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TIFs Tue Oct 20 2009
As Block 37 struggles, what happens to TIF cash?
After a series of fits and starts throughout the past four decades, today's news wasn't entirely unexpected: Block 37--a planned commercial center in the Loop--is facing foreclosure.
Block 37 developer Joseph Freed and Associates LLC isn't only over-budget by $34 million, but owes $128.5 million on a $205 million loan that's overdue.
While this may signal all sorts of unsavory prospects for the commercial real estate market, it also raises the question of what now happens to the enormous amounts of taxpayer money invested in the project through the Central Loop TIF district.
Chicago-watchers--and Mechanics readers--are familiar with TIFs. Ramsin posted a link to an excellent piece by Josh Kalven of Progress Illinois earlier this week. TIF stands for tax increment financing, a tool used by municipalities to encourage economic development. In recent years, many have become critical of TIFs and whether they're being used properly.
Block 37 is a case study in the abuse of property taxes through TIFs. Ben Joravsky--the intrepid TIF investigator and agitator with the Chicago Reader--reports the city poured at least $72 million into the Block 37 project from the Central Loop TIF since its inception in 1984.
The project--and the Central Loop TIF--was supposed to be completed by 1995, but the TIF went on, and Block 37 kept receiving money meant for parks and schools until the bitter end.
On October 14, 2008, the Community Development Commission approved the latest grant of $12 million for the Block 37 development. The funding was intended to defray some of the developer's costs associated with a CTA station, parking deck, and street-level improvements. It was contingent on the construction of a new hotel on the site, which, until last month, was going to be built by Loews Hotels through property they acquired for $1 thanks to the unwitting generosity of the city's property taxpayers.
The city and the developer expressed certainty they would find a new hotel developer when Loews pulled out. They haven't.
At a time when the city is dealing with a half billion deficit and the Chicago Public Schools are $104 million in the red, city leaders should finally face the facts on Block 37 and demand reimbursement for their prior corporate largesse. A reasonable argument could be made for a refund of the most recent $12 million subsidy, and perhaps more.
And what would happen to Block 37? David Greising's column in today's Chicago Tribune questioned the need for Chicago to offer cash "sweeteners" to big businesses like United Airlines and MillerCoors that are big enough to take care of themselves. The same could be said for developers that seek to fill a need for new restaurants, shopping, and hotels in places like the Loop.
Instead of fancying themselves entrepreneurs with first dibs on other people's money, city leaders should focus their efforts and the resources entrusted to them on the business of the people, not rent-seeking businesses.
Michael Hathaway / October 21, 2009 2:49 PM
This is all fine and good, yes? But when are The people of chicago going to protest the abuse of tif funds instead of lending their support to palestine marches or some other far far away conflict. I am not making light of those problems,I just never see anyone March for something local! Better yet, Go to your alderman and chew him or her out for bowing to the mayor. Has no one read BOSS? Royko is rolling over if you know what I mean....