Chicago property tax 101 

What to tell an alderman who fibs to you about TIFs

click to enlarge LILLI CARRÉ
4

In the last few weeks, officials with the teachers union have been meeting with aldermen, trying to get them to convince Mayor Emanuel to return some of the hundreds of millions in unused TIF dollars to the schools.

So far, they've had mixed results.

On the upside, 32nd Ward alderman Scott Waguespack agreed to sponsor a proposal that would return as much as $250 million to the schools, and several of his colleagues have expressed support.

On the downside, in the budget he unveiled last week, Mayor Emanuel only proposed turning over about $30 million to the schools.

Interestingly enough, the mayor's floor leader, Alderman Patrick O'Connor, initially took a hard line—as in, don't give the schools any money from the tax increment financing reserves, which have been estimated at anywhere between $500 million and $850 million, depending on how the numbers are added up.

"Quite frankly, I don't think they understand they've gotten every dime that they put forth in a tax levy," O'Connor told Rebecca Vevea of the Chicago News Cooperative after meeting with union officials on October 4. "They've never been deprived of any money, so it's kind of an argument that, for me, falls on deaf ears."

Wow, that's pretty cold, especially coming from a sidekick of the mayor who's pledged to do whatever he can on behalf of the kids. But cold or otherwise, the real question is whether O'Connor is telling the truth.

And the real answer is not that simple. Like most other things in the exceedingly complicated world of TIFs, there's enough of a kernel of truth in O'Connor's statement to keep me from calling him a flat-out liar. So let's just say it's a very, well, creative interpretation of how the TIF program works.

All of which made me realize something: since everyone—even aldermen—is talking about TIFs right now, it's probably time for another TIF primer.

Okay, take a deep breath—you can get through this.

It all starts with the property tax. Basically, your property tax is the product of the value of your property times the tax rate. So if your property's assessable value is $100 and the tax rate is 10 percent, then you pay $10 a year in property taxes.

Now, that wasn't so hard.

Next, that $10 is divided among the various taxing bodies—the city, schools, parks, county, etc. Their portions are itemized on your property tax bill—which, coincidentally, just arrived in the mail.

For taxpayers in the city, the Chicago Public Schools take roughly 50 percent of the property tax. So, if you pay $10, the schools get $5. Appropriately, on your property tax bill, it will say: Board of Education: $5.

This is when it gets tricky, guys, so stay with me.

When the city council creates a TIF district, it freezes the value of property in that district for up to 24 years. If your property's assessable value is $100 when the TIF is created, it will remain at $100 for the following 24 years—at least as far as the schools, parks, county, and other taxing bodies are concerned.

Of course, your property will rise in value over that time—property values have been rising all over the city for the last three decades. So let's say its value shoots up to $200. With a 10 percent tax rate, you'll pay $20 in property taxes.

But the schools will still only be getting $5.

Why? Because under the TIF law, as far as the schools are concerned, your property's assessable value remains frozen at $100.

Of course, the school system's costs do not remain frozen for 24 years. On the contrary, they tend to go up every year, since they include everything from rising utility bills to the forever-escalating salaries of the top administrators.

So in order to compensate for the $5 they're not getting from the escalating value of your property in the TIF district, the schools ask for more money from taxpayers throughout the city.

And this is why TIFs are tax hikes.

Consider it another way: the city's 160-some TIF disctricts collect more than $500 million a year altogether—on top of what you're paying to fund the city, schools, parks, and county.

In fact, if you only remember one thing from this primer, remember this: a TIF is a tax hike.

Now, here comes the really snaky part of the scam: our public officials don't tell you that TIFs are hiking your property taxes.

Quite the contrary. If you live in a TIF district, the property tax bill tells you that the TIFs take zero dollars.

The bill proceeds to itemize, down to the penny, exactly how much you're paying to the schools, parks, and county—even though the whole thing's made up.

I know, I know—it's hard to believe your government would so blatantly deceive you. Bernie Madoff must be sitting in federal prison wondering why he didn't come up with this.

To illustrate my point, let's examine the most recent tax bill of one of my favorite mayors—Richard M. Daley, who happens to live in the Near South TIF district. According to his tax bills, Mayor Daley will end up paying $12,917.40 in property taxes this year, of which $6,716.84 went to the Chicago Public Schools and zero went to the Near South TIF.

In reality, the schools got $446 of his tax dollars and the Near South TIF got about $12,000.

In short, Mayor Daley's tax statement is a fraud. He should be outraged and demand reform!

Oh, wait—he's the one who pretty much deformed this baby in the first place.

But in order to compensate for the $6,300 or so that Mayor Daley's tax bill says is going to the schools when it's actually bound for the TIF, everyone else in the city has to pay more in taxes to the schools.

One more time: thank you, Mayor Daley, for this wonderful program.

Which brings us back to Alderman O'Connor, who was also Daley's floor leader and voted for all of his TIFs. When the alderman says the schools have "gotten every dime they put forth in a tax levy," he's talking about the property tax dollars the schools get to keep for themselves—after asking taxpayers to dig deeper—as opposed to the property tax dollars the schools essentially hand over to the mayor's TIFs.

Here's what he isn't saying: taxpayers are handing over roughly $250 million a year that they think goes to the schools when it actually feeds the TIF slush fund, which pays for things like a $46 million handout to private Loyola University, to name just one TIF deal in Alderman O'Connor's north side ward.

Give the teachers credit: they've finally caught on. Now they're essentially telling aldermen and the mayor that if taxpayers are forking over $250 million in the name of the public schools, the money should be spent on the public schools—as opposed to private universities on the north lakefront that don't really need it.

Speaking of Alderman O'Connor . . .

A decade ago he penned an essay for a neighborhood newspaper that was titled, "Officially Speaking: To TIF or Not To TIF."

It was actually fairly witty and filled with self-deprecating wisecracks, like, "So much has been written about TIFs recently that, except for the few accountants out there who take delight in such scintillating articles, the general public has in large part lost interest.... I will not give you a sophisticated description of a TIF (or pretend that I could)."

Back in 2000, the year O'Connor wrote that article, the tax bill on my north-side house was almost $3,000. This year it's about $8,400.

That's an 180 percent increase, for all you sadists keeping score at home.

Thanks for the laughs, Alderman O'Connor—looks like the joke's on me.

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