Emanuel TIF reform too little, too late, critics contend

Mayor Rahm Emanuel just can’t win when it comes to the political pinata otherwise known as tax increment financing.

During the mayoral campaign, Emanuel was accused of doling out subsidies to clout-heavy developers in a thriving downtown area and ridiculed for initially proposing a $55 million TIF subsidy to build a basketball arena near McCormick Place for DePaul University.

And now that the mayor is finally freezing spending in seven downtown TIFs and shutting down those districts when existing projects are paid off, critics are complaining it’s too little, too late.

“A lack of revenue has been by design. They left revenue on the table,” Chicago Teachers Union Vice President Jesse Sharkey said on the day that principals got individual school budgets with dramatic cuts.

“The mayor is finally going to address the problem in the five downtown central TIF districts. That’s something we’ve been calling on him to do for years. It’s about time they’ve finally done it. But the fact they waited so long to do it has produced the budget shortfalls we see now.”

Ald. Scott Waguespack (32nd), Emanuel’s most outspoken City Council critic, called the mayor’s plan a “good step in the right direction.” But Waguespack said Emanuel had nowhere else to turn if he hopes to get $500 million in teacher pension relief from the Illinois General Assembly.

“To have that much of the city’s strongest economic engine covered in TIFs was detrimental to CPS and other property taxpayers. They ran into financial disarray at CPS. They don’t have much of a choice,” Waguespack said.

“It could be that other people [in Springfield] are pushing and saying, `You need to show us something else. You need to have TIF reform and put other money on the table.’”

Waguespack pressured the mayor to go further.

In TIF districts, property taxes are frozen at existing levels for 23 years. During that time, the “increment” or growth in property taxes are held in a special fund and used for specific purposes that include infrastructure, public improvements and developer subsidies.

“Maybe this will encourage us to allow CPS to opt out of TIFs. Fifty percent of the TIF bill is taken out of what CPS would [otherwise] get. What a lot of states and cities do is let them continue to receive the taxes they would normally get. You could continue to get economic development and create jobs. But you’re not hurting schools,” Waguespack said.

Civic Federation President Laurence Msall said the decision to phase out seven downtown TIF districts “shows the mayor’s commitment to free up all available resources to deal with the city’s ongoing financial crisis.” But he, too, was underwhelmed.

“It is not a comprehensive plan. It does not identify how these districts were chosen over the many other TIF districts that continue to exist. And it does not identify how the city will fund future capital and infrastructure needs in these closing districts,” Msall said.

“The Civic Federation continues to call on the city for a long-range, comprehensive financial plan to deal with both the short-term credit crisis and the long-term tax levying and investment needs of the city.”

The Chicago Sun-Times reported Monday that Emanuel plans to freeze new spending in seven downtown TIF districts and shut down those districts when existing projects are paid off.

The decision to phase out the seven TIFs that cover portions of downtown Chicago would free up about $250 million over the next five years.

Of that windfall, $125 million would go to the cash-strapped Chicago Public Schools and $50 million to city government. A “small amount” would be held back for “emergency infrastructure projects.”

The plan also calls for converting from an executive order into law Emanuel’s mandate that the city declare at least 25 percent of the unrestricted cash balance of healthy TIFs as a surplus and return the cash to CPS and city coffers and for establishing a first-ever “TIF termination policy” that would spell out the criteria under which taxing districts would be automatically shut down and shining even more light on TIF spending.

On Monday, County Clerk David Orr released a study that showed that TIF revenue dropped by a record 12 percent last year to $372 million, primarily because the Near South TIF was terminated.

That’s Chicago lowest annual take from TIFs since the $328.7 million collected in 2004.

Orr’s report also revealed that the seven TIF’s targeted for early termination by the city have together generated $869 million in revenue and $93 million in 2014 alone.

“Chicago and the mayor are moving in the right direction by freezing new spending at some downtown TIFs and dissolving those TIFs when current projects have ended. Still, such scrubbing is overdue and it could certainly include more than seven of 147 TIFs,” Orr wrote in a press release that accompanied his report.

Orr’s annual TIF report includes a first-ever analysis of the 71 Chicago TIFs due to expire between now and 2024. That includes five of the seven Emanuel has targeted for early termination.

In what he called a “conservative estimate,” Orr projects $296 million in recovered TIF value over the 10 years.

Of that money, CPS could reclaim $160 million from closed TIFs while Chicago and other major taxing bodies could get $136 million.

Recovery would be small until 2019 when there would be a $94 million windfall unless the seven downtown TIFs are shut down sooner.

The report also includes other interesting tidbits:

• Although eight TIFs were canceled in 2014, Chicago added four new ones and quadrupled the size of the 119th/Halsted TIF. The long-promised extension of the CTA’s Red Line to 130th Street and the 111th Street station projects were the “driving force” behind the TIF expansion.
• The new Washington Park TIF near the University of Chicago is expected to generate $25 million and could be used to bankroll promised infrastructure projects tied to the Obama Presidential Library.
• 92 TIFs had revenue increases. The largest TIFs in 2014 by revenue were Canal/Congress ($20.3 million); Chicago/Kingsbury ($19.5 million) and Kinzie Conservation ($19.3 million).
• 25 TIFs, including the eight shut down, did not collect any revenue.
• The 2014 decline in TIF revenue marks only the fourth time that TIF revenue has gone down. The other declining years were 2008 (11.5 percent); 2011 (11 percent) and 2013 (7.6 percent).

Contributing: Lauren FitzPatrick