Pass the Donuts

The board that’s supposed to hold the line against TIFs rubber-stamps another one.

By Ben Joravsky
August 18, 2006

ON AUGUST 4 the five members of the Joint Review Board gathered in a drab, windowless room on the tenth floor of City Hall to consider the LaSalle Central TIF, Mayor Daley’s latest proposed tax increment financing district. In theory, the stakes were high.

The Joint Review Board is the only “independent” body (i.e., its members are not directly appointed by the mayor) that reviews a TIF before it goes before the City Council, where no TIF has ever been rejected. If the board—made up of representatives of the major taxing bodies—asked tough questions and took a stand, maybe it could force Daley to alter his plans.

How did the board members handle this huge responsibility? They ate doughnuts, drank coffee, and listened to Steven Friedman, a private planning consultant, read a summary of his own report endorsing the LaSalle Central TIF. When he was done, Friedman looked up and asked, “Any questions?”

For a few awkward seconds the board members sat in silence. Then chairman Eric Reese called for a vote. And just like that they recommended creation of the costly and controversial TIF district. From start to finish, the meeting took maybe ten minutes—not a word of discussion, no questions asked.

To appreciate the self-destructive effect of this timid behavior, you have to understand the impact TIFs have on the taxing bodies the Joint Review Board members represent. TIFs in Chicago are districts created by the City Council at the mayor’s urging. As a practical matter, they are tax hikes. From the moment a TIF is created until the moment it expires, at least 23 years later, it roughly caps the amount of revenue that the taxing bodies (such as schools, parks, city colleges, county government) take from it. Any additional property taxes generated in the district—through development or even inflation-driven reassessments—go to the TIF. Unless the schools, parks, colleges, etc, are prepared to respond to inflation by cutting back, as the years pass they will find themselves having to raise their tax rates to compensate for the property taxes they are losing to the TIFs. The more TIFs the city creates and the longer they’re around, the more tax hikes they require.

Four of the five review board members represent the very taxing agencies that the TIFs hit hardest: Ken Gotsch, chief financial officer for the City Colleges of Chicago; Susan Marek, deputy controller of the Chicago Public Schools; John Baldwin, an economic development specialist for the Cook County Department of Planning; and Reese, deputy director of budget and management for the Chicago Park District. (The board’s fifth member, John McCormick, is the city’s finance manager for TIFs.) The state created joint review boards precisely to give schools and parks protection against TIFs. In towns like Evanston and Oak Park, the boards force the city governments to make compromises in order to protect the tax base. But Chicago’s board always goes along.

Taxpayers have paid a price for the board’s allegiance to the mayor. In 2003 the taxing bodies had to compensate for $275 million kept by TIFs; in 2004 that total rose to $335 million; last year it rose to at least $400 million (the precise numbers have not been calculated). If the LaSalle Central TIF passes, over the next 23 years it will siphon off at least $2.1 billion in property taxes that the area would otherwise yield from routine assessment increases alone. That’s according to an analysis by Cook County commissioner Mike Quigley, who’s calling for a moratorium on TIFs until various reforms he’s proposed are adopted.

Daley contends that the TIFs fund necessary public works. The LaSalle TIF, for example, is supposed to repave roads, rebuild sidewalks, modernize old buildings, and perhaps even add a trolley in the commercial area roughly bounded by Randolph, Van Buren, State, and Canal.

Those sound like laudable goals, but there’s no guarantee that the city will accomplish any of them. No rules or regulations restrain the city from changing its mind about how to spend TIF dollars. Once a TIF district is adopted, Daley and the relevant aldermen are pretty much free to spend its money any way they want. There’s no independent oversight—there’s not even an annual budget. That’s how the Central Loop TIF, intended to rebuild a few downtown retail and commercial strips, wound up contributing $95 million to build Millennium Park. The Fullerton-Milwaukee TIF, intended to spruce up local businesses around that northwest-side intersection, ended up spending $8 million to build high-end condominiums on Belmont near Pulaski.

So far, the city has budgeted only about $550 million of that $2.1 billion predicted by Quigley’s analysis. This suggests a lot of money will be sitting around in an unmonitored piggy bank controlled by the mayor and a few aldermen. Meanwhile, taxpayers face a looming property tax crisis. Over the last several months Cook County has been sending out two sets of notices to Chicago property owners: a tax bill from the treasurer and an assessment notice from the assessor. The hike in this year’s taxes is relatively marginal—about 3 or 4 percent, nothing to be outraged about.

But the tax hike to come—the message buried in the assessment notices—will be severe. According to assessor Jim Houlihan, assessments in poor, black south- and west-side communities like Englewood and Lawndale are rising by as much as 60 percent. Three years ago, residential property owners here were largely shielded from rising assessments when state legislators temporarily expanded the home owner’s exemption. That exemption expires next year and unless legislators extend it before next summer, home owners in Englewood are looking at property tax hikes of upward of 150 percent.

The notices announcing those big hikes won’t come out until this time next summer—and then you will hear the howling. “I don’t think people realize what’s coming,” says John Paul Jones, an Englewood resident who’s director of community outreach for the Neighborhood Capital Budget Group, a fiscal watchdog. “It’s going to be devastating.”

That’s why the stakes were so high at the August 4 Joint Review Board meeting. And it’s why activists like Jones were so disappointed when the Joint Review Board rolled over once again.

At least the vote this time wasn’t unanimous. At the insistence of Quigley, newly installed Cook County Board president Bobbie Steele directed Baldwin to vote present on the LaSalle Central proposal. So as the Joint Review Board members were preparing to break after the voice vote, Baldwin quietly asked Reese to be sure to note that his vote was present, not yes. Reese looked at McCormick, who shrugged, and then duly noted Baldwin’s vote. With that the meeting ended.

Officially, the board sent its recommendation to the Community Development Commission, another advisory group. The CDC, whose members are appointed by Daley, might ask more questions, but it’s never rejected a proposed TIF. The CDC recommendation goes to the City Council, which gets the final word.

The CDC will consider the LaSalle TIF at its September 12 meeting. Jones vows to fill the room with residents from all over the city in the hope of halting the TIF and the $2.1 billion tax hike that goes with it.

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