Mayor Rahm Emanuel and Ald. Ameya Pawar (47th) are joining forces on a new, locally-driven policy aimed at methodically phasing out some of the city’s 146 tax-increment-financing districts and funneling the money to the Chicago Public Schools.
Thirty-eight aldermen have demanded that TIF money “not pledged, earmarked or designated for payment and securing of TIF contractual obligations” be forwarded to CPS. The policy would continue during any year when the CPS bond rating is “below investment grade” and total operating expenses exceed operating revenue by “5 percent or more,” their ordinance states.
Now, Emanuel and Pawar are drafting an alternative to that unilateral plan.
It calls for converting from an executive order into law Emanuel’s 2013 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, city coffers and other units of local government.
More importantly, the ordinance would create an “opt-in process” for local aldermen that would allow them to place a moratorium on new TIF projects in their wards.
“For every dollar that gets surplused, over 50 cents goes to the schools. That’s not insignificant. Everyone . . . believes there’s hundreds of millions of dollars. But if we’re gonna surplus those dollars, it should be done with aldermen steering the ship. I don’t want unilateral action against TIFs in my ward,” Pawar said.
“This will create a process where aldermen can go through each one of their TIFs and freeze the district. They can automatically surplus those dollars — either until the TIF expires or until a year of their choosing. TIFs located in neighborhoods that really need economic development shouldn’t have to have every dollar surplussed.”
A top mayoral aide said the new policy, expected to be introduced at the Sept. 14 City Council meeting, is an alternative to the “all-or-nothing” TIF surplus ordinance co-signed by 38 aldermen.
“There are parks and schools and retail projects being funded by TIF. Cancelling those projects may have political appeal, but that’s not what most aldermen want to do,” the Emanuel aide said.
Earlier this year, Pawar put $16.5 million in TIF projects on the chopping block that would have made dramatic improvements at Sulzer Regional Library, Revere and Chase parks, and North Center Town Square.
To stave off devastating teachers layoffs and classroom cuts before the deal that brought CPS up to $600 million in state help, he also offered to cancel a $2 million plan to complete an outdoor campus project at McPherson School. Ald. Proco Joe Moreno (1st) offered to cancel a $1 million baseball field for the “incredible” team at Roberto Clemente High School.
On Tuesday, Pawar said he would start the ball rolling on the larger TIF phase-out discussion by retiring two of his local TIF’s in 2018.
Retiring a Western Avenue South TIF scheduled to expire in 2025 would free up roughly $7 million. The early ending of a Ravenswood Industrial Corridor TIF due to close in 2029 would generate $1 million.
“These are high-performing TIFs. That gives you some idea that TIFs are not the silver bullet solution for every problem, like pensions, schools or [avoiding a new tax on] water and sewer bills,” Pawar said.
“It’s easy to turn TIFs into a proxy. Let’s at least start having an honest conversation about them. Otherwise, we keep having the same annual fight about them. This is a way to make sure that everyone has control over the conversations locally.”
For years, TIFs have been a political pinata and a thorn in the side of the Chicago Teachers Union.
That’s because they siphon hundreds of millions of dollars in revenue from CPS and other local taxing districts and create what amounts to a political slush fund from which Chicago mayors have doled out subsidies to clout-heavy developers, too often without public scrutiny.
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.
Last year, Emanuel froze new spending in seven downtown TIF districts — and vowed to shut those districts down when existing projects are paid off — to free up about $250 million over five years. That’s on top of the 14 TIF districts he closed out during his first term and the TIF surplus strategy he implemented that has returned hundreds of millions to local government.
But the reforms have not gone far enough to satisfy the City Council’s Progressive Caucus or the CTU. The criticism reached a crescendo when Emanuel proposed using a $55 million TIF subsidy to help finance a 10,000-seat basketball arena for DePaul University that would double as an “event center” for McCormick Place.
The DePaul project became such a symbol of what critics called Emanuel’s misplaced priorities, that the mayor subsequently rearranged the financing so the TIF subsidy would be used to acquire land for the project and surrounding hotels, instead of to build the stadium.