Progress Illinois

Angela Caputo: "Chicago has a sordid history of doling out TIF subsidies to corporations that later squander them"

That is the risk governments like the City of Chicago take in utilizing TIF. The initial investment isn't guaranteed to provide a positive return. In my opinion, this is just yet another reason TIF shouldn't be used. Like many things liberal, TIF looks like a good idea on the surface, but it is ultimately not good for our freedoms or our economy. We already have a fair economic system in capitalism, TIF meddles with that system in an attempt to correct a problem that already has a solution.

Here are some reasons our government should mostly not use TIF:

-Subverts our capitalist economic system, weakening the system and our economy as a whole because market conditions are no longer fully dictating the success or failure of a given business, but instead the government is.
-Redistributes wealth from the tax payers to weak, struggling, or failing businesses that should be eliminated because they can no longer provide quality, in-demand products or services at a competitive price.
-Redistributes wealth from one set of tax payers to benefit a completely different set of tax payers, and encourages future tax increases to pay for further TIF subsidies.
-In light of what we we've learned about the governor of Illinois and what we already know about Illinois and Chicago politics, TIF provides yet another lucrative avenue for corruption in government.

More TIF criticisms that can be found on the TIF Wikipedia page.

Anon - I deleted the portion of your comment that was cut-and-pasted from Wikipedia. Just include the link if you want folks to read content from another source.

To your point about TIF being a "liberal" policy, I don't think it's as simple as that. Many TIF critics agree that the tool can spur economic development in struggling areas. The problem is that, in Cook County, it's widely used in areas that aren't necessarily struggling beforehand, thereby defeating the original purpose on the broader scale.

In his report, A Tale Of Two Cities, Comm. Quigley points to a 2006 study proving as much:

"Paul Byrne found that TIF districts in greater Chicago lead to higher growth in areas marked by high vacancy rates and older buildings, suggesting that TIFs are effective when located in areas that are indeed suffering from blight. But he found evidence as well to support the claim that some TIFs are located in areas with “natural advantages” – that is, areas that were growing before TIF designation and were likely to continue to do so after TIF designation – including the Loop and Chicago’s low-density suburbs."

You can find Quigley's entire report here:

http://www.commissionerquigley.com/mq/index.php?option=com_content&view=...

Josh Kalven: "I deleted the portion of your comment that was cut-and-pasted from Wikipedia. Just include the link if you want folks to read content from another source."

No problem. I only included the points from Wikipedia in my comment because they might not be there in the same form or at all in the future as Wikipedia articles can change frequently. I was afraid I was taking up too much real estate as is. I tend to do that. :-)

Josh Kalven: "To your point about TIF being a "liberal" policy, I don't think it's as simple as that . . . it's widely used in areas that aren't necessarily struggling beforehand, thereby defeating the original purpose on the broader scale"

If that isn't liberal, I don't know what is. Further, any sort of wealth redistribution (which is at the heart of TIF) really can't be considered anything but liberal. And, it is my understanding that TIF is used primarily in larger cities which are usually liberal bastions.

In my view, TIF is the antithesis of capitalism. TIF subsidies are like a bunch of mini-bailouts that may or may not be repaid. If we let the market work such things out, we need not worry about getting repaid as quality, in-demand goods and services are always rewarded, and the tax revenues will follow naturally.

As for "TIF is the antithesis of capitalism....If we let the market work such things out, we need not worry..."

If we let the market work out such things, we end up in the fix we're in now. The economic collapse is, even to free market champion Alan Greenspan, proof positive that the market doesn't know how to act in its own interest, leave alone everyone else's.

Critics of liberal tax policy usually expect dollars to move from wealthier taxpayers to the benefit of lower income taxpayers. Under Mayor Daley’s administration, though, what’s actually happening with TIFs is the complete opposite: a disproportionate amount of tax is being extracted from lower income taxpayers and handed off to well-connected insiders for Mayor approved projects. Anonymous, there is a lot about TIFs that deserve your disapprobation but its redistributive effects are not as you imagine. And mini-bailouts? More like super-sized I-like-you presents that the Mayor gives out to his friends.

As you may have heard, Fix Wilson Yard, a residents group based in Uptown, filed a suit in the Cook County Circuit Court last week to block a major mixed-use development on the Wilson Yard site. Their suit alleges that the project’s developer improperly received a $51-million TIF subsidy to finance it. At issue is the City’s contention that the six-acre North Side site would not have been developed if the city didn’t provide financing. Fix Wilson Yard disputes this notion. The complaint asks the court to prevent the City of Chicago from providing TIF financing to the Wilson Yard project. The complaint also alleges that the city improperly approved changes to the development without fully considering public input. This includes an increase in the TIF redevelopment budget from $130 million to $150 million.

While I cannot comment on the particulars of the Wilson Yard case, I cannot help but reflect upon our own situation here in North Lawndale. There are 7 TIFs in our community that exist without any accountability to the local residents. By the time the TIFs expire, local property owners will have spent hundreds of millions of dollars, with very few direct benefits, and even less information. There are no TIF advisory councils; no public meetings regarding new developments that will receive TIF funds; no evidence that North Lawndale residents are hired to work for local companies that receive funds; no community benefits agreements; no comprehensive economic development strategy. Our schools and parks are suffering, and will have no alternative but to raise taxes and user fees because tax increases that would normally go to these taxing bodies are held in the TIF funds. Clearly, there are many rooms for improvement.

For the purposes of this article, I will focus on the “but for” test that every TIF must meet before approval. In a nutshell, the City must demonstrate that development in an area would not occur unless the TIF is created. When I look at the TIFs in North Lawndale, I’m not convinced that the only way to attract development here is to create TIFs. In fact, I don’t believe creating TIFs in and of themselves will guarantee that investment will come. I will share two examples—the Ogden/Pulaski TIF and the 26th and Kostner TIF.

The Ogden/Pulaski TIF was approved in February of this year. As a result of the creation of this TIF, essentially all of North Lawndale is in a TIF district. While I would agree that there are a number of blighted areas in the community, it is not all blighted. In fact, the data suggest that the area was on the rise before the Ogden-Pulaski TIF was approved.

The Ogden/Pulaski Tax Increment Financing Redevelopment Area Project and Plan dated August 3, 2007 indicates that the Project Area’s equalized assessed value (EAV) per acre was $187,346, in 2005, as compared to $405,529 for the City of Chicago. The revised Ogden/Pulaski Tax Increment Redevelopment Area Project Plan dated November 30, 2007, indicates that the Project Area’s EAV per acre was $330,749 in 2006, as compared to $475,323 for the City. In fact, the EAV in the Project Area (before the last tax hike) grew at a rate of 77% in one year, as compared to the City’s 17% growth in EAV for the same period of time. A recent article in the Chicago Sun-Times indicated that the average property tax increase in Chicago for 2007 was 8%, while the average increase for North Lawndale was 31%.

The Ogden/Pulaski Tax Increment Financing Redevelopment Area Project and Plan also indicates that there were 1,431 building permits issued for the area between 2000 and 2005. Of that number, 435 were for new construction. Remember this activity occurred before the creation of the TIF.

The 26th and Kostner TIF was created in 1998, and was retired earlier this year due to lack of investment. A new 26th and Kostner TIF was subsequently created around a vacant industrial parcel that had been the centerpiece of the original TIF. The new TIF is project specific, and will only generate revenue from the properties that will be developed in the future, as opposed to the existing properties in the surrounding neighborhood.

I have to wonder, if the developer can wait that long before the TIF gets enough money to finance development in the area, if the TIF was necessary in the first place. If the 26th and Kostner TIF doesn’t have the resources now, does that mean that some of the funding for upfront project costs could come from the adjacent Ogden-Pulaski TIF?

As I consider the examples above, I am left wondering how does the City clarify the “but for” test to ensure that creating a TIF is the only way the property may be developed. Given the current economy and collapse of the housing market, the TIF should be a tool of last resort rather than the first line of defense—or shall I say “offense” in this case?

Alderman Flores, if you are seeking citywide comment for ways to improve the TIF program, please e-mail me at valeriefleonard@msn.com

To "Anonymous" : you are absolutely right that TIFs transfer wealth from one class of taxpayer to another. In many cases, the wealth is transferred from low to moderate income minorities to subsidize developments pushed by wealthy individuals, influential foundations and powerful nonprofits. If we're not careful, poor minority homeowners are financing their own displacement in favor of the middle class homeowners who may or may not be minority.

I wouldn't call this liberal or conservative, but it is certainly regressive, if left unchecked.

Great piece. I will add a link to this article up on my blog. We have also seen how TIFs are miss used here in Pilsen.

I just noticed that you will be looking for ideas for TIF reform. You should call a citywide meeting to solicit ideas, including requesting Alderman Flores to host public hearings at City Council on the topic. I'd be willing to help arrange the meeting , reach out to other groups around the City who have concerns, and share experiences from North Lawndale. Please e-mail me at valeriefleonard@msn.com.