I do not think that word means what you think it means | Bleader

Thursday, August 6, 2009

I do not think that word means what you think it means

Posted By on 08.06.09 at 02:52 PM

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If you've ever wondered why Ben Joravsky feels the need to constantly explain what a TIF is, here's why:

"If the [Olympic] village is built in a tax increment financing district, the extra property tax revenue generated by the new development would pay for public improvements in the area for a set period of time."

Joravsky has more on the Olympic village project today. But let's just look at that one word, extra.

I mean the post title quite literally. Whether or not it's "extra" is a matter of interpretation. And Daley's been riding the above interpretation for years, siphoning off billions in revenue that the city can quite literally do what it wants with, including shift TIF funds from one TIF district to another.

So, is it "extra" property tax revenue? Depends on what you mean. Here's how Joravsky explained it in a 2005 article:

"Suppose you paid $2,000 in property taxes in 1990, when the city made your neighborhood a TIF. Assessments have undoubtedly gone up since then, so now you're paying about $4,000. But only $2,000 of that will be turned over to the schools, etc. The remaining $2,000 goes into the TIF fund."

And as we all know, housing values skyrocketed this decade.

'Til now, at least. But here it's worth noting Cecil Adams's reply to this question: "I saw in the paper that the county is revising property assessments downward because of the drop in home values. Does this mean my property taxes are going to go down?"

"Smart-ass answer: Sure, right after they discover a cure for death."

And reading through some of Joravsky's old TIF coverage, I rediscovered this little gem, from the city-issued "ABCs of TIFs":

"TIF is not a new tax, but it works by putting the natural increase in property taxes to work in that specific neighborhood."

"Natural" != "extra," to my mind.

Hang on, I'm not done. Note that specific neighborhood. Here's how that works:

"Since 1984 TIF districts located downtown, on the Gold Coast, and on the near east and west sides have collected more than $1.35 billion that would have otherwise gone to the schools and other strapped taxing bodies. The Central Loop TIF, the granddaddy of them all, has reaped $875 million alone. Meanwhile, as you might expect, TIF funds established in truly deserving neighborhoods are puny by comparison. Englewood's two TIFs have gathered only about $20 million between them, though one of them dates back to 1989. Woodlawn's TIF fund has collected under $10 million after six years; Pullman's has less than $20,000 after seven."

Okay, bear with me:

If TIFs work as intended, the "extra" tax revenue is driven back into that specific neighborhood. Therefore neighborhoods that will "naturally" generate more tax revenue (and the natural increase can be related to TIF-funded development, but also Alan Greenspan, AIG, and the price of tea in China) will siphon off more money from the city tax base than the more blighted neighborhoods that the program is theoretically intended for. Thus, in some ways, the system works in reverse - the money pools in districts with more and/or more valuable properties.

Since this draws away from tax revenue that would go to citywide services, taxes then have to go up to make the tax base more level. As Joravsky puts it:

"Think about this. If the schools, parks, and county can only get $100 from a TIF district, what do they do when their expenses go up to $200? They have to raise their levies—the amounts they each get from the property tax pie—to compensate for the money diverted to the TIFs. When they do that, property taxes go up. No matter what the city tells you, TIFs are tax hikes, plain and simple—the more you create, the higher taxes go."

It's a win-win for the mayor: a way of passing off tax hikes - and not just regular tax hikes but ones that create malleable slush funds - as "extra" tax revenue, as if TIFs were a way of spinning straw into gold: "everyone—including people who don't live in the TIF district—pays more. This is how TIFs result in tax hikes across Chicago, even though almost every elected official follows Mayor Daley's lead in pretending they don't."

Win-win, at least, as long as it's framed that way.

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