| 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.

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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.

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