TIFs were abused. Time for a new approach to city investment.
If you had to use one word to describe Chicago’s downtown, what word would you use? Dazzling? Absolutely. Blighted? No way.
So why, for so many years, did the Loop get a helping hand from tax increment financing, aka TIF funding? The way the state’s TIF law is structured, blight is supposed to be a prerequisite for a project or parcel of land receiving TIF help. Some blocks of downtown may benefit from investment and sprucing up, but it surely isn’t blighted.
Chicago has a long history of abusing the TIF law. More recently, though less egregiously, the city has expanded the purpose of TIFs to help spearhead major projects in dormant areas that are ripe for redevelopment.
It’s time for a TIF do-over by new Mayor Lori Lightfoot. The city can’t afford to be a participant in every new project that comes to town.
The worst transgressions came under Mayor Richard M. Daley. TIF districts proliferated throughout the city like dandelions while Daley was in power. In downtown, TIFs popped up in the Loop and the LaSalle Street Financial District, subsidizing private development projects with millions in tax dollars. At times, that money was “ported” out of a TIF district to pay for a project in a different neighborhood.
Taxpayers bear the costs. Once a TIF district is set up, tax revenue collected within its boundaries is frozen for up to 23 years. The incremental tax revenue increases that are produced by rising property values within the TIF are supposed to get reinvested into improvements inside the district. As a result, that money doesn’t go toward improving the neighborhood’s schools, parks or libraries.
TIF abuse eased under Mayor Rahm Emanuel, who phased out some TIF districts that no longer needed the economic and infrastructure boost TIF money provides. Still, under Emanuel, nearly half of the TIF funds spent by his administration went to the city’s central business district, rather than to Chicago’s neighborhoods.
Now comes Lightfoot, who says that she gets the problem with TIFs. A report her mayoral transition team compiled and released in May said the city’s TIF process “has been warped, causing division and trauma to the people and communities TIFs were designed to protect.”
At the core of any reform Lightfoot undertakes should be a renewed emphasis on the original intent of TIFs — reviving neighborhoods suffering from real, discernible blight and disinvestment. What is blight? Streets in Englewood lined with vacant lots. What isn’t blight? Willis Tower and the other skyscrapers that fill downtown’s LaSalle Central TIF district.
TIFs with projects that no longer need a helping hand should be phased out, so that those tax dollars can get channeled back to CPS and other taxing bodies. City Hall’s process for deciding how TIF money is used also needs reform. Decision-making on how funds are spent is too opaque.
That’s the verdict from the city’s inspector general, Joseph Ferguson, In a report released this month, he called for much more clarity from City Hall in how it justifies TIF dollars for specific projects, and what criteria it uses to decide whether TIFs should continue or expire earlier than planned.
TIFs can serve a valuable role in economic growth. Recent uses of TIFs for mega-developments Lincoln Yards on the North Side and “The 78” between the South Loop and Chinatown will go toward important investments in roads, bridges and other infrastructure. They are parts of major projects that will infuse the city with thousands of jobs and billions of dollars in economic activity. Those two development sites were fallow, not blighted. We supported the projects based on current TIF practices. A lawsuit filed in April by several groups seeks to block those TIF agreements.
A rethinking of TIFs should clarify the rules, end abuses and raise the bar on usage of taxpayer money to spur development. The point is to prioritize projects that would improve life for Chicagoans but likely wouldn’t happen unless there’s government support.
Developers should know they need to make a strong case that their project will improve life for Chicagoans and likely wouldn’t otherwise get built. The city needs investment, but doesn’t have to play the role of investor.
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