The city of Chicago could be in line for a giant windfall of tax revenue, just in time to face down a $700 million budget gap.
A new report from the county clerk’s office could be manna from the sky. But some observers say if it sounds too good to be true, that’s because it is.
Chicago took in $841 million in tax increment financing, or TIF, revenue in 2018, according to a new analysis by the office of Cook County Clerk Karen Yarbrough.
That’s about $180 million more than the previous year. Reassessed property values have meant higher tax assessments for wealthier homeowners, and, in turn, more money for TIF funds.
Tax increment financing is a controversial, often misunderstood economic tool the city has at its disposal. Here’s how it works: The city designates a TIF district and then freezes all of the property tax revenues within that district for 23 years. Any incremental increase in property values or new construction (which results in new taxes) goes into the TIF fund. The collected money is designated for public or economic development projects. It’s been described in the past as a slush fund controlled by the mayor.
Yarbrough’s comprehensive analysis of the city and county’s TIFs was released Wednesday.
“It’s the good, the bad, and the ugly,” Yarbrough said. “I think they use it like a piggy bank, in that they know the money’s there, and they may use it for any number of things. Those of you that live in or near a TIF, you should pay attention to your village mothers and fathers as to how the money’s being used.”
Some of the TIF revenue collected last year could go toward the city’s budget gap. The city can declare a TIF surplus, meaning it has more money in those funds than it needs. Former Mayor Rahm Emanuel declared a surplus most years. The rub is that money has to be returned to all of the county taxing bodes and only a portion of that goes to the city.
“It’s in the tens of millions of dollars for city budget through the surplus method,” said Laurence Msall, president of the Civic Federation. “Closing the TIFs would be potentially hundreds of millions, but you’d have to look to see that work in TIFs that are set to expire is done and you don’t need that revenue for other purposes.”
Chicago Mayor Lori Lightfoot and many progressive aldermen campaigned on severely curtailing TIFs – if not getting rid of them altogether.
In fact, one activist from the nonprofit Civic Lab has been campaigning for years to get rid of TIFs, saying they steal money that could go toward blighted neighborhoods.
“For those folks in struggling communities like Lawndale, and places that have been suffering, TIFs will never help you,” said Tom Tresser, who wrote a book called “Chicago is Not Broke.” “They handcuff the money where there’s already prosperity.”
The city’s richest TIF district is on the North Side, a transit TIF signed into law by Emanuel three years ago exclusively for construction work on the CTA’s Red and Purple lines. It has brought in $115 million, but half of that is going to Chicago Public Schools – that’s money the school system is getting above and beyond the property tax levy.
Meanwhile suburban Cook County saw $339 million in TIF revenue – that’s a decrease from the year before.
And finally: two giant new city TIFs districts just went online, one for Lincoln Yards, and one for the 78 in the South loop that could be worth more than $2 billion.
Follow Paris Schutz on Twitter: @paschutz