Mayor Lori Lightfoot is reforming tax increment financing to increase oversight, focus on equity and prevent a repeat of the controversy surrounding $1.6 billion in subsidies used to unlock the development potential of two mega-projects: Lincoln Yards and “The 78.”
Arguing that TIF spending decisions have “occurred in the shadows” for too long, Lightfoot is promising to “bring in the light” as her campaign slogan famously put it.
A new TIF Investment Committee will make “equity” the central focus of TIF subsidy decisions with pivotal input from Chief Equity Officer Candace Moore.
“Just like other investment committees at a bank, we’re looking at projects holistically in a region. How they spur economic development,” said Samir Mayekar, deputy mayor for economic and neighborhood development, who chairs the committee.
“You have a body of folks like the CFO, the budget officer, the comptroller asking pretty tough questions to make sure that taxpayer money is being allocated in the most catalytic way.”
For years, critics have accused the city of violating the “but, for” clause in the TIF statute requiring tax increment financing subsidies to be confined to projects that would not move forward without that assistance.
Lightfoot is promising a “more rigorous but, for” test for developers seeking city subsidies.
That includes initial standards to be included immediately in a revised TIF program guide and the hiring of AECOM to put “much more quantitative rigor behind” but, for standards by the end of this year.
“We have a near-term solution and a long-term solution,” Mayekar said.
The city also plans to: publish TIF spending decisions on a monthly basis; release annual reports; develop a new user friendly-version of its existing TIF portal and update the TIF program guide annually to give taxpayers and developers alike a better idea how the city operates the program.
Mayekar pointed to the 100% affordable housing project next to the Logan Square Blue Line stop and the renovation of the Ramova Theater in Bridgeport as evidence of TIF subsidies that generate “positive community benefits.”
“TIF can play a very important role in catalyzing economic development. The key is that it’s transparent and that there’s a high degree of accountability around how the money is spent. That is what the mayor is doing here with these sweeping reforms,” he said.
Many of Lightfoot’s reforms were suggested last year by Inspector General Joe Ferguson.
In 2018, Chicago’s 138 TIF districts generated $841 million in tax revenue, an $181 million increase from the year before, according to a report released last summer by Cook County Clerk Karen Yarbrough.
The reassessment contributed to a 12.5% bump in equalized assessed value, which factored into the 27.4% increase in revenue for the city’s TIF districts.
Mayekar refused to say whether any of Lightfoot’s reforms would have stopped the lame-duck City Council from approving $1.6 billion in TIF subsidies for Lincoln Yards and “the 78” weeks before Lightfoot took office.
Instead, he emphasized the need for “robust methodology behind how TIF investment decisions are made” instead of considering a series of “one-off transactions.”
That may well include a repeat of what happened last fall, when Lightfoot declared a $300 million TIF surplus that was the largest in Chicago history.
“If you have an equity lens to this, where there are parts of the city that generate a lot of increment and there’s not a specific need for that money to be used, then the most effective use of that money can be by surplusing, which then generates funding for schools and other purposes,” he said.
When a TIF district is created, 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.
On April 10, 2019, the lame duck City Council approved $1.6 billion in subsidies for Lincoln Yards and “The 78.”
The divided roll calls — with 14 dissenting votes for the 78 and 13 no votes for Lincoln Yards— followed a late-night reversal by then-Mayor Elect Lightfoot.
Lightfoot had convinced the City Council to delay the vote on those two projects, only to let them go through in the end after persuading developers to bolster minority participation in both.
At the time, she told developers to “enjoy this moment in the sun because you’re never going to get a deal like this again out of the city of Chicago as long as I’m mayor.”
Despite Lightfoot’s win on minority contracting, her most ardent supporters were disappointed that she did not reduce the subsidies for either project.
Still, the structure of both deals — with developers being allowed to borrow against the money in several installments and being reimbursed as individual infrastructure projects are certified by the city — gave her leverage to make additional changes down the road.