Nobody buys a house without checking the fine print: What's the crime rate in the neighborhood? How are the schools? What was last year's property-tax bill?
For prospective buyers in Chicago, what's missing from the equation is how much property taxes will go up in the future.
It's not a good time to invest when the bottom's falling out, and the foundation is slowly crumbling beneath the city of Chicago, which has a more than $34 billion pension-debt problem.
In spite of the city's dire financial straits, however, Chicago realtors are experiencing a boom this summer, as prices are rising in the city and good listings are moving within a matter of days.
With average rent at nearly $2,200 per month, many Chicagoans in their 20s and 30s are opting for a mortgage instead of a lease.
But anyone thinking of investing in property in Chicago should read this disclaimer: Your taxes are going to skyrocket in the next few years, and, for the most part, your money will be going toward debt payments and pensions, not city services.
Illinois homeowners already face the second-highest property tax burden in the country, according to the nonpartisan Tax Foundation. Property taxes in the city are relatively low compared to those in the suburbs, though property taxes in the city went up by an average of $90 in 2014 according to Cook County Clerk David Orr. Property taxes on a home worth $199,000 totaled more than $3,300.
Property taxes are sure to continue rising in the city, with one main driver: public pensions.
For years Chicago has pushed off the harsh realities of its mounting pension debt in lieu of continuing to operate as if the problem didn't exist.
But that approach is starting to come apart at the seams.
Chicago Mayor Rahm Emanuel is floating a proposal to increase property taxes by $175 million over one year just to pay for contributions to the teacher pension system, which is $9.6 billion in debt and has less than $0.50 for every dollar needed to pay out benefits.
Chicago Public Schools, or CPS, faces a $1.1 billion deficit for fiscal year 2016. CPS just made good on a $634 million payment to the teachers' pension fund by borrowing and making stark cuts: more than 1,000 workers will lose their jobs and the CPS budget will be slashed by $200 million. Unfortunately, these cuts are par for the course for CPS over the past several years. In 2013, CPS closed 50 schools and laid off nearly 3,500 teachers and staff.
But teachers aren't the only ones who get pensions in Chicago.
The pension fund for Chicago firefighters has $3.1 billion in pension debt, and just $0.24 of every dollar needed to pay for benefits.
The police pension fund has $6.9 billion in debt and less than $0.30 of every dollar needed to pay benefits.
All in, Chicago owes $34.5 billion in pension debt. That breaks down to $33,500 per Chicago household.
Where will the city turn to get out of this hole? Likely, officials will try to continue to take on debt, though this will become a much costlier option, given the city's junk rating and extreme debt levels. That means the city will be more likely to hit up homeowners, and Emanuel's one-year, $175 million property-tax increase proposal is just the beginning. An April 2015 study from Nuveen Asset Management revealed Chicago would need an aggregate property-tax increase of well over 50 percent for Chicago government to start tackling its pension crisis. Another estimate pegs the property-tax hike at 60 percent. Analysis from Crain's Chicago Business suggests that property taxes could go up by 30 percent this year alone.
At the same time the city's obligations are skyrocketing, its population is growing at a snail's pace, gaining just 82 residents in 2014. With 2.7 million residents as of 2014, Chicago's population is the same as it was in 1920.
City leaders are in a bind: Raising revenues on a stagnant tax base is a risky game. Drive any more residents out to greener pastures and that tax base will begin to shrink. This was the nail in Detroit's coffin.
Big changes to the way city government operates are necessary if Chicago is to dig itself out of this hole. Ending special property-tax carveouts is one good place to start. Emanuel announced plans to freeze seven tax increment financing, or TIF, districts, freeing up $250 million over the next five years, according to the Chicago Sun-Times. TIFs use a portion of property-tax revenues generated in these special economic zones to give tax incentives to private developers located in these districts. Since 1986, Chicago has collected $6 billion in TIF funds, according to the Cook County Clerk. That's $6 billion in a slush fund to subsidize private development projects, not school, park and library districts.
Sunsetting TIFs and uncovering hidden wealth won't be enough, however - Chicago will need serious structural overhauls to end its pension bleed. Otherwise the city's pension monster will eat Chicago alive.