PI Original Josh Kalven Tuesday August 25th, 2009, 10:55am

Memo To Fran Spielman: What About TIF?

Kudos to the Sun-Times for their headline on today's article previewing Mayor Daley's public budget hearing tonight: "A Meter Culpa From The Mayor."  Heh. But then come these passages from Fran Spielman's actual article: With a $520 million shortfall ...

Kudos to the Sun-Times for their headline on today's article previewing Mayor Daley's public budget hearing tonight: "A Meter Culpa From The Mayor."  Heh.

But then come these passages from Fran Spielman's actual article:

With a $520 million shortfall that can only be filled by tax increases and spending cuts, three nights of public hearings on Daley's preliminary 2010 budget are expected to turn into giant gripe sessions before City Hall lowers the boom. [...]

Even after wringing concessions from organized labor and drying up a "rainy day" fund created by the parking meter deal, Chicago has a $520 million budget shortfall in 2010.

With no obvious untapped sources of revenue, Civic Federation President Laurence Msall has warned that city government will be "forced to re-invent itself in the way it delivers services and eliminates services not critical." [Emphasis added]

By asserting that tax increases and spending cuts are the sole avenues available to close next year's budget deficit, Spielman reinforces the myth that Mayor Daley's overgrown tax increment financing (TIF) system simply can't be used to relieve pressure on the city's operating budget.  It's a myth the mayor has worked hard to erect and preserve.  Indeed, any mention of dipping into his TIF piggy bank is met with red-faced derision. 

But as we laid out earlier this summer, there are several avenues available to Chicago aldermen to free up TIF funds for operating expenses.  Here's the short version:

1) Release some surplus funds: Daley’s 150-plus TIF districts ended 2008 with $1 billion in aggregate unspent revenue.  Numerous other Illinois municipalities have shown how easy it is to release these surplus funds back to local taxing bodies.  Yet that possibility is rarely discussed when it comes to the Chicago system.

2) Retire some elderly TIFs:  Under Illinois law, TIF districts have a lifespan of 23 years and individual municipalities can extend them up to 35 years if they wish.  But assuming a TIF district has served its purpose (i.e. spurred redevelopment), there is no reason it can't be expired early, thereby providing a boost in revenue.

3) Index the tax base: At the time a TIF district is created, the amount local taxing bodies can levy from the enclosed properties is capped.  Over the ensuing decades, as inflation rises, the value of that capped revenue erodes.   One easy fix would be to index the TIF tax base to inflation, just as Massachusetts and California do.

The 2010 budget process will hopefully spur a lively debate among the mayor, aldermen, and the public about the city's priorities in these tough economic times.  Scaling back and reforming the TIF system should be part of that conversation, no matter how badly Daley wants to keep it out.

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