Whose Slush Fund Is It Anyway?

In the 47th Ward, an alderman gets a rude awakening. Before long, we all will.

Eugene Schulter at Lane Tech

A. Jackson

By Ben Joravsky
October 13, 2006

FOR YEARS 47TH Ward alderman Eugene Schulter has been among the herd of aldermen approving Mayor Daley’s proposed tax increment financing districts, but recently he broke ranks. No, Schulter didn’t come out against the LaSalle Central TIF, the mayor’s latest boondoggle—he says he’s still studying that proposal. But he did do something few other aldermen have braved. Addressing top Daley aides at an October 3 meeting of the City Council’s finance committee, Schulter blistered the administration for breaking its promises about how TIF funds are to be spent. “They said they were going to spend this money in my ward,” Schulter says. “And now they’re not. I have to stand up for the people of my ward.”

Schulter’s rebellion is one chink in the mayor’s heretofore seamless control of TIF funds. Another is the threat of disaster that looms over the city’s commitment of future tax revenues its residents can ill afford.

As regular readers know, TIFs are districts created by the City Council in which property tax dollars earmarked for the schools, parks, county, and other taxing bodies are frozen for 23 years. If a TIF district generates $10,000 for the schools, parks, and other entities when it’s created, that’s more or less all the schools, parks, etc will get until it expires. The rest of the property taxes generated by rising assessments and new development—we’re talking hundreds of millions of dollars citywide—goes to the TIFs, slush funds controlled by Daley and (usually, anyway) the local aldermen.

There are plenty of reasons to oppose TIFs. They’re poorly regulated and, no matter what City Hall tries to tell us, they’re driving up taxes as a result of the millions they divert. But aldermen tell me they’re forced to go along with TIFs because they’re the only game in town when it comes to funding neighborhood development projects. It’s a go-along-to-get-along system: if you want money for your own ward, you have to vote for TIFs in all the other wards. As a result the council keeps creating them— we’re now at 140-plus TIF districts— and the funds are sucking up about $400 million a year in property taxes.

In exchange for routinely endorsing TIFs, Schulter and other aldermen expect a major say in how TIF funds their wards produce get spent. Schulter says Daley and former planning commissioner Christopher Hill persuaded him to create two adjoining TIFs, the Western Avenue South and the Western Avenue North, by dangling before him the promise of new schools, parks, and senior citizen housing within his ward.

“I really wasn’t a big supporter of TIF districts,” Schulter says. “But I was assured by the mayor and Hill that these tax dollars would stay right here in the community. I thought, if we can help elementary schools and high schools and the parks and the seniors in our own community, how bad can that be?”

Together the Western Avenue TIFs cover 481 acres along Western from Belmont to Montrose, with branches jutting down Wilson and up Damen all the way to Foster. Since the City Council approved them in 2000, they’ve collected roughly $20 million in property taxes, including about $6.2 million in 2005. The city projects that they’ll collect about $120 million in property taxes before expiring in 2023.

Working with his ward’s TIF community advisory council, Schulter was putting together a list of things he wanted to spend the money on when he got an urgent call to meet with city officials. On September 25 he went to City Hall, where John Dunn, the mayor’s chief legislative aide, told him that the mayor was taking charge of the Western Avenue TIFs. Dunn said that the mayor needed the funds to help him make good on his electionyear promise to spend a billion dollars building and rehabbing schools all over the city.

In this case, Daley wants to pay for two school projects—a rehab of Mather High School and the construction of a new north-side high school—by selling about $60 million worth of bonds and paying them off with future property taxes raised out of the Western Avenue TIFs. The news outraged Schulter—neither project is in the 47th Ward.

“There was an extensive community process when we created these TIFs,” he says. “There were meetings. They made promises. I have the documents saying the money will be spent in the community. All of a sudden they’re just giving this money away.”

As Schulter sees it, the city was stringing him along by allowing him and his constituents to believe they had control over the TIFs. “We have tremendous parks needs,” Schulter says. “They told us we could spend money on parks. We’ve had meetings. We’ve made plans. They can’t just take this money.”

Actually, the TIF program was never intended to fund public-improvement projects in relatively prosperous communities like North Center. It was designed to bring economic development to poor, blighted communities that otherwise wouldn’t attract investment. But the city has so brazenly perverted the scope of the TIF program—using it to fund everything from Millennium Park to the new Block 37 underground CTA station—it’s easy to see why Schulter would want his constituents to have a slice.

Hanging over this power struggle is the larger question of city finances. Daley’s plans hinge on the Western Avenue TIFs generating at least $60 million by 2023. What if they don’t? Sure, the area’s hot, but the condo market’s already softening. This points to an even broader problem: there’s no guarantee that taxpayers can keep pace with the city’s furious appetite for property taxes. As it is they’re rising at a far faster pace than most people’s incomes, with property taxes in some areas looking to go up as much as 100 percent next year.

For the last several years groups like the Tax Reform Action Coalition have urged Daley to use his clout with state legislators to pass a law capping the rise in residential property tax assessments. But so far Daley has offered little more than lip service to the cause. And he has good reason for holding back on tax caps: he can’t afford them. If the state were to impose a cap, he wouldn’t get the money he needs to meet his ever expanding TIF obligations. Then what—bankruptcy?

Schulter’s concerns are much more immediate. Lane Tech needs a new football stadium, Lakeview High School needs new elevators, Coonley Elementary School needs a new lunchroom, Clark Park needs new soccer fields and baseball diamonds—the list goes on and on. But now he’s learning that when it comes to TIFs only Daley gets to control the piggy bank.

At the finance committee meeting Schulter fired questions at Dana Levenson, the mayor’s chief financial officer, demanding to know how the Western Avenue TIFs could fund projects in the 47th Ward if the city diverted $60 million for schools in other areas. Levenson promised to meet with Schulter in private to discuss the matter. In effect he was taking Schulter out into the hallway. It’s a variation on an old game played at mayoral budget hearings. A resident will complain about city services, and the mayor will dispatch an aide to take the complainer into the hallway, away from the press, to give him whatever it takes to shut him up and go away.

In this case the city may try to silence Schulter by juggling the TIF books in order to find money for Lakeview, Lane, Coonley, and at least some of the other projects on his list. The problem is that other aldermen—John Pope in the 10th Ward, Freddrenna Lyle in the 6th, Anthony Beale in the 9th, and Ed Smith in the 28th, for example—are starting to mutter about TIF money spent outside their wards. If Daley takes care of Schulter he’ll have to take care of all the aldermen even as the existing TIFs strain to keep up with their obligations.

Watching it all with a bit of bemusement is Cook County commissioner Mike Quigley, who’s recently begun something of a crusade for TIF reform. Quigley praises Schulter for standing up to Daley, but he notes that it’s ironic to hear aldermen complaining about a program they’ve been rubber-stamping for years. “I feel a little sorry for the aldermen,” Quigley says. “They’ve all been hoodwinked to some extent.”

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