This report presents results of an analysis of the issue of the relationship between real estate development and property tax increases in DuPage County, Illinois during the 1980's. The motivation for this analysis is the interest of the East-West Corporate Corridor Association in clarifying issues raised by the report Impacts of Development on DuPage County Property Taxes (DuPage County Development Department, 1991a and 1991b).
The report by the DuPage County Development Department points out, among other findings, that there is a significant statistical relationship between increases in property taxes and real estate development, especially nonresidential development. This, of course, is contrary to the common wisdom that nonresidential development helps reduce the residential property tax burden.
The methods of the DuPage study have been criticized extensively and we concur with many of the points raised by the critics. Nevertheless, we do not believe that the methodological shortcomings entirely invalidate the statistical associations found in the study. At the same time, the study goes beyond what is warranted by its data in suggesting causal explanations. While the study does not claim to offer proof for these, its selection clearly focuses on costs imposed by non-residential development, and leaves out most other possible explanations.
Both the weakness of the empirical findings, due to methodological problems, and the problematic nature of the causal explanations, suggest a different, more comprehensive study is needed to answer the key questions: what is the relationship between property tax increases and different kinds of development in DuPage County, and why do these relationships occur? We suggest several components of such a study.
Our report starts out with a brief review of data on development and property taxes in DuPage County. We then review the methodology employed in the study by the DuPage County Development Department. Next, we discuss some alternative explanations for the relationship found in the study and suggest a series of questions or hypotheses for further analysis.