Tobacco giant Altria won a lucrative property tax break last year on a Franklin Park factory from the office of Cook County Assessor Joseph Berrios, who also is the co-owner of a lobbying firm that counts Altria among its longtime clients.

In September, Berrios’ office slashed the real estate assessment on a 500,000-square-foot chewing tobacco warehouse and manufacturing facility owned by the U.S. Smokeless Tobacco Company, part of the Altria Group which is best known for its Philip Morris cigarette brand.

The action shaved about $370,000 off the factory’s 2017 property tax bill. And the value of the break could potentially be worth hundreds of thousands of dollars more. Records show the warehouse was under contract to sell for double the value that Berrios’ office assigned, despite the legal requirement that the standard for such determination is 100 percent of fair market value.

The Berrios lobbying firm, B-P Consultants, has represented the interests of Altria and its subsidiaries in Springfield since 2009, state lobbyist registration records show.

In a brief telephone interview, Berrios told the Better Government Association he “wasn’t involved” in the Altria tax appeal. At the same time, Berrios said he believed the assessment reduction granted to Altria was justified.

“I stand by the decision,” Berrios said.

He declined to answer questions about his lobbying business because “that is not political.”

In addition to his $125,000-a-year public job and the private lobbying business, Berrios also serves as chairman of the Cook County Democratic Party.

Berrios since taking office in 2010 has been embroiled in a series of controversies involving his political ties and hiring of relatives to work in his office.

But the interplay between the public and political hats Berrios wears has come under intensified scrutiny following a Chicago Tribune investigation last year detailing broad disparities in residential tax assessments from his office that disadvantage low- and middle-income property owners.

Previous BGA reporting has also highlighted the tight relationship between the assessor and property tax lawyers who thrive off a flawed assessment system while funneling donations to Berrios controlled political committees.

The Altria tax break raises questions about yet a third hat worn by Berrios — his ownership interest in B-P Consultants — and how the firm represents the business interests of a client that separately sought tax relief through the assessor’s office run by Berrios.

Such controversies are coming to a head as Berrios seeks reelection to a third term and faces a challenge in the March 20 Democratic primary from political newcomer Frederick ‘Fritz’ Kaegi, a former investment fund manager from Oak Park.

U.S. Smokeless' break

For years, Altria’s U.S. Smokeless subsidiary had used its Franklin Park facility to manufacture popular Skoal and Copenhagen brands of chewing tobacco. But in late 2016 the company announced it planned to lay off the factory’s 246 employees, sell the building and move operations out-of-state.

Last summer, it asked Berrios’ office to lower the factory’s assessed value on the grounds that the building was emptying out and, on average, was 45 percent vacant for the year, records show.

The assessor’s office responded by lowering its estimate of the value of the property to $8.1 million from the original value of just under $12.3 million. That translated into a reduction in the 2017 tax bill to about $725,000 from just under $1.1 million.

But as the appeal was being weighed, U.S. Smokeless had already signed a contract to sell the property for $16 million—double the value placed on it by the assessor. If Berrios’ office had valued the property close to the actual sales price, Altria’s tax bill would not have dropped but rather increased to as high as $1.4 million.

The $16 million sale closed just days after the assessor’s office signed off on the break.

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Unlike with the income or sales tax, a break granted to one property taxpayer does not translate into a loss of revenue for local taxing bodies. Instead, the tax burden simply gets shifted to other property taxpayers to make up the difference.

In short, the decision by Berrios’ office to effectively reduce the tax bill for Altria meant that all other property owners in Cook County, and in particular those in Franklin Park, had to pay a little more.

Records show Altria gained the break from Berrios’ office even as the assessor held a 49 percent interest in B-P.

Berrios is not personally registered to lobby, but his partner in B-P, former state representative Sam Panayotovich, is.

Both share in earnings from B-P, which, in addition to Altria, has a client base that includes cable giant Comcast as well as trade associations for the makers and operators of gambling machines, bars and package liquor stores and bowling alleys.

Berrios and Altria declined to reveal how much B-P has been paid to lobby on behalf of the tobacco firm. The Cook County ethics ordinance does not bar Berrios from outside employment, but it does prohibit him and other elected officials from making decisions on matters in which they have an economic interest.

Tom Shaer, a spokesman for the assessor’s office, said the Altria assessment break was justified and unconnected to the tobacco firm’s lobbying contract with B-P. All assessment appeals are decided “solely on merit,” Shaer said.

Those arguments were echoed by Altria spokesman Steven Callahan. “It is our understanding that property tax assessments do not always correlate to the market value of a property,” Callahan added.

An unusual deal

Under Illinois law, commercial properties are supposed to be valued by a county assessor at fair cash value — in other words an estimate of what a willing buyer would pay a willing seller. That is not what happened in the case of the Franklin Park factory, with Berrios’ office valuing it at half of what it turned out to have sold for.

It is not unusual for county assessors in Illinois and elsewhere to provide assessment relief based on vacancy for commercial rental properties in hardship cases where problems outside the owner’s control make it difficult to keep tenants and earn revenue. Examples of problems that would meet that test are an economic downturn, fire, or flood damage.

The U.S. Smokeless Tobacco Company facility pictured above was sold for nearly double the assessor's estimate of its fair market value.

The vacancy at the U.S. Smokeless factory was quite different.

The building was not a rental property but rather one used by the owner to make its own products. And the vacancy resulted solely from a business decision by U.S. Smokeless to relocate its operations.

Records filed by U.S. Smokeless as part of its bid for an assessment cut stated the property had been put up for sale and no attempts had been made to lease the factory space it had vacated.

In weighing any assessment appeal, Berrios’ office requires it be notified of any property sale by an owner. But there is no indication contained in the appeal file for the Franklin Park property that Altria informed the assessor that a $16 million sales contract had already been signed.

The buyer of the property was a partnership between Panattoni Development Company, a leading industrial real estate firm based in Newport Beach, Calif., and the California teachers pension fund. The new owners plan to tear down the tobacco factory and replace it with a modern industrial facility that would employ between 60 and 150 workers, according to documentation filed by the developer with Franklin Park.

Panattoni informed the village last summer that it had agreed to buy the property for $16 million. That was around the same time Altria was asking Berrios’ office to cut the assessment on the factory because it was emptying out.

In an ironic twist, the Panattoni disclosure was included in its application to Franklin Park to gain a different property tax break designed to encourage industrial development in the town located near O’Hare International Airport.

Altria spokesman Callahan also defended the propriety of the tax relief his company obtained from Berrios’ office.

“Common tax practice recognizes that a manufacturing facility that is limiting operations is eligible for a lower assessment for property tax purposes than a full utilized factory,” Callahan said in an emailed statement.

Shaer, the Berrios spokesman, said court decisions prohibit the assessor from using the sale price of a property as the sole determinant of its worth for tax purposes. “We cannot and do not assess a property solely on its sales price,” said Shaer.

What’s more, Shaer said lawyers for Berrios’ office would not have considered the transaction a traditional sale but rather a sale-leaseback. However, records show Panattoni allowed Altria to continue to occupy some of the property only through June before it is to be demolished.

Shaer said Berrios did not review or discuss the Altria tax matter with anyone. The company underscored that point, with Callahan saying no one representing Altria contacted Berrios to discuss the tax appeal before his office. The appeal, Callahan said, was handled for the company by an outside law firm.

Since 2010, Altria has donated $1.3 million to Illinois politicians, though it made no contributions to political funds controlled by Berrios. The company, however, did make $12,000 in donations to Berrios’ daughter, Toni, who served as a Democratic member of the Illinois House from Chicago through 2014.