It's hard to find the good news in David Orr's TIF report for 2007, which the independent-minded Cook County clerk released last week. The bad news begins with the bottom line: the city's tax increment financing districts sucked up $555 million in property taxes last year, up 11 percent from the $500 million they took in 2006. All in all TIFs have pocketed well over $1 billion in the last two years, diverting money from schools, parks, police, and your wallet.
With the report, available at cookctyclerk.com/sub/TIF.asp, Orr again makes good on his promise to cast a spotlight on a program that Mayor Daley and the City Council would rather keep in the shadows. Nearly everyone else in city government, from aldermen to oversight board members, looks the other way as the program delivers hundreds of millions of dollars to the mayor to be spent as he sees fit—and aside from Orr's report, there's really no other public accounting of how much there is to spend or what he spends it on. While aldermen and the mayor conduct their annual ritual, haggling over relatively small changes in the official city budget—this year they promise no property tax hikes—the TIF take steadily rises, year after year, by as much as 30 to 40 percent.
"Since the first TIF was created in the 1980s, they've collected over $3 billion—any way you look at it that's a lot of money," says Orr. "I think TIFs demand more scrutiny. Folks need to know how this money is being spent so at the very least they can decide if this is how they want it to be spent."
Last year's 11 percent increase was lower than in 2006, when the TIF take rose 30 percent from 2005. Orr and his aides say TIF revenues generally fall in the year following a reassessment (and Chicago's last reassessment was in 2006). For instance, in 2004, after the 2003 reassessment, the TIF take went up "only" 14.2 percent. By contrast, it grew 32.8 percent in 2003 and 44 percent in 2002. County experts predict the TIFs will collect well over $600 million in 2008—the bucks flowing into Mayor Daley's hands even as you read this.
Yet there's always the possibility that this goose has finally stopped laying golden eggs. TIF revenues go up as properties within the districts get redeveloped and generate new tax dollars. If development slows because of the economic meltdown, it raises a new problem with the TIFs—they're overextended.
On occasion the mayor and the council will directly dip into TIF reserves to pay for a project, as they did in the case of Millennium Park and are currently doing with Block 37. But by and large they finance deals by borrowing against future TIF dollars, selling bonds that get repaid with revenues they expect to collect in years to come. Last year, for instance, the city sold about $356 million in bonds to be paid back over the next 20 years with money collected in various TIF districts. The money was earmarked for building new schools.
It's a complicated finance arrangement that exposes further flaws in the TIF program. By law TIF money is to be spent in the districts where it's collected. In fact one of the big selling points for program, articulated by aldermen down through the years, is that TIFs keep tax dollars in local communities.
But a loophole in the state law allows the city to spend TIF money collected from one district in any adjoining TIF district—this is called porting. To raise the money for the schools, city and school officials worked out a scheme in which money was ported from one TIF district to another district. For example, the school board's building a new South Shore High School located in the 71st and Stony Island TIF. But that TIF doesn't generate enough money to pay off all the bonds on the $89 million project. So the city's moving money into the Stony Island TIF from adjoining TIFs, including the Avalon Park district.
Here's the problem with that: The amount of money collected by the Avalon Park TIF actually declined last year, from $744,864 to $725,403, according to Orr's report. If the trend continues—and especially if it accelerates—the Avalon Park TIF won't have enough to pay off its portion of the bonds for the new high school, and the city will have to shuffle in more money from adjoining TIF districts or even from districts in other parts of the city.
The exact amount of the city's TIF-related obligations is buried in the arcane language that governs dozens and dozens of TIF-funded projects. But I'm starting to realize why Mayor Daley's aides cautioned aldermen at last year's budget hearings that they shouldn't expect to be able to bond against future TIF revenue. A few aldermen—most notably Eugene Schulter of the 47th Ward—rebelled, and the mayor told his bean counters to back off. Unwisely, the city's been running up more TIF obligations ever since.
School officials tell me they have the money to pay back last year's school bonds—apparently it'll take even the city some time to run through all the TIF money in its coffers. But if the slowdown continues it might jeopardize Mayor Daley's plans to bring the 2016 Olympic games to Chicago.
Hey, maybe there's some good news in Orr's report after all.v
Hear Ben Joravsky interviewed about this and other columns on the Mr. Radio podcast, mrradio.org/theworks. And for more on Illinois politics, see our blog Clout City.