Last week, I heard Chicago Reader columnist Ben Joravsky talked all about tax increment financing, the current complication in the City of Chicago’s budget. Originally designed to help improve blighted neighborhoods, the TIF program has turned into a slush fund with little transparency and a lot of potential for corruption.
For example, the 53rd Street TIF was set up to help small merchants improve their storefronts, but the money is going to the developer of the new Hyatt Hotel project.
A TIF district takes money from property taxes and uses it to create improvements in the neighborhood. The idea is that the improvements will raise real estate valuations enough that the TIF will pay for itself. However, that only happens if the TIF is narrow in scope, operates for a limited time, and is set up in an area that truly needs development. In Chicago, TIFs cover broad swathes of neighborhoods that may not be blighted, and the uses of the funds are not adequately disclosed. Taxpayers see that their property taxes are going up, and they assume that it is to fund schools or city operations, and in reality, it is not.
When Joravsky started covering the topic for the Reader, he quickly found that they were the vehicle of choice for Mayor Daley to find money for projects without disclosing the details to the taxpayers. Joravsky noted that Mayor Emanuel is more careful and more transparent in his use of TIFs than was Mayor Daley, but that is not saying much.
The gray area in the TIF law is that funding may go to neighborhoods with the potential to become blighted, but what does that mean? Joravsky said that, for example, a potentially blighted neighborhood may have a large percentage of buildings that are over 50 years old, but so do some of the best neighborhoods in the city. A developer interested in establishing a TIF can hire a planning consultant to help set the boundaries to meet the requirements; if the mayor’s office is making the request, then it’s easy to make a TIF that will qualify, especially as the consultant would be paid by the mayor’s office.
Some information is available through the Freedom of Information Act, but it is difficult to analyze as there are 160 TIFs. Still, Joravsky has tried; recently, David Orr’s office has put information about TIFs online and allows property owners to find out what they pay into them.
Joravsky said that he is mystified that there isn’t more outrage. He has spoken to Libertarian and Tea Party groups that seem to have thrown up their hands; the University of Chicago, a center of free-market economics, is also a beneficiary of TIF financing.
