Chicago making moves to implement ‘super TIFs’

Chicago would create new transit-based super TIFs before the close of the year in order to secure federal funding, while adding more opportunities for city-run slush funds to hoard tax dollars.

While attention in summer 2016 focused on the passage of a stopgap budget, politicians passed a smaller amendatory bill to allow Chicago to create four transit-based tax increment financing, or TIF, districts, referred to as super TIFs. Like standard TIF districts, these super TIFs would divert funds from the cash-strapped city. Unlike standard TIFs, the super TIFs can take money from one neighborhood to benefit transit projects in other parts of the city.

Months have passed, but now City Council is poised to enact the super TIFs.

The purpose of these super TIFs is to partially fund four projects in order to secure approximately $800 million in federal funding. Those four projects are: the Chicago Union Station Master Plan, the CTA Red and Purple Line Modernization Plan, the CTA Red Line Extension and the CTA Blue Line – Forest Park Branch Modernization Plan. Some of the new super TIFs City Council needed to approve by Dec. 31 in order to qualify for that funding.

Instead of holding hearings in the months since the General Assembly passed it, the mayor has opted to push through subject matter hearings in the span of one week to satisfy the public hearing elements of the state law. The Committee on Finance, the governing body in the City Council, held a subject matter hearing Nov. 22 and intends to hold a second hearing Nov. 28 before passing these items at a special city council meeting Nov. 30.

The items the City Council is considering encapsulate phase one of the transit modernization program. The Blue Line modernization, the Red Line extension and the Union Station rehabilitation will be taken up at a later time.

Proponents say TIFs are positive, because they are a mechanism for providing economic incentives to developers to redevelop blighted neighborhoods. TIFs freeze the existing tax rate for a designated area and collect all taxes above that rate for use in the TIF. Individual taxing bodies (the city of Chicago, Chicago Public Schools, Metropolitan Water Reclamation District, etc.) get their usual share of the money at the frozen rate.

While this sounds like a dream scenario that helps all interested parties get the money they need for development, it actually turns into a taxpayer nightmare. TIFs divert tax dollars from the city’s general fund, which often leads politicians to push for tax hikes. In part, that’s because there’s little accountability for these public funds.

With super TIFs, the state law carved out an exemption for Chicago Public Schools, or CPS. This means CPS would receive its state mandated share of approximately 53 percent. Only then would 80 percent of the remaining amount be deposited into these newly created super TIFs. The other taxing bodies would receive the remaining 20 percent in proportional amounts. This is expected to divert fewer funds than a standard TIF district. Standard TIFs seemingly never end, but super TIFs lifespans are even worse. The state law increased the lifespan of the super TIF to 35 years (up from 23 years for standard TIFs).

One key difference to the super TIF is how the boundaries are drawn. In a standard TIF, boundaries can be arbitrarily determined to include multiple neighborhoods. In the super TIF, the district must be centered on a mass-transit facility and shall not be more than 0.5 mile in any direction. In plain language, super TIFs along the Red/Purple Line modernization would include River North, Lincoln Park, Wrigleyville, Uptown and Rogers Park, among others.

Given the diversity of the neighborhoods involved, and the mechanisms being used to implement these super TIFs, it’s clear this is a cash grab by the mayor to fund transit developments outside of the neighborhoods providing the financial support. It’s no coincidence that these are neighborhoods that do not qualify for traditional TIFs due to the definition of “blight.”

The corruption and unfairness associated with TIFs in Chicago is well documented. TIFs have served as political slush funds, into which the mayor diverts millions of tax dollars to reward his political donors. One of the chief concerns about TIFs has always been a lack of transparency. Considering City Hall’s penchant for embarking on poor deals, taxpayers should be extremely wary.

While the elimination of existing TIF districts is a good idea, the creation of new mechanisms to be used as a replacement slush fund is not. Aldermen are taking pause regarding the implementation of these new super TIFs, and rightfully so. This is a deal Chicago taxpayers can’t afford to make. City Hall is about to embark on yet another financing scheme that will only spell disaster for residents.

Contact your Alderman today and let him or her know that you oppose the creation of super TIFs.