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Airbags

Tax Increment Financing is to local and state politics as foreign films are to pop culture: everybody knows about them, and when one of them causes a huge stir people will notice it, but generally, they leave them to the nerds. But "TIFs" (actually TIF districts) are one of the cornerstone's of Chicago's top down system of government, where legislators take on roles more like colonial governors, and the executive has something approaching complete discretion over decision making. And this makes Reader columnist Ben Joravsky very, very mad, if you hadn't noticed by his obsessive coverage of TIF issues over the last few years.

Joravsky rails against TIFs at almost every possible opportunity, and although this is usually a symptom of monomania, I think he's got a point. The reason Joravsky can tie the CTA near-catastrophe and ongoing drama to TIFs is... well, like everything in local government that has to do with money, TIFs had a lot to do with those things. "Incremental" taxes collected and spent on private investment into neighborhoods that don't necessarily need them are, simply, funds that aren't going to go into improving transit. Granted, these are property taxes and not sales taxes (the dedicated stream that goes to the CTA), but given the crisis in public transportation, freezing and rebating such huge amounts of tax money is hardly helping. Let's let the TIF Maven himself explain:

In 2005, the city approved $42.4 million in TIF funds to help build a $213.2 million underground train station at Block 37, in the heart of the Loop... Theoretically the underground megastation would provide round-the-clock service to both airports. Apparently no one at the CTA told the mayor that we already have 24-hour train service from downtown to O'Hare and Midway or that there are no tracks for the express train to run on. Instead, Daley's underground station was pushed to the top of the CTA's to-do list, ahead of buying new buses and repairing decrepit lines.

When I asked CTA and city officials why they were replicating existing service, I was told that the express train will get passengers to the Loop from O'Hare ten to fifteen minutes faster. When I pointed out that there are no tracks for the express I was told the CTA would deal with that problem later. When I asked why in the world the city would waste so much money on such a goofy idea, I was told it was the mayor's pet project and that when the mayor wants something you don't stand in his way. The CTA and the City Council approved the deal with hardly any debate.
(Chicago Reader, Sept. 28 2007)

But other than Joravsky, the issue only rarely bubbles into the political dialogue. Aldermen don't complain about them, the Mayor obviously loves them, and the press largely ignores them. It almost makes him seem like a crazy person.

Crazy like a fox. TIFs were supposedly created to help development in areas considered "blighted," but in reality, were a solution to constant developer demands for heavy government subsidies in exchange for investment. The idea is the legislature creates, by ordinance, a geographical "TIF District," or special services area (SSA). The property tax assessment (meaning the values of properties as defined by the Assessor's Office) will then freeze for an extended period, typically 23 years. The properties continue to be assessed, though, and the developers pay the "real" unfrozen tax, but the tax difference between what they would have paid at the frozen rate and what they actually paid is essentially rebated to them in the form of infrastructure supports, economic incentive agreements, etc. Except for a likely serious consequence for schools, it's not a terrible idea for attracting development.

The problem in Chicago comes from the City's TIFing mania: loose statutory language has allowed them to define basically any area as blighted. Those funds — the "tax increment" — although theoretically rebated to the district, actually go into a fund controlled by the executive — the Mayor through the Department of Planning and Development. If you don't immediately see a problem here, it may be time to revisit a civics lesson.

Only the legislature is supposed to be able to impose and, more importantly, spend tax money. It's called appropriation, the so-called "power of the purse." Our founding fathers were pretty smart that way: they knew that the directly-elected representatives, the "people's chamber," should have the sole right to spend, because then the public would have the most input into how the government spends money; government spending should therefore reflect the general population's priorities.

Not in Chicago. So much money is diverted into special TIF accounts that are controlled by the executive branch, that the mayor can essentially become his own appropriator: these funds don't need to be appropriated through a democratically approved budget. They just need to be spent "in the district" on any of a laundry list of vaguely-defined things. In some cases, they can even be spent in adjoining TIF districts. Tying up TIF funds can seriously drain tax revenue out of a ward or alternately lavish a ward with infrastructure improvements. This is just another way to force legislators, who are supposed to hold the power of the purse over the executive to as act like bureaucrats in the executive branch. Jostling for funds through sycophancy.

What I'm trying to say is: I'm with you, Ben.

Tax incentives of this sort are pretty good tools to use. The problem with TIFs is not their existence, but their nature. The language is too loose and the oversight too limp to stop abusing what is already essentially a corporate welfare program. At least 30 percent of the city's land area is TIF'd. It is just a happy coincidence that 30 percent of the city's legislators were appointed by the mayor, but it's an awfully poignant one.

Comments

Vinny / October 24, 2007 5:49 PM

2 things:

1) I would suggest that TIFs are also like foreign films in that people who want to be thought of as smart talk about them a lot.

2) Joravsky does have them on the brain. So TIFs are to blame for the Block 37 transit stupidity?

Isn't his heavy reliance on that story proof of his monomania? If the project had been funded with cigarette taxes, and botched so stupidly, would it be a good case against cigarette taxes? Of course not.

Relying on the CTA angle is a cheap way to promote the story when the real story is the separation of powers/accountability issue.

Spook / October 25, 2007 10:53 AM

Joravsky is like John Kass but smarter. Don't get me wrong, I also like John Kass alot too!

Josh / October 25, 2007 11:51 AM

TIF expenditures are approved by the legislative branch (City Council). After first going to the Community Development Commission (yes--appointed by the mayor), they are introduced as ordinances (much like the annual budget ordinance) to the City Council and are heard by the finance committee. Because they are considered individually as opposed to the budget which is considered en masse, TIF expenditures do indeed have light shined upon them. The big difference is that they are considered throughout the year rather than just once at budget time (right now). Each TIF has a budget, but actual expenditure reflect who actually applies for development subsidy. This creates an oversight burden of sorts and as Mr. Joravsky likes to point out, most Chicagoans don't care to pay attention to these things.


Also although they both use the property tax system for revenue, TIFs and SSAs are different beasts.

Ramsin / October 25, 2007 4:29 PM

Josh,

Thanks for this. This part was a bit problematic for me, and the reason I delayed the article for a week. It seemed by most of the literature on TIFs, and from the people I spoke to, that distribution of the money in the funds had a high level of executive department discretion and that the actual spending could be concealed.

While I knew that the "TIF Budget" had to be approved, I couldn't find details anywhere regarding the amount of detail in a TIF Budget.

If you have a moment, I'd like to discuss some of this in more detail--for example, while development subsidies must be applied for (or included in original agreements), does that application go before the Council?

Peter Zelchenko / October 26, 2007 3:22 PM

Hi, Ramsin. TIFs are not the same as SSAs. For one thing, Ben's on TIFs and I'm on SSAs, and he was initially loathe to discuss them (being, as you have perceived, fixated on TIFs). But at least he is finally acknowledging they are both bad things happening to good people. Sorry I will be missing Green Eye tonight.

truth squad / October 30, 2007 3:41 PM

"Josh" is mistaken. TIFs do not enjoy annual budgets; the only time any kind of budget is put forward for a TIF is in the eligibility study done prior to its creation. Furthermore, only redevelopment agreements pass through the rubber-stamp CDC and nearly-as-rubber-stamp City Council. But there can be--and often are--thousands or even hundreds of thousands of dollars' worth of spending taking place outside of the strictures of redevelopment agreements. They are listed, sort of, in the annual compliance reports the city puts out, but other than telling you the vendor and in which of about eight extremely broad categories the spending falls, there is no information about what taxpayers are getting for the money.

 

About the Author(s)

Ramsin Canon studies and works in politics in Chicago. If you have a tip, a borderline illegal leak, or a story that needs to be told, contact him at rc@gapersblock.com.

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