property taxes while he paid about a quarter of that, records show.
Donald Trump - Photo by Gage Skidmore | Wikimedia Commons
Trump never lived in the penthouse, which, though partially unfinished, was considered fit for occupancy. Typically, high-end condos and residential spaces are sold that way, allowing it to be built out as to the buyer’s specifications.
It’s not clear why the penthouse wasn’t sold sooner. Trump Tower opened in 2008, the year of the recession, and “sales were notoriously slow in the building,” said Tom Shaer, a spokesman for the assessor, adding that Trump’s original asking price of $32 million was “highly inflated” and “not supportable in the market.”
Trump was unavailable to comment on this story.