Tax Increment Financing: Christmas year-round for local politicians, developers

Tax Increment Financing: Christmas year-round for local politicians, developers

Statewide use of slush funds ensures it’s Christmas every day for political leaders and their chosen developers.

Local slush funds across Illinois continue to provide benefits for a select few while taxpayers and schoolchildren end up with little more than a stocking full of coal.

That’s because, thanks to state law, cities are able to siphon off tax dollars from schools to provide benefits to often well-connected developers. This process is carried out through Tax Increment Financing districts, or TIFs.

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, the school district, the library, etc.) get their usual share of the money at the frozen rate.

TIFs have proven to be beneficial to the politicians who control them. Chicago saw a record $561 million in revenues to TIF districts in 2016.

In order to make up for the revenue diverted into TIF funds, counties and municipalities resort to hiking property taxes on homeowners. This only adds to Illinoisans’ already heavy property tax burden. Take, for example, recent property tax hikes by Chicago Public Schools and St. Clair County.

Abuses of the TIF system are well documented, yet little is done to correct these issues. In fact, Chicago is currently contemplating creating a new TIF district encompassing industrial land in the well-to-do Lincoln Park neighborhood. This follows a similar process that occurred on the site of the former Lathrop Homes.

The reality is that TIF is a bad deal for just about everyone but the politicians who get to dole out TIF money and the developers they choose.

How to fix the problem

Illinois can fix these problems. By eliminating TIFs, funding would be freed up to help local school districts in the short term. Municipalities and school districts must also push at the state level to enact pension reform to address their ever-growing, local pension burdens.

TIFs serve as another example of fiscal mismanagement by politicians. Taxpayers shouldn’t have to pick up the tab for irresponsible budgeting practices that benefit connected developers. Until Illinois gets rid of these slush funds, local governments will continue to force taxpayers to make up for shortfalls while a select few benefit.

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