WTTW News Explains

WTTW News Explains: What Is a TIF District?

Once upon a time, the king, oops, mayor, of a mystical land named Chicago came across a magic wand that possessed truly awesome powers.

This so-called magic wand is a financial tool called tax-increment financing, better known as TIF.

With just a flick of the wrist, the TIF wand makes a giant pool of taxpayer dollars appear — as long as they promise to use that money to make the city a better place to live.

TIF wasn’t invented in Chicago, but former Mayor Richard M. Daley perfected it as he worked to transform Mud City into a gleaming metropolis.

Here’s how this deceptively simple tool works: City officials determine an area is particularly blighted — maybe its roads and sidewalks are in bad shape, or its air is rife with pollution, or it’s strewn with vacant buildings. They declare it a TIF district, a distinction which stays in place for 23 years and is there to promote public and private projects.

Let’s make it simple. Say you buy a house for $100,000 and set aside $2,500 to cover your annual property tax bill. Every cent will go to critical services like police, fire, libraries and schools.

But just as you sign on the dotted line, city officials include your home in a brand-new TIF district.

Ten years go by. Your home has doubled in value, and your property tax bill has gone up.

The original share is still funding crucial city services, just as it did a decade ago.

But the rest — the tax increment, or the amount your taxes have gone up since the TIF was declared — has been flowing into a special account the mayor and his friends on the Chicago City Council can use to subsidize projects in your area.

Millions for a new road? You got it! A new housing development? No problem!

And the people of Chicago live happily ever after … or maybe not.

As more than $1 billion every year flows away from Chicago’s schools, parks and libraries, and into a TIF account instead, everyone’s taxes go up to keep those critical agencies solvent.

At the same time, while TIFs are meant for “blighted” areas, sometimes already affluent parts of the city make it onto the TIF list, gaining a boost from the TIF funds, alongside any private investors seizing on the opportunities in the growing area, often leading to gentrification.

TIF districts are a powerful tool to be sure. But they’re no magic wand. A fairy tale ending isn’t guaranteed around the corner — but a budget deficit dragon sometimes is.

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