Chicago’s new TIF district would siphon millions of property-tax dollars into city slush fund
Creating a tax increment financing district around the Lathrop Homes redevelopment will ensure that 100 percent of property-tax revenue generated on the site will go to a city-run slush fund.
The corruption and unfairness associated with tax increment financing districts, or 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.
But Chicago’s latest TIF scheme involving public housing known as the Lathrop Homes borders on criminal.
In theory, TIFs are a mechanism allowing blighted neighborhoods to return to vitality by providing economic incentives to developers. 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.
The city is now planning to use this system to divert property taxes in a well-established neighborhood toward a brand-new TIF fund. How? By creating a new TIF district in conjunction with a redevelopment of dilapidated public housing, which is sitting on prime riverfront real estate.
Lathrop Homes, located on 32 acres on city’s North Side at Diversey Avenue and the Chicago River, was once considered the gold standard in public housing. It spurned the typical high-rise model of public housing in favor of brick row houses and smaller apartment buildings. The National Register of Historic Places added the homes in 2012 in part due to the open space designs of noted landscape architect Jens Jensen.
It has since fallen into a state of disrepair and needs to be overhauled. The Plan Commission approved a new development for that area that would keep public housing while adding new market-rate units. However, the Chicago Reader reports that the plan would eliminate 500 public housing units.
In order to achieve this development, the city is in the process of creating a brand new TIF district on that site. At this time, the city is holding informational meetings in the community but it’s only a matter of time until the TIF is presented before the City Council.
It’s important to note that the land in the proposed TIF district is owned by the Chicago Housing Authority and is currently tax-exempt. That is, no property tax is collected for any property on the Lathrop Homes site. If the city approves the new TIF, the current property-tax rate of 0 percent will be frozen and all taxes collected will go to the TIF.
In other words, all property taxes collected on the redeveloped Lathrop Homes site – which will house not just people with affordable housing vouchers, but also people paying full rent – will be deposited into a TIF account to be spent as the mayor sees fit after the site redevelopment costs have been paid.
Chicago Public Schools, or CPS, gets nothing. The Chicago Public Library gets nothing. The Chicago Park District gets nothing. The only entity that would receive property-tax dollars from the site over the next 24 years would be the city-run TIF fund.
To be sure, this isn’t a little-known swath of property. This is prime real estate that is likely to bring in tens of millions of dollars annually to the TIF. For reference, three nearby TIF districts had 2014 closing balances in excess of $10 million. Those TIF districts are Addison South ($11.2 million), Fullerton/Milwaukee ($14.9 million) and Western Avenue South ($16.5 million).
This latest play with TIF funds circles back to a greater discussion surrounding the budget crises of the city and CPS. The mayor often cries poor while handing out millions of dollars to connected companies through TIF deals. The Lathrop Homes development is a joint partnership including Related Midwest, a friend of Mayor Rahm Emanuel. Related Midwest employees gave over $13,000 to Emanuel’s campaign fund in 2014, according to the Illinois State Board of Elections.
In 2002, the Neighborhood Capital Budget Group produced a study of 36 Chicago TIF districts and found that there was a net gain of only $300 million. However, those gains came at the expense of CPS to the tune of $632 million.
TIFs undermine efficient and transparent government operations. These deals continue to plague Chicago taxpayers and benefit the connected friends of the mayor. The solution is to place a moratorium on the creation of new TIF districts and allow for the remaining TIF districts to expire. Those first steps would allow the city and sister agencies to get their fiscal house in order in a fair and transparent manner.