Data centers near O’Hare win nearly $100M in local tax breaks, leaving suburban homeowners to cover the gap

Over a dozen data centers located in the northwest suburbs of Cook County, Illinois, including Northlake, Elk Grove Village, and Franklin Park, have been granted nearly $100 million in local property tax breaks. These reductions, stemming from assessment cuts by Cook County officials and special tax incentives, have effectively shifted the financial burden to local homeowners, who face higher annual tax bills. The practice has drawn a growing public backlash, even as local leaders like Elk Grove Village Mayor Craig Johnson and Northlake Mayor Jeffrey Sherwin defend the incentives as necessary to attract and retain businesses.

Fritz Kaegi, the outgoing Cook County Assessor, has been a vocal opponent of these valuation reductions, arguing that commercial properties, particularly data centers, have been historically undervalued. His office, through its director of valuations research, David Lehman, has battled data center operators and their appraisers over assessment methods, advocating for valuations based on power capacity (kilowatt) rather than square footage and including expensive systems like backup generators as real property. For instance, a Microsoft Azure data center in Northlake was ultimately valued at $364 million by the Board of Review, significantly less than Kaegi's $900 million estimate but higher than Microsoft's appraisal of nearly $250 million.

Taxing bodies, such as school districts, sometimes settle with data center owners to avoid prolonged legal battles and potential retroactive refunds. In one such case, Digital Realty reached a settlement with the Leyden Township school district regarding a Northlake property valuation, much to Assessor Kaegi's dismay, as he felt it undermined efforts to secure higher tax revenues. The property tax community remains divided on how to accurately assess data centers due to their unique nature and the scarcity of comparable sales data.

Cook County leaders are now re-evaluating their approach to these tax incentives. A property tax reform working group, coordinated by County Board President Toni Preckwinkle's office, has recommended transforming the current "by-right, shall-issue" incentive programs into more tailored, tiered systems. Critics argue that data center developers do not need these substantial tax breaks, given the industry's profitability and the prime real estate locations already available with access to power, water, and fiber-optic lines.