Nearly a third of property tax revenue in Chicago is diverted into 143 TIF districts controlled by the mayor, nearly half of which are located in affluent neighborhoods.
Tax increment financing, or TIF, districts in Cook County generated a record $1 billion in 2017, up nearly 18 percent from 2016, according to the Cook County clerk. Chicago accounted for most of these gains by generating $660 million, an 18 percent increase from 2016. As long as these TIF districts exist, however, struggling school districts in those districts won’t see a dime of this revenue. This comes at a time when Cook County and Chicago face budget shortfalls up to $95 million and $812 million, respectively, by 2020.
In theory, TIFs are a mechanism used to revitalize “blighted” neighborhoods by providing economic incentives for developers to invest in the area. TIFs freeze the Equalized Assessment Value, or EAV, of all properties in a designated TIF district and divert all property tax revenue above that EAV into a private TIF fund. The amount of property tax revenue collected by individual taxing bodies within a TIF district – school districts, libraries, et cetera – is effectively capped at the frozen EAV.
In Chicago, nearly a third of all property tax revenue is diverted into private TIF funds appropriated for the city’s 143 TIF districts. And despite the fact that TIFs are meant to encourage development in blighted neighborhoods, these districts aren’t limited to underserved areas. Nearly half of the $660 million Chicago collected in TIF revenue last year was captured by TIF districts located in affluent neighborhoods, including the Loop. The LaSalle Central TIF district, which is only 12 years old, brought in nearly $57 million in revenue in 2017, the highest among Chicago-area TIF districts.
This leaves taxing bodies such as Chicago Public Schools scrambling for funding to make up for revenue diverted to TIF funds. In order to make up for revenue lost to TIF districts, local taxing bodies resort to raising their property tax levies. This only adds to Illinoisans’ already heavy property tax burden.
Abuses of the TIF system are well documented, but lawmakers have done little to correct these issues. In fact, Chicago is currently considering a new TIF district encompassing industrial land in affluent Lincoln Park. This follows another recent TIF district established at the site of the former Lathrop Homes.
The reality is that TIFs are a bad deal for everyone but the city officials who award TIF money and the developers who receive it.
How to fix the problem
Fortunately, some state lawmakers are looking to take necessary steps toward reform. Two bills with bipartisan support – Senate Bill 2880, filed by state Sen. John F. Curran, R-Downers Grove, and House Bill 5230, filed by state Rep. William Davis, D-East Hazel Crest – would define “blighted areas” as areas in which the median household income is “100 percent or less of the area median income,” as specified by the U.S. Department of Housing and Urban Development. This measure would go a long way toward limiting TIF abuse.
TIFs serve as another example of fiscal mismanagement by city officials. Taxpayers shouldn’t have to foot the bill for irresponsible budgeting practices that benefit connected developers. Until Illinois does away with these political slush funds, local governments will continue to force taxpayers to make up for shortfalls that benefit a select few.
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Author: Tyler Durden