Shedding Light on the Shadow Budget | Feature | Chicago Reader

Shedding Light on the Shadow Budget 

The TIF budget we recently pried from the city's grip reveals drastic inequities in how the money's spent.

Sign up for our newsletters Subscribe

Last Thursday, with wounds still raw from a contentious budget vote the day before, Mayor Daley used the ribbon-cutting ceremony for an upscale indoor market in the West Loop to rebuke rogue aldermen and other critics of his tax increment financing program.

The Chicago French Market, in the Ogilvie Transportation Center, is what the TIF program is all about, the mayor said. If the city hadn't kicked in $8 million in taxpayer-funded subsidies, the market wouldn't have been built and an economic opportunity would have been missed. "The city had to put some skin in the game and that's what it did," Daley said.

The mayor was right—the market is an excellent example of what the TIF program is all about. But it's not a good example of what it's supposed to be about.

Daley has claimed for years that the program is the city's chief tool for bringing economic development and infrastructure investment to neighborhoods that couldn't otherwise attract them. "Most of [the TIF money] is pledged for economic development in depressed areas, to bring jobs back or keep jobs there," the mayor said on WBEZ last month.

In the case of the market, the City Council, at Daley's urging, voted in 2006 to spend a total of $12 million in taxpayer money on construction of a new shopping area in the Ogilvie Transportation Center; $8 million of that sum went to the French Market. The project happens to be headed by a well-to-do, politically connected developer who's contributed thousands of dollars to the mayor's campaign coffers. And the city plans to spend another $23 million in the River West TIF district through 2011.

By contrast Roseland, one of the poorest neighborhoods in town, will get just $5 million to spend through 2011.

That's typical of how the TIF program works citywide, according to the Daley administration's own budget for the program—a document that the Reader obtained through a series of Freedom of Information Act requests and posted at chicagoreader.com last Friday. This is the document we've been referring to as the "shadow budget" because the city puts it together behind closed doors and had previously refused to release it publicly, even though it maps out the use of about half a billion dollars a year in taxpayer money.

An analysis of the budget, which lays out proposed and approved expenditures for 152 active TIF districts from 2009 through 2011, shows that the program has generated a huge kitty that primarily funds improvement projects in thriving neighborhoods.

Chicago TIF districts
  • Though most TIF districts are on the south and west sides, those in the city center
    generate—and therefore get to spend—most of the money.

Eight of the ten districts set to receive the most TIF-funded investment through 2011 are in prosperous neighborhoods near downtown, such as the South Loop and West Loop, while the districts that will receive the least investment are concentrated on the south and west sides. The biggest winner is the Near South TIF, roughly bounded by Michigan, Van Buren, State, and 21st Street: the TIF budget indicates that about $118 million will be spent there through 2011 on things like streetscaping on Congress, facade work on the Harold Washington Library, a rehab of the Blackstone Hotel, and construction of a new Jones High School. That's more than the total TIF spending planned for 82 districts on the other end of the spectrum in the same period.

Moreover, what qualifies as an "economic development" project is so loosely defined that the Daley administration can—and does—justify spending TIF money on just about anything. Among the hundreds of projects slated to receive funding are public housing redevelopments, new sidewalks and speed humps, CTA station reconstruction, ornamental street lighting, and subsidies for corporations, a bakery, a Jewel, and a theater troupe. Most, like public infrastructure and maintenance spending, are not subject to consideration by the City Council even though comparable expenditures in the regular budget are; others, such as the subsidies, benefit for-profit companies operating in already prosperous business districts.

In 2008, Chicago's TIF program took in $570 million, according to the administration. The city started 2009 with about $825 million in the bank, the TIF budget shows, and from 2009 through 2011 it plans to spend more than $1.3 billion. For context, the city's regular budget for 2010 is about $6.1 billion, and the Daley administration plans to cover a $500 million deficit by raiding the so-called rainy-day fund generated by the parking meter lease deal.

"TIFs are a useful economic development tool," says 38th Ward alderman Tom Allen, who's emerged as one of the mayor's chief critics on budget matters. "But when you are in an emergency financial situation, then you have to adjust your thinking. You can't continue to have blinders on about how this program works."

The nature of the TIF program practically guarantees that wealthier areas rake in more money.

The amount each property owner pays in property taxes is determined by multiplying the tax rate by a property's assessed value. The tax rate is the same citywide, so it's the differences in property values that determine how much property owners pay. The higher the value, the more the owner owes.

When the City Council creates a TIF district—which is almost always done at the mayor's behest—it freezes for up to 24 years the value of the property in that district that can be taxed by the schools, parks, and other bodies. Assuming property values rise, the owners still pay higher taxes accordingly—but all those extra tax dollars go into the TIF account. The more property values rise, the more money the TIF collects.

TIFs aren't just a tool for economic development. They're a tool for consolidating power. The mayor ultimately controls these accounts, which gives him leverage over every public entity, from the City Council to the public schools to the Park District. As we've previously reported, at least half a dozen aldermen have told us that mayoral aides pressure them on key votes—such as the ordinances for funding the Olympics or moving the Children's Museum to Grant Park—by either promising to give their wards more TIF dollars or threatening to take TIF dollars away.

The more TIF districts are created, the more money goes into the TIF accounts and the more powerful the mayor becomes.

Back in the 1980s, in the early days of Chicago's TIF program, Mayor Harold Washington said he would limit TIF districts to paying for specific projects in blighted communities that truly needed them. But the program has expanded over the years, and the administration and City Council have held almost no discussion of its evolving goals; now virtually any project in any community can qualify for subsidies. According to a TIF primer city officials distributed to aldermen this fall, TIF money can be used for program administration costs, property acquisition, rehabs of existing public or private buildings, construction of "public works or improvements," job training, business relocation and financing subsidies, planning studies, marketing, building demolition, and the services of architects, engineers, lawyers, and financial planners.

Many aldermen have come to like the program because it provides funding for their wards on top of what's designated in the regular budget—but without the same scrutiny. They're happy to take credit for the projects TIF money buys when they go before their voters at election time.

The specifics of how the city spends TIF money have always been kept from the public, even when Mayor Daley and his top aides craft a budget for it. When city officials shared small pieces of such a budget with individual aldermen this fall, several passed theirs on to us.

On September 21 we submitted a request under the state Freedom of Information Act for the complete TIF budget. On October 14 we got a letter from the Department of Community Development, which administers the program, informing us that our request had been denied on the grounds that "the information contained in it is comprised of staff-determined estimates. . . . They are not final or official projections."

click to enlarge Mayor Daley (second from right) at the opening of the Chicago French Market
  • Mayor Daley (second from right) at the opening of the Chicago French Market
  • Aregoni International

We appealed that decision. In a letter to the city's chief FOIA officer, Jennifer Hoyle, we argued that the budget involved both projections and allocations and was no more preliminary than the city's regular budget, which is similarly based on estimates of the next year's revenues and spending. We also noted that the state FOIA specifies that "all information in any account, voucher, or contract dealing with the receipt or expenditure of public or other funds of public bodies" is considered public and open to inspection.

Meanwhile, a story we wrote about the "shadow budget" hit the street just as the City Council was beginning debate on how to deal with a $500 million hole in the city's regular 2010 budget. Calls for TIF reform came from the public, the daily papers, and even aldermen, putting the administration on the defensive.

Mayor Daley told reporters the city merely needed to do a better job of publicizing the program. "If you look at TIFs, and we give you the complete breakdown of what it's accomplished in each community, it's amazing," he said on WBEZ. The Tribune gave the city's chief financial officer, Gene Saffold, space to reiterate the usual half-truths about the program. (For Ben Joravsky's breakdown of the doublespeak, see tiny.cc/6lqI6.) And city planning officials met with aldermen to persuade them that (according to a briefing packet they distributed) without the TIF program the city would be without funding for new libraries, parks, or street resurfacing.

On November 24 Hoyle e-mailed us saying she would grant our appeal. She said she'd send us the budget once Community Development had redacted the names of companies with which the city was still actively negotiating.

We finally got it on the afternoon of December 4, two days after the council, despite a barrage of criticism of the administration's financial management, had voted 38-12 to approve Mayor Daley's budget. (We've posted the complete original file at tiny.cc/TIFPDF and created a sortable, searchable spreadsheet from it at tiny.cc/TIFXLS.) Allen, one of the nay votes, attacked the administration for its "stubborn and obstinate refusal or failure to address TIF reform." Administration allies fired back. Alderman Bernard Stone (50th) argued that TIF funds pay for community improvements that in turn generate more taxes that can be used to make the community still better. "We invest taxes to improve our communities, our local communities," he said. "That is a TIF. It's a tool. It's not something you put in your budget."

But Stone and the administration are ignoring two key issues: the program's lack of transparency and its severe inequities. By keeping the TIF budget secret, the administration was able to conceal the fact that the program actually produces far more money for capital projects in the Loop and surrounding neighborhoods than it does in the outlying wards. The 16 TIF districts in what the city classifies as the central part of Chicago had a balance of about $309 million at the beginning of 2009, the budget document shows. That's an average of $19 million per district. In contrast, the 56 districts on the south side had just $175 million available, or an average of $3 million apiece.

That means that in tough budget times like these, downtown neighborhoods have millions more dollars a year available for new curbs, new CTA stations, business development, and whatever else the administration deems worthy—an gourmet market, for instance.

The River West TIF, the one that helped fund the French Market, was created in 2001 to spur development just west of the Loop. It's now one of the richest TIF districts in town. Up through 2009 it's collected about $49.3 million in property taxes, according to county clerk David Orr. The budget shows that it had a balance of about $17 million at the beginning of this year. In the next couple years, according to the budget, the city plans to use River West TIF funds to subsidize the redevelopment of the office building at 540 W. Madison, the Blommer Chocolate factory at 600 W. Kinzie, and the Ogilvie Transportation Center at 500 W. Madison.

The French Market in the Ogilvie Center was developed by MetraMarket, a joint venture of Bensidoun USA Inc., a French-owned grocery chain, and U.S. Equities, one of the biggest developers in town. The chairman and CEO of U.S. Equities is Robert A. Wislow, who was appointed by Mayor Daley to sit on Metra's board of directors.

Over the last ten years Wislow and his wife, Susan, have contributed at least $4,000 to Mayor Daley's election fund, as well as $2,000 to the coffers of Alderman Ed Burke, chairman of the City Council's finance committee, which oversees TIF deals with private companies, and $2,150 to the campaign of Illinois Supreme Court justice Anne Burke, Alderman Burke's wife. U.S. Equities gave another $4,000 to Daley and $10,000 to Ed Burke. Nancy Pacher, the president of U.S. Equities Realty, is a member of the Chicago Plan Commission, the body of mayoral appointees that approves major development deals, including the controversial proposal to move the Children's Museum into Grant Park.

Meanwhile Roseland and Englewood, two neighborhoods so deprived of resources and services that researchers consider them "food deserts," will together have spent less than $12 million in TIF funding in 2009, according to the budget.

When critics have pointed out the TIF program's inequities in the past, Mayor Daley's black and Hispanic political allies have come to its defense.

For instance, in 2007 Governor Rod Blagojevich called in county board commissioner Mike Quigley, then the city's most prominent TIF reformer, to talk about the program to a group of key legislators, including Illinois house speaker Michael Madigan. Daley shrewdly countered by sending in two Hispanic aldermen, George Cardenas and Ray Suarez, and two African-American aldermen, Latasha Thomas and Carrie Austin.

When Quigley noted that several academic studies had shown that TIFs actually benefit wealthier communities over poor ones, Austin cut him off, saying: "Professors never built nothin'."

And so ended that debate.

With the city facing a gaping budget crisis, though, the movement for reform may be picking up steam. Alderman Allen proposes radically changing the TIF program to remedy the inequity and the transparency problem. As he envisions it, the city would replace dozens of individual TIF districts—each with its own budget—with one large economic-development fund, paid for with property tax dollars and itemized in the regular city budget.

"That way we can actually see who's getting how much of what," says Allen. "And we can decide, do we want to spend, you know, $20 million on this big project downtown? Or would we rather spend it somewhere else?"

This would push TIF funding out of the shadows. Of course, the more light is shed on the TIFs, the less power Mayor Daley holds. If Allen actually brings his scheme to the council, expect a nasty political fight.

"I know that's a pretty radical proposal," says Allen. "But these are desperate times."   

Ben Joravsky discusses his reporting weekly with journalist Dave Glowacz at mrradio.org/theworks.

Tags:

Support Independent Chicago Journalism: Join the Reader Revolution

We speak Chicago to Chicagoans, but we couldn’t do it without your help. Every dollar you give helps us continue to explore and report on the diverse happenings of our city. Our reporters scour Chicago in search of what’s new, what’s now, and what’s next. Stay connected to our city’s pulse by joining the Reader Revolution.

Are you in?

  Reader Revolutionary $35/month →  
  Rabble Rouser $25/month →  
  Reader Radical $15/month →  
  Reader Rebel  $5/month  → 

Not ready to commit? Send us what you can!

 One-time donation  → 

More by Ben Joravsky

More by Mick Dumke

Related User Lists

Agenda Teaser

Performing Arts
July 31
Performing Arts
April 30

Popular Stories