For years, former Mayor
Richard M. Daley heard criticism that City Hall’s use of a particular economic development tool amounted to little more than a slush fund for him to subsidize corporate Chicago at the public’s expense.
Mr. Daley invariably responded that he used plenty of the money generated by the tool, tax-increment financing or TIF (pronounced tiff) for schools, parks, elevated-train stations and other purely public pursuits across the city.
Now, as aides to Mayor
Rahm Emanuel review the city’s use of TIF amid the backdrop of severe budget shortfalls, an analysis by the Chicago News Cooperative shows that TIF spending was allocated almost evenly between public works and subsidies for private interests.
The examination of city TIF records for the last eight years of Mr. Daley’s tenure reveals that his administration spent about $1.7 billion in TIF money toward public and private endeavors. While about $700 million was spent to the benefit of private interests, roughly $865 million went to public projects like school construction, street repairs and Chicago Transit Authority stations and tracks.
Another $1 billion paid off bonds issued to finance public and private projects, for a total outlay of almost $3 billion, the city records show.
The city began using TIF in 1984, after state lawmakers authorized the financing technique to help cities spur development in blighted or declining areas. Once the city designates an area as a TIF district, the amount of property taxes that the city, county, schools and other local governments can collect from it is frozen for 23 years. Any new tax revenue generated from rising property values — the tax increment — is collected by the city and must be spent within the district or in a bordering one.
The intent is to use these pots of money to lure investment from private real estate investors by fixing infrastructure, acquiring properties for developers or subsidizing them directly. As the developers build or renovate offices, homes and factories, property values presumably rise, leading to incremental increases in property tax revenues.
“I think the public would be in some ways heartened to know that a lot of their money has gone into public facilities and infrastructure,” said Rachel Weber, associate professor in the urban planning and policy program at the University of Illinois at Chicago and a member of the panel appointed by Mr. Emanuel to examine the program’s effectiveness. “This might answer some of the TIF critics that have said that TIFs have just gone to line the pockets of developers.”
But many people remain unswayed. They point out that much of the TIF money was diverted from public schools, parks, libraries and other taxing districts and was instead put into accounts that Mr. Daley controlled and kept shrouded in secrecy.
“The findings do nothing to dissuade what had been my longstanding concerns, which were transparency in the process,” said John Fritchey, a Cook County commissioner.
Mr. Fritchey, a North Side Democrat, irked Mr. Daley last year when, as a state representative, he introduced legislation that would have funneled TIF money directly to the Chicago Public Schools.
Mr. Fritchey and other elected officials in Chicago have said that hundreds of millions of dollars are sitting in the accounts of scores of TIF districts, even after Mr. Daley tapped the TIF account last year to help balance the city’s 2011 budget.
“There is no question that several good projects came to be through the use of TIF funds,” Mr. Fritchey said. “The bigger question is, Is the city getting its money’s worth out of that investment? It’s a troubling prospect to give millions of taxpayer dollars to projects that are also generating millions in developer fees.”
Mr. Daley vigorously championed the use of TIF. By the end of his tenure in May, city officials had established more than 160 TIF districts that covered about one-third of Chicago. In total, the districts capture about $500 million a year, city and Cook County documents show.
The amount is equal to about one-sixth of the city’s annual core budget, although under Mr. Daley the money was not tracked or approved as part of the budgeting process, and his administration provided only a vague accounting of its TIF activities.
Mr. Emanuel has already made marked improvement in transparency by making TIF data public. He has promised to detail the flow of TIF dollars in his first city budget proposal, due in October.
The analysis by the Chicago News Cooperative relied on TIF expense records obtained from the city’s Department of Finance through the Freedom of Information Act. Because officials did not classify expenditures by spending category in that data, the analysis involved categorizing thousands of payments. Ultimately, all but 2 percent of the city’s TIF spending was able to be tracked.
Between 2002 and September 2010 — when Mr. Daley announced he would not seek re-election —he used about $626 million for public projects, including rejuvenated C.T.A. stations, 11 new schools, Millennium Park and dozens of other parks throughout the city. Another $238 million went to street improvements, bridge repairs, new streetlights and other public infrastructure projects.
Developers received $505 million in subsidies, just over 30 percent of the total TIF money spent by Mr. Daley. Those payments included $5.4 million to United Airlines to move its headquarters to Willis Tower, $13.7 million for the insurance giant CNA to renovate its South Loop headquarters and $8.5 million to help renovate the Carbide and Carbon building to house the Hard Rock Hotel on Michigan Avenue.
The city also spent more than $200 million buying properties, razing vacant buildings and cleaning up toxic land, mostly for the benefit of private developments.
Another $90 million, or 5 percent of total spending, was used for program administration, consulting and legal services, and for job training for businesses in select districts.
Those figures track closely with city data presented last month at a public forum organized by Mr. Emanuel’s Task Force on TIF Reform. The 10-member panel has promised to release a report and recommendations this month.
According to the documents distributed at the forum on the South Side on July 28, the city has spent about $3.7 billion in TIF money on public works and private projects in the almost 30 years since the program began. Private subsidies accounted for a slightly greater share of the disbursements than public works.
Of the $1.8 billion devoted to private investors, the leading categories were mixed-use projects (33 percent), commercial (29 percent), industrial (15 percent) and residential development (11 percent).
The $1.7 billion for public works was divided among schools (47 percent), “streets and public buildings” (40 percent) and parks (13 percent).
The city has also spent $131 million in TIF proceeds on programs to aid small-business owners and homeowners, the city documents show.
In recent years, however, the balance of TIF spending has tilted more toward public works than private subsidies. The biggest factor in that shift was the city’s $515.2 million, seven-year initiative to build or renovate 23 schools. More than $340 million of the money earmarked for the schools program has already been spent, records show.
That left about $868 million in unspent TIF money at the end of 2010. Although the weak economy and high rates of unpaid property tax bills could slow the program’s growth, city officials project that recently created TIF districts will still drive an increase in revenue, from $463 million this year to more than $508 million in 2013.
How that money is used may depend on the reform panel’s suggestions. Members are “charged with developing a comprehensive policy regarding the use of TIF funds, including standards for future investments and measurable performance criteria,” according to the annual financial analysis released by Emanuel aides last month.
In that document, city budget officials estimate that private developers contribute $5 for each TIF dollar the city invests.
“The city understands that, on a big-picture level, there is value in looking at the program as a whole, which is why the mayor is leading a comprehensive effort to evaluate all aspects of the TIF program,” said Tom Alexander, a spokesman for the Emanuel administration.
Representative Mike Quigley, Democrat of Illinois, praised the new mayor’s efforts at transparency and said the city should conduct an audit to track the contractors, lawyers and others who benefited from the program.
“This is Chicago,” Mr. Quigley said, “and when you are flying blind with hundreds of millions of dollars, bad things can happen.”
Critics of TIF frequently complain that too much of the money was spent in or near downtown, in areas that scarcely need such help. The analysis confirmed that TIF spending was skewed toward wealthier areas. For example, about $430 million was spent since 2002 in the Central Loop TIF district alone. That district’s TIF status expired in 2008.
But some experts say Mr. Daley’s heavy spending on downtown reflected the fact that TIF districts in Chicago’s dense, booming core netted vast amounts of property taxes, while those in poor areas struggled to raise revenue.
“In truly blighted areas, it’s very hard for TIF to jump-start development,” said Ms. Weber, the University of Illinois-Chicago professor and TIF panel member. “It’s a sweetener, so it plays off of there being some developer interest in an area.”
jvelez@chicagonewscoop.org
Residents of all ages are invited to attend our first annual Community Resource Fair on Saturday, August 27 from 10:00 AM to 2:00 PM at Dunham Park.
er line. During a heavy rain event, the smaller opening allows less water into the sewer system. The streets act as a temporary holding area for the rainfall. Surplus water in the system will not be forcing contaminated water back through homeowners' private lines and into the home's lowest spot - the basement. The street ponding buys time for the system to catch up.
