Mayor Brandon Johnson offers revised plan to borrow $1.25 billion for development, housing projects

A revised version of Mayor Brandon Johnson’s plan to borrow $1.25 billion to spur affordable housing and economic development projects was unveiled Thursday, though a key addition to the proposal sparked lengthy questioning at a City Council committee hearing.

Both Council members and local development organizations applauded changes to increase transparency — including in the project selection process, guidelines for retaining some tax increment financing districts and the frequency of reports to the Council and the public.

But at a public hearing, many said they’d still like to see more changes, especially with regard to which projects will be subject to Council input and what TIFs still could be evaluated for extension.

Johnson’s plan, his first big development proposal, was introduced in February. It represents a possible shift in how Chicago has traditionally funded its development projects — moving away from using money from TIF districts and toward financing that isn’t beholden to geographic restrictions.

The $1.25 billion housing and development bond would provide $250 million per year over five years, split between the city’s Department of Planning and Development and the Department of Housing. Each department would use the funds for economic development and housing programs.

The plan also involves letting dozens of TIF districts — which use tax dollars generated in a district to fund projects within those boundaries — expire. The tax dollars recouped from those districts would help float the plan.

The Johnson administration targeted three main areas of change with the substitute ordinance: project selection; transparency and reporting; and fiscal responsibility.

Both those city departments would now be required to publish selection criteria for each program funded by the bonds. The ordinance also requires those departments to provide reports four times a year — not just annually — to Council and the public on project commitments and funding, along with publishing all bond-funded projects on an online portal.

The hottest point of contention was that projects exceeding $5 million or more would need to ink Council approval to move forward.

Feedback from the City Council’s Office of Financial Analysis led to the proposed changes. Janice Oda-Gray, an analyst in that office, said Thursday the department supports the plan overall for its “potential to enhance Chicago financial flexibility and funding major developments.” But the department wants clarity on how the $5 million figure for Council authorization was decided.

“If the proposal is carefully crafted, it has the potential to offer greater flexibility than the previous program and support the growth of new businesses, affordable homes and future developments,” Oda-Gray said.

Several Council members, including Ald. Raymond Lopez (15th), also asked how that $5 million figure was arrived at.

Daniel Hertz, director of policy, research and legislative affairs for the housing department, said the amount was chosen based on the recommendation of the financial analysis office and other stakeholders who believed a threshold for “significant projects” should be set. Under that threshold, virtually all multifamily projects — both new construction and redevelopment — would need Council approval.

Ald. Samantha Nugent (39th) wasn’t satisfied with the administration’s answers after hearing questions from fellow Council members about the threshold. She checked TIF projects in her ward over the past five years and said none exceeded the $5 million mark.

“I think that’s a really big deal, and TIF is a really important funding mechanism for me,” Nugent said.

Nugent wants a lower threshold for Council approval, and was echoed by Ald. Brendan Reilly (42nd), who suggested $1 million.

“A whole bunch of the low-hanging fruit for this program lies in that $1 to $5 million range,” Reilly said. “If we’re giving up approval over a big chunk of where the projects land — which is that middle ground — my concern is that we won’t really have a whole lot of say on what’s funded and what’s not.”

Reilly and others also asked which TIFs will expire soon and be up for renewal. Roughly one-third of Chicago’s 121 designated TIF districts will expire in the next three years, according to the Department of Planning and Development.

Ciere Boatright, commissioner of that department, said the list of TIFs that could be extended is only a draft, but she can share what’s currently planned with Council members.

Despite those hesitations, some Council members and community organizations still expressed support for the bond plan and for adding another tool to the city’s development toolbox. Several alderpersons pointed out the increase in transparency compared with the last administration.

The Chicago Community Loan Fund and Metropolitan Planning Council were among other groups speaking in favor of the bond issue.

Joe Ferguson, president of the Civic Federation, said the watchdog group sees the plan as a sensible reset to the city’s over-reliance on TIF funds.

“We are on the precipice of a TIF cliff, for which immediate response is needed,” Ferguson said. “The Civic Federation has long regarded TIF as a crucial tool for economic development. However, the city’s more recent use of funds indicates that the practice needs reform.”