Special Service Areas: Chicago’s little-known taxing bodies

Special Service Areas: Chicago’s little-known taxing bodies

Special Service Areas levy taxes on Chicagoans over and above the already steep taxes and fees imposed by the city.

Special Service Areas, or SSAs, are expected to raise in excess of $25 million in 2016 from the taxpayers within their boundaries. The taxes levied for SSAs come on top of the property taxes and over 30 different additional taxes and fees imposed by the city, which already make Chicagoans the most heavily taxed residents of any city in Illinois. What are SSAs? Put simply, SSAs are taxation without representation for pet projects throughout Chicago – and the people who pay for these special taxing districts have little say in how they’re set up or run.

People who own or rent property in any of the 53 designated SSAs pay additional taxes that they may not understand. Through SSAs, the city and aldermen can tax property owners within given areas to raise funds for additional maintenance and service. Even though there are 53 SSAs in Chicago, virtually none of the residents or business owners within these vast swaths of the city know they exist.

For example, in 2003, then-Alderman Manny Flores was concerned that city services were not adequately addressing the needs of the 1st Ward, particularly for garbage pickup, graffiti removal, snow removal and the retention of local artists. Flores worked with the Wicker Park Bucktown Chamber of Commerce to create SSA No. 33. Through the use of taxpayer funds (currently, residents of SSA No. 33 are taxed at a rate of 0.304 percent for a total annual amount of $1,050,554), the chamber of commerce, which the city designated as the service provider for the SSA, conducted an inventory of trees, added and replaced trees, installed art projects, sponsored events, cleaned sidewalks and streets, and added trashcans and bike racks. But the city is already supposed to cover such services through the many taxes it imposes and administers, in part through the aldermanic menu program.

Another layer of taxes

The Illinois Constitution grants municipalities such as Chicago the authority “to levy or impose additional taxes upon areas within their boundaries in the manner provided by law for the provision of special services to those areas and for the payment of debt incurred in order to provide those special services.”

SSAs increase the already extensive list of government units within the city. The SSA program creates a new taxing body within specified boundaries where the additional tax revenue is used to pay for services such as sidewalk maintenance, landscaping, security, snow removal, decorative trash receptacles and local business advertising. SSAs furnish these services in addition to those the city already provides.

How SSAs are born

SSAs are a prime example of taxation without representation, as there is limited, if any, daily oversight from elected officials. The process by which an SSA comes to fruition is favoritism at work.

  1. First, a sponsor agency, typically the future provider of services (e.g., the Lincoln Park Chamber of Commerce, the Chicago Loop Alliance, Back of the Yards Neighborhood Council) holds several public meetings to “gauge community support.” (In truth, these meetings are scarcely attended by members of the public.)
  2. The sponsor agency then completes an application that includes information such as economic analyses and demonstrated public support among the owners and lessees of property within the affected area.
  3. The mayor, with input from the local aldermen, appoints commissioners to serve as stewards of taxpayer money. Taxpayers do not get to vote for these stewards; nor do taxpayers have any say over who controls their money.
  4. These stewards, in turn, select and work with city-approved providers, who tend to be local chambers of commerce or neighborhood councils, to manage the day-to-day affairs of the SSA.
  5. After the selection of all the parties, the City Council holds a sparsely attended public hearing before passing the relevant scope-of-services ordinance.

At the time of creation, the Department of Planning and Development sets an upper limit for the tax rate for the SSA. During the duration of the SSA, the tax rate can increase annually to meet the needs of the SSA but cannot exceed the set upper limit. SSA budgets can be as high as $2.4 million and as low as $9,000 and must be approved by City Council. SSAs are expected to raise in excess of $25 million in 2016.

Unelected commissioners and appointed service providers have discretion over the budgets in their SSAs. Thus, while residents have the opportunity to voice concerns over SSA spending at various times throughout the process, the ultimate decisions lie with those unelected commissioners and service providers.

What can taxpayers do?

Taxing bodies overseen by unelected individuals provide ample opportunity for corruption and cronyism. In November 2015, the city attempted to create a new SSA in the Jefferson Park neighborhood with the expressed support of local 45th Ward alderman, John Arena. However, instead of the usual quick passage, residents and business owners forced a delay on the matter by detailing possible fraud and inaccuracies in the process. The item remains in legislative limbo and may never pass out of the Finance Committee. (The alderman’s staff, though, is confident that it will eventually pass.)

It is often difficult for taxpayers to determine which taxes they pay and when, and to what ends city officials use those taxes. It is even more difficult when the taxing body is not managed by elected officials accountable to their constituents. Knowledge of these taxes will lead to a more informed and active citizenry, which is a good first step toward easing one of the highest tax burdens of any major city in the country.

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