Million-Dollar Lies

The tax bill for 77 W. Wacker is just one glaring example of how the county helps the city hide the real cost of TIFs.

By Ben Joravsky
August 11, 2006

IT'S HARD TO imagine a public document as oddly self-contradictory as a Cook County property tax bill. They’re intended to be easy-to-understand and painstakingly accurate accounts of how the city and the county spend the tax dollars you send them. And yet they play a key role in covering up the real cost of Chicago’s tax increment financing districts, or TIFs.

Over the last three years TIFs have swallowed more than $1 billion in property taxes, but you’d never know that by looking at your tax bill. If you live in a TIF district your bill tells you that zero dollars go into the TIF fund. If you don’t live in a TIF district your bill doesn’t mention TIFs at all. It’s as though the fastest-growing money pit in city government doesn’t exist.

To truly appreciate the depths of deception you have to know a little something about the connection between TIFs and tax bills. TIFs are districts created by the City Council at the behest of Mayor Daley, the city’s planning department, or local aldermen, ostensibly to generate economic development. From creation to extinction, a period of at least 23 years, a TIF puts a rough cap on the amount of property taxes the schools, parks, and other taxing bodies get from the district. Any new property taxes generated after a TIF has been set up--the so-called increment created by new property and rising assessments--goes into the TIF fund. The more TIFs the city puts into place--and there are at least 145 now--the more property taxes we have to pay to compensate for the money they divert from the schools, the parks, etc.

“I call the TIFs a shadow tax,” says Jacqueline Leavy, executive director of the Neighborhood Capital Budget Group, a nonprofit watchdog organization that tracks the program. “They take a lot of your tax dollars, but you don’t even know that they’re there.”

Originally TIFs were intended as economic development tools for blighted communities that would otherwise find it hard to attract investment. But they long ago ceased to function in keeping with their original intent. There are TIFs in affluent areas like the Loop, Lincoln Park, and Lakeview. They’re used to subsidize everything from the construction of high-end condos to the renovation of tax-exempt buildings on Loyola University’s lakefront campus. Daley and the aldermen love TIFs for the very reason reformers like Leavy abhor them--they’re slush funds unregulated by any independent agency. And their cost is enormous: according to figures kept by the Cook County clerk’s office, TIFs took in $335 million in 2004, up from $287 million in 2003. Last year’s TIF take is expected to total well over $400 million, though the official numbers haven’t been released yet.

Property tax bills have. The second of two installments, sent out by Cook County treasurer Maria Pappas two weeks ago, is intended to tell you precisely how your tax dollars are tabulated and spent. As an example, let’s look at the bill for the commercial highrise at 77 W. Wacker, where United Airlines is moving its headquarters in a real estate deal subsidized by $5.25 million in TIF funds. According to the bill, this property generated $1,465,846.27 in taxes this year, which was divided among 13 governmental entities, including the schools, the parks, the community colleges, and the libraries, as determined by their individual tax rates multiplied against the property’s assessable value of $24,508,381. So for instance, multiply the Chicago Park District’s share--.421 percent--by $24,508,381 and you get $103,180.28, the amount the statement says the parks get from the bill. Based on its rate of 3.026 percent, the Board of Education receives $741,623.61; the community colleges get $57,349.61, based on their rate of .234 percent, and so forth.

Also on the tax bill for 77 W. Wacker is a line item labeled “TIF-Chicago Central Loop,” which according to the statement has a tax share of 0.00 percent and received zero dollars. That’s a lie: in actuality the Central Loop TIF received all the tax money paid by the building’s owner, down to those last 27 cents. That’s because the building was constructed on tax-exempt land after the Central Loop TIF was created in 1984. Since the property generated no property taxes before the building was built, the TIF now takes all the property taxes it produces--close to $5 million over the last three years. The high-rise at 77 W. Wacker is a money machine for the Central Loop TIF, leaving nothing for the schools and parks and libraries, no matter what the tax bill says. That’s the way it goes in every TIF. If you own property in one, at least a portion of your taxes goes into the TIF, but your bill won’t reflect it.

Tax bills also obscure the property tax hikes that everyone pays to compensate for TIFs. Each year the taxing agencies determine their levy (the amount in property taxes they get to spend) by multiplying the tax rate by the overall amount of assessable property. Board of Education officials, for instance, claim they need a tax rate of 3.026 to meet their levy. But that rate is higher than it would need to be if it didn’t have to compensate for funds swallowed by TIFs. How much higher is hard to figure, but according to Cook County commissioner Mike Quigley, TIFs have inflated the overall property tax rate by as much as 8.4 percent (and that’s based on the most recent county information, tabulated in 2004).

Why aren’t school and park and county officials howling? Some don’t realize what’s going on--you’d be amazed how many public officials, from Board of Education representatives to county commissioners, have no clue about the TIF system. Others wouldn’t dare criticize one of Daley’s favorite programs. Then there are those who, frankly, just don’t care. “I hate to sound cynical, but you get the levy no matter what, so, realistically, what difference does it make if you wind up raising the tax rate to pay for the TIFs?” says one county official, speaking off the record. “As long as they get their money, officials aren’t going to care about the TIF.”

Why do Cook County officials send out bills that they know misrepresent actual property tax allocations? A cynic might suspect it’s because this allows Daley and his allies to cling to the myth that TIFs don’t raise taxes. But Pappas and Cook County clerk David Orr insist they’ve never been pressured by the mayor or his aides to conceal TIF information from the public. Pappas says she’s ready to put TIF information on the property tax bills as soon as it can be done: “David Orr’s office sends us the information that we put on the bill. It’s not a big deal to us. If David sends us the information, we’ll put it on the bill--period.”

Orr says that philosophically he has nothing against putting TIF information on the bill: “It’s just that it would require significantly upgrading the clerk’s computer technology.” Still, he insists, “I think it’s a good idea to put the TIF stuff on the bill. I’m one of the people who believes TIFs are being abused. We need TIF reform and accountability.”

All of this is setting the stage for a major showdown with Mayor Daley, who wants to create a new downtown TIF district and likely will to try to extend the Central Loop TIF, due to expire next year. But Pappas and Orr may have no choice but to add TIF information to the tax bills. Quigley, who’s emerging as an outspoken critic of TIFs, is proposing an ordinance that would require it as soon as next year.

“Getting the TIFs on the tax bill is all part of a larger fight over TIFs,” he says. “The TIFs are a back-door tax--they’re a hidden tax. We want it to come out of the shadows. Put them on the tax bill for everyone to see.”

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