By Nathan Worcester
CivicLab, a local civic collaboration institute that describes itself as a “do-tank,” has accelerated efforts to end tax increment financing (TIF) districts. The organization intensified this campaign, originally launched in autumn 2019, in light of the ongoing coronavirus (COVID-19) pandemic.
TIFs generate value for redevelopment in a designated geographic area by collecting all property tax money above a given threshold. During the first year of the TIF, for example, officials might assess a district’s property taxes at $10,000. If government collects $11,000 in property taxes the next year, the extra $1,000 goes in the TIF fund.
Jonathan Peck, president and CEO of CivicLab, said experience proves TIFs are fundamentally unworkable and inequitable in Chicago since being introduced under Mayor Harold Washington in 1984. He cited feedback from CivicLab’s TIF 101 workshops, held across the city, as a key motivation for the organization’s new focus on abolition rather than reform.
“The message was pretty clear: they want more accountability, not less,” said Peck. “Based on our research, based on conversations, based on monitoring how the funds were being spent, it was clear that the loser in this TIF program was predominantly Black and Brown neighborhoods—and most certainly low-income communities across the City of Chicago. We saw the contrast between the lack of investment and the surge of investment in certain North Side neighborhoods—the surge of investment in the central district of the city—versus the divestment, or the lack of investment, or the neglect taking place in neighborhoods across the South and West Sides. We came to the conclusion as an agency that, at this point, the tax increment financing scheme clearly has not served all of Chicago.
“We began to see a lot of payback going on—a lot of typical Chicago machine politics.” Peck added, citing the fact that TIF districts proliferated under Mayor Richard M. Daley. “They were all geared towards ensuring he retained political control of the wards.”
‘End the TIF program’
“Our position is, end the TIF program, take the current $1.2 billion [in TIF funds], and use it towards the need to combat the COVID-19 pandemic in Chicago,” Peck continued. “Wouldn’t it be great to have over $1 billion to shore up all the efforts of folks combating this pandemic? It’s clear the City has to have a more robust plan to combat COVID-19.
“Don’t use public dollars for private gain,” Peck emphasized.
“CivicLab is right that TIFs have been grossly abused in the past,” said Dick Simpson, professor of political science at the University of Illinois at Chicago (UIC). “However, total abolition is probably not the best idea. There aren’t many other tools for economic development. We need to take the excess funds from the TIFs and redistribute them effectively.
“If what’s on the docket now doesn’t work, then we should reform it again,” added Simpson.
“If people feel like they can reform this within the culture of corruption in Chicago, within machine politics… go for it,” said Peck. “At CivicLab, we actually don’t see that happening. I think it’s very naïve of people who actually think that will happen if you just tweak it a little bit.”
Rachel Weber, a professor at UIC’s College of Urban Planning and Public Affairs (CUPPA), seconded Simpson’s concerns with TIF abolition.
“Abolishing TIFs would not provide the City with much money; 60% to 70% of what’s in the accounts would likely revert to the Chicago Public Schools,” Weber said. “When TIFs are terminated, the value in the accounts is redistributed on a pro rata [proportional] basis to the overlapping taxing jurisdictions. Because we are in a county and a state with property tax extension limitations, what would happen if your base swells, if your tax rolls swell, it’s possible that you would have to lower your tax rate. So, it’s not like the schools would necessarily be getting all of this money back. They just have to lower their tax rate. It would be the property taxpayers paying less.
“Over 50% of the expenditures in TIFs have been used for infrastructure—building affordable housing, and building senior housing, and building playgrounds and schools, and filling in potholes,” Weber continued. “If you ask any affordable housing developer in the city, ‘Should we get rid of TIFs?’ they’re not going to say yes unless there’s something you can propose in its place.
Improve capital budgeting
“I would like to see a more emboldened citywide capital budgeting process take place instead of it being fragmented through this TIF system,” said Weber. “I think that would be a lot more reasonable for the City then relying on which places are in TIF districts.”
“We’ve strayed very far from the original intent of the law,” Weber added, referring to the 1977 legislation that allowed TIFs in the State of Illinois. “The enabling legislation was all about jobs, and it’s become a kind of all-purpose redevelopment tool, mainly used for real estate development.”
Since her election in 2019, Mayor Lori Lightfoot has advocated reforming the TIF system, including introducing a new TIF Investment Committee that would make “equity” the primary determinant in spending decisions.
“Tax increment financing (TIF) is one of multiple financial tools the City uses to improve neighborhoods, primarily involving public infrastructure, schools, affordable housing, parks, public transit, and related projects that are budgeted years in advance and financed over extended time periods,” wrote Kristen Cabanban of the office of public affairs for the City of Chicago, in response to Gazette Chicago inquiries. “The program will continue to be utilized responsibly and transparently for these and other investments that help make neighborhoods better places to live, work, and raise families.”
Weber expressed some support for Mayor Lori Lightfoot’s efforts to
reform the TIF program, saying they were “a step in the right direction.”
“I think TIF is at its essence an inequitable development tool because it relies on the potential to attract developer interest and private market interest,” added Weber. “You have to have property values that have a high probability of increasing. The areas that have a high probability of property values increasing are those where developers and households are already interested.
“The TIF program rewards those neighborhoods that are best able to reward themselves,” added Weber. “It has a greatest effect on areas on the perimeter of the central business district, where property values may have been low at one point and they are experiencing rapid escalation and appreciation. So that may be because the City, like it did on the Near North Side, tore down the Cabrini Green homes and public housing.”
“Let’s have a real discussion about how we develop the city for and by the people,” said Peck. “What can we do to make sure that all the neighborhoods get the resources they need—particularly the ones that have been neglected historically for the last two generations?”
For the City of Chicago Office of Public Affairs, call (312) 744-5000. For View CivicLab’s People’s COVID-19 response at www.civiclab.us/peoples-covid19-response/. For Simpson, email firstname.lastname@example.org. For Weber, email email@example.com.