The TIF Twilight Zone

Comm. Mike Quigley — Wed, 09 Jul 2008 14:34:18 -0700

Imagine, if you will, traveling through another dimension, a dimension not only of sight and sound, but of imprudence. A wondrous land where more than $500 million a year is spent off-budget; a land where $500 million does not appear on a single tax bill; a land where $500 million is spent to spackle the cracks of waste, bloat, patronage, and corruption.

Welcome to the land of Tax Increment Finance districts (TIFs). Although that $500 million figure is merely the amount of revenue collected through TIFs in Chicago in 2006, the TIF twilight zone extends throughout Illinois, scooping up hundreds of millions more in taxpayer dollars every year.

Tax increment finance is one of those issues that bores you silly before you learn something about it -- and then it outrages you. Simply put, TIFs are widely-used economic development tools which capture all new property tax revenues within a specified “district” and reinvest them within that area’s borders for public improvements and private development incentives. Originally intended as a way to spark redevelopment of blighted or near-blighted neighborhoods, the network of TIFs now extends to such downtrodden areas as Chicago’s Loop -- encapsulating such notable tenements as the Sears Tower, Chicago Board of Trade, and City Hall.

Once a district is designated, any additional property revenue generated there over the next 23 years is directed to a TIF account and therefore is unavailable to the city agencies that oversee the schools, parks, libraries, etc. As a result, these agencies are often forced to raise their tax rates to generate the same amount of revenue. Of course, those higher rates fall directly on the taxpayers.

In addition, much of the revenue growth might have happened even without TIFs. If so, the TIFs are taking credit -- and cash -- they does not deserve. As documented in my 2007 report, “A Tale of Two Cities: Reinventing Tax Increment Financing,” my staff and I found that in Chicago, TIFs failed to produce the intended growth in property values at least 40 percent of time. Nonetheless, TIFs receive 100 percent of the revenue from that growth.

These sins might be forgiven if the TIF system was transparent and accountable to the public. But it decidedly is not.

In Chicago, the mayor’s office controls all TIF funds. Lax oversight by the City Council and scant public information means there are few checks and balances in the system. Aldermen need to start watching things more closely; but since projects in their wards are often the recipients of TIF funds, it is left to the public to keep watch.

Unfortunately, detailed information about TIFs is not easy to come by at present. The city produces annual reports for each TIF district, including a record of all expenditures $5,000 or greater. However, beyond a general category, these offer no details regarding the purpose of each disbursement. Furthermore, those reports are not available online. Instead, the city website features summaries containing far less information -- and those only appeared last fall, over a year after I started asking questions about TIFs.

The single worst aspect of the TIF system in Cook County is that taxpayers residing in the districts have no idea how much of their tax payments end up in TIF accounts. Indeed, while TIF is listed on every bill alongside the agencies receiving property taxes, the line always reads $0.00. This is due to a quirk in the way the County Clerk has historically calculated tax rates. But as a consequence, the taxpaying public is misinformed. In response, I have introduced a County ordinance to change the way property tax bills are calculated so that taxpayers can see how much of their payments are going into TIF accounts. The measure would also add a line to all tax bills in Cook County reminding taxpayers that the use of TIFs by municipalities increases tax rates.

Providing basic information to the public on the use of their tax money is the least we can do. But don’t be surprised when the big guns come out in opposition to any reform that might expose TIFs to greater scrutiny. I’ll keep asking, but what we really need to change the system – to make the TIF system work better for taxpayers and the distressed areas it was designed to help – is a large public chorus asking questions and demanding answers.

Mike Quigley sits on the Cook County Board of Commissioners, where he represents the 10th District. He is also an adjunct professor of political science at Loyola University, lecturing on politics, the environment, and local government.