Daley letting huge Loop TIF die
(Crain's) — City Hall is putting a lid on Mayor Richard M. Daley's favorite honey pot.
Facing apparent opposition from Gov. Rod Blagojevich, the Daley administration is abandoning efforts to extend the legal life of the massive Central Loop tax increment financing district, which covers a wide swath of Chicago's commercial heart.
The decision means the district automatically will sunset on Dec. 31 — and it means that the more than $111 million it has been throwing off each year for development projects instead will return to the regular property tax pool.
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At least in the short run, the action is good news for taxpayers, likely providing a windfall as soon as 2009 for cash-strapped local governments that have been scurrying to cut costs and find new sources of revenue. Public schools would get most of that, but about $20 million a year would be available for the regular city budget.
Mayoral aides clearly are not happy that a pot of money the mayor had tapped for everything from building Millennium Park to subsidizing development of Theater Row and Block 37 no longer will be available for those uses.
But some watchdogs are thrilled.
"Potentially, this could mean a lot more money for public schools, parks and other local governments," says Laurence Msall, president of the Civic Federation. The district's now expiring 23-year life span "is a sufficient length of time for the city to carry out its original plans," he adds.
Official confirmation that the plug is being pulled comes from Arnold Randall, who heads the city's Department of Planning and Development.
As recently as late spring, the city was talking to legislators in Springfield about passing a bill to give the district another 12 years of life, an action that potentially could have helped the mayor raise cash needed to host the 2016 Olympics.
But, says Mr. Randall, "the environment in Springfield is not conducive. So we made a decision to let the Central Loop TIF expire."
A tax-increment financing district is a means of jump-starting development, subsidizing new projects today by borrowing against the increased property taxes those projects will produce in the future.
When a TIF district is formed, the value of all property in the district is frozen for tax purposes at the existing rate. Any increase in property tax revenue, from growth or inflation, goes not to schools, etc., but to a special pool for subsidies and infrastructure. That continues for the life of the TIF district, usually 23 years.
By the end of this year, the Central Loop TIF will have generated just under $1 billion for the special pool, $111.8 million of that just last year, according to the city. Those proceeds — the income from more than $2 billion in growth in property tax values since the district was created — will go back into the regular property tax pot next year.
Translation: Getting needed support from Mr. Blagojevich would have come with a political price tag, which Mr. Daley wasn't willing to pay.
Mr. Randall adds his view that the district "has done its job" in allowing the city to spend an extra $1 billion or so since 1985 to subsidize and otherwise spark development. He dubs the district "the poster child for success," arguing that it has leveraged billions of dollars of private investment into projects such as development of a string of Broadway-caliber theaters along Randolph Street.
Now, the city will rely instead on other TIF districts in the LaSalle Street and Near South areas, Mr. Randall says. "At this point, we're not contemplating" any substitute means to raise revenue — by, for instance, creating a new TIF district elsewhere downtown, he says.
That's just fine with a small but growing number of critics. For years they've argued that TIFs are a little-understood means of effectively raising taxes and shunting subsidy cash to favored developers outside the normal budget process.
Particularly key may have been a meeting last year between Cook County Commissioner Michael Quigley and Mr. Blagojevich about how to reform the TIF process. Mr. Blagojevich responded by demanding what aides describe as "increased disclosure" about winners and losers in any TIF legislation.
Illinois House Majority Leader Barbara Flynn Currie, who was carrying the bill to extend the life of the Central Loop TIF, says the governor took things too far, vetoing some bills that had wide support.
"This governor has been very, very hard on TIFs," she says. Getting the governor to sign off on the mayor's plan "would be difficult."
TIF critics are right, counters state Rep. John Fritchey, D-Chicago. Because of recent publicity, "TIFs are not in a black box anymore. The last thing voters want to see now is more subsidies for developers."
Whoever's right — in my view, TIFs make sense in selective spots, but Chicago has grossly overused them — a chapter in the city's financial history is ending.
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