As local public schools begin to grapple with devastating budget cuts, community activists from across the city continue to put the spotlight on Chicago’s tax increment financing (TIF) program.
Since its inception in 1986, the city’s TIF program has raked in about $5 billion in property tax dollars. Of that money, $2.7 billion was diverted from the school district.
In return, Chicago’s TIF program looks to spur economic development in blighted areas by providing subsidies to companies for projects, such as housing complexes or a shopping center. TIF money has also been used for school building construction projects.
But at a recent TIF town hall meeting, Rogers Park residents criticized the program, saying it has done little to generate economic development in the 49th Ward and other struggling communities across the city.
“We need to end the TIF program,” said 49th Ward resident Don Olson at the CivicLab’s TIF forum held at Loyola Park last week.
The CivicLab is making its way to wards across the city as part of its TIF Illumination Project, which is focused on promoting TIF transparency at the local level. Since February, the CivicLab has illuminated 89 TIF districts inside 12 wards.
The more than 100 far North Side residents who attended last Monday's meeting decried the city’s practice of handing out millions of dollars in TIF subsidies to profitable companies such as Coca-Cola, the Hyatt Hotels and Walmart. And they slammed Mayor Rahm Emanuel’s recent proposal to use $55 million in TIF funds for a DePaul University basketball arena and hotel near McCormick Place as part of the “Elevate Chicago” plan.
As part of the controversial deal, DePaul University would pay $70 million for the $173 million arena and another $70 million would come from the McCormick Place Exposition Authority’s bond fund. The remaining $33.5 million for the arena is slated to come from TIF dollars, while another $21.5 million in TIF money would be allocated for the purchase of land for the nearby hotel.
Under the mayor’s proposal, Chicago’s Children Museum would also be expanded and Navy Pier would see a series of other improvements in an effort to boost tourism and turn the location into a world-class destination. The “Elevate Chicago” announcement in May came just before the Chicago Board of Education voted to shut down 50 neighborhood schools due to CPS’ reported budget deficit and underutilization crisis.
“How many times have we heard this dialogue about a world-class city,” the CivicLab’s co-founder Tom Tresser asked at Monday’s TIF forum. “To me, you can’t have a world-class city if you’re only graduating 54 percent of your kids from high school.”
The Chicago Reader’s Ben Joravsky and Mick Dumke, who both report extensively on TIFs, were also panelists at the TIF meeting. Audience members asked the reporters what could be done to stop the city from using the $55 million of public money.
Joravsky said the TIF program essentially diverts some $225 million in tax revenue from the school district each year, adding that, consequentially, there needs to be a voice that will speak up for public education in the city. The problem, he said, is that the watch guard for public education in Chicago is a school board of mayoral appointees “who are far more rubber stamp than the Chicago city council.”
The Chicago Board of Education should have specifically denounced the DePaul arena and hotel deal from the start, Joravsky said. But instead, the board “has been completely silent” on the proposal.
“(The board members are) choosing for whatever reason to play along with this scam. So you ask me what we can do? I would say we have to have a different kind of school board,” he said.
The full city council still has to sign off on the proposal, which could be the only hope for stopping the $55 million TIF deal, Joravsky added.
Dumke said residents should lobby the city’s aldermen, urging them to vote ‘no’ on the deal.
“That’s the only possibility of, if not stopping this, at least raising enough of a stink so that it becomes kind of an issue through history,” Dumke said. “We’re stuck with the parking meter deal, but the one thing we can say is that everybody whose name is attached is going to go down in history with this deal.”
Dumke added that residents should not underestimate the power of “public shaming.”
“Sometimes that’s what you have to do,” he said.
Members of the Chicago Teachers Union (CTU) and Raise Your Hand For Illinois Public Education, among other groups, were also at the meeting.
According to Raise Your Hand’s calculation, as of July 4, the reported budgets for some 150 local public schools amount to a combined figure of more than $90 million in cuts as a result of CPS’ new per-student budgeting system. CPS handed principals their individual school budgets for the next academic year last month.
The CTU and other education activists have called out CPS for failing to go after other revenue streams before making budget cuts, including redirecting TIF surpluses back to the school district.
Local officials have also raised concerns about the cuts, including members of the Chicago City Council's Progressive Reform Caucus.
“Instead of divesting from our public education system, we should invest heavily from the TIF funds,” the caucus said in a statement at the end of June. “If we act now and surplus a portion of the annual TIF revenues and re-invest in neighborhood schools, our school funding problems would be partially alleviated. We understand an annual TIF surplus may not be a sustainable solution, but it's available now and clearly better than short changing our children's future with draconian cuts.”
In addition,during a press conference last week, Ald. Ameya Pawar (47th), State Reps. Ann Williams (D-Chicago) and Greg Harris (D-Chicago), and Cook County Commissioner John Fritchey suggested the city use TIF surplus funds as a “stop-gap” measure to temporarily tackle CPS’ budget problems.
At the TIF meeting, CTU Vice President Jesse Sharkey said the school budget cuts would likely lead to the end of recess, art, physical education and other programs promised with the longer school day. He also announced that the union would begin neighborhood canvassing this summer to spread awareness about the TIF program’s impact on public education.
Residents of the 49th Ward also learned at the meeting that the six TIF districts in their ward siphoned $1.7 million of their property taxes in 2011, according to the CivicLab's analysis. The 49th Ward produced about $47 million in property taxes in 2011, but the TIF districts took about 4 percent of that money, Tresser said.
According to the CivicLab, the TIF districts located within the 49th Ward had $5.9 million sitting in their collective bank accounts at the end of 2011.
And by itself, the Howard Street/Paulina Avenue TIF District extracted $21.7 million in property taxes since it was created through 2011.
Of the projects created in part with TIF money in the 49th Ward, 22 percent were public and 28 percent were private. Another 50 percent of the projects funded with TIF money through 2010 were for non-profits, specifically Loyola University, which was authorized to receive more than $20 million in 2006 for campus renovations.
Private projects that received a TIF subsidy included a shopping center on Howard Street with a Dominick’s and redevelopment of the Howard Theater, the CivicLab found.
In other wards, nearly all of the TIF projects funded through 2010 have been skewed to the private sector with very little public developments, Tresser explained.
“At least you can say in the TIF scheme of things, you are getting some public improvements with your TIF dollars,” Tresser added.
Some of the public projects funded with TIF funds included the Chicago Transit Authority's Howard Street 'L' station and the Chicago Park District’s Gale Community Center and Willye B. White Park.
Tresser stressed that TIF money was not originally intended to be spent on parks and other projects that do not generate future property taxes.
“It is legal, however, because TIFs have been morphed so drastically,” he said.
One attendee said although the 49th Ward has had TIF districts for years, not much has changed in terms of commercial development.
Dumke said TIF districts in low-income areas that need economic development the most do not generate as many property tax dollars for future projects. And in the areas where districts are generating money, there are no standards in place for how the funds are spent. He said tax increment finance is a “giveaway” program on an ad hoc basis.
“Is it the smartest way to get our city prosperous through these rifle shot, clout-driven gifts ... is that the way to make our city proposer for everyone," Tresser asked.
Chicagoans need to "put their thinking caps on," Tresser added, and decide for themselves what economic development should look like in their city. A better, long-term economic development strategy could involve helping more Chicago students graduate high school, rather than throwing TIF money at Walmart and other rich companies, Tresser noted.
But the TIF program "will never address that,” he said. “We need a whole other game to get that fixed.”