Remarks by:
Patricia Nolan, Director of Planning,
Neighborhood Capital Budget Group
Good Morning.
The City of Chicago has 129 TIF districts on the books, by the time I get back into town tomorrow, I am sure that another will be in the works. Mayor Daley has repeatedly stated that “TIF is the only game in town!”. Chicago is a town that loves to TIF. In fact, nearly 15% of our assessed value is in TIFs, which translates to nearly $5 billion of our property value, or 27% of the City’s total acreage.
Our organization, NCBG, does not see TIF as good or evil, and we are not anti-TIF. TIF is a tool and when used wisely it can bring great benefits to communities.
With consistent community participation, TIF can be a tool for implementing a community-based revitalization plan through encouraging affordable housing development, improving parks and school facilities, fixing basic infrastructure, putting vacant land to productive use, creating good paying jobs, and meeting other local needs.
Without strong and sustained public participation, however, TIFs can give the City the power to change the basic character of a neighborhood against the wishes of those who live and work there, accelerate the pace of gentrification, and drive up property values to the point that existing residents and businesses cannot afford to stay in the community.
In short, TIF is a mixed bag, and its success or failure depends on how active the community is in their planning and implementation.
The state law that allows Illinois cities to create TIFs requires that they are only established in areas that are blighted or becoming blighted (often called conservation TIFs). Any planning consultant worth a dime in Chicago can find blight or potential blight in almost every corner of the city. The blight requirement is meaningless. For example, the downtown or Central Loop in Chicago is a TIF. In fact, it is our oldest and largest TIF, but hardly blighted.
So, if TIF is not really used just in blighted areas as the intent of the law states, then what other “myths” about TIF can we dispel?
Well, the first and most important is the myth that TIF is cost free or free money.
There is an ongoing and heated debate in Chicago about the effect that TIFs have on the tax bills of residents and businesses inside the TIF. It is true that TIFs do not directly affect the tax rate you pay. However, TIFs when successful increase the value of your property, which will lead to a higher tax bill for you. TIFs may also have a long term impact on tax rates. If the tax base “flattens out”, while the costs of government services escalates, that means that tax rates will have to go up to keep pace. Moreover, if you TIF an area that was already growing in property value prior to becoming a TIF, eventually your taxing body will face having to raise the tax levy. When this happens, you are then officially shifting the tax burden to every taxpayer in the city to pay for properties in the TIF that won’t be paying their fair share of property taxes. TIF is not cost free. There are many trade offs!!
The idea behind TIF is that little or no new development would happen “but for” or without the use of TIF. Unfortunately, the state law does not provide us with a good set of rules or measures for determining whether or not development would take place without the TIF. This has opened the door to widespread abuse of TIF in some areas. In fact, until 1999, TIFs in Illinois could be used to build golf courses!
Like, I said in the beginning of my remarks-TIFs are not all bad though.
TIFs have become a key ingredient in Chicago’s industrial retention and development strategy, with more than 3 dozen industrial TIFs in place. So far these TIFs have generated $86 million in increment. So far the City has pledged $215 million of TIF money to developers and existing companies. These subsidies are expected to generate an estimated $1.15 billion in private investment. This translates into about $5.40 in private investment for each TIF dollar promised. These figures also include a planned investment of at least $132 million in job training in these TIFs.
One of the most important ways for industrial development to benefit the City as a whole is through the ability to create good paying jobs. Overall, the City reports that TIF deals will create 13,000 jobs and retain over 21,000 jobs. The City has also created another program called “TIF WORKS” as a vehicle for providing job training funds with TIF dollars. We think that this is all very good news as part of a very hard fought for TIF policy reform campaign by NCBG members.
With all that being said, I have a final thought.
TIFs are not supposed to take the place of existing forms of public investment. Our Capital Improvement Plan contains a wide range of infrastructure and economic development projects, paid for out of local, state and federal revenues. While if might make sense to pay for some CIP projects with TIF funds, the TIF should not carry the entire burden itself. Most TIFs do not generate substantial new money for redevelopment until they are at least five years old. This means that there are a lot of competing priorities for a relatively small pool of money.
Bond issues are the most common way to “front fund” a TIF. So far in Chicago, 28 TIFs have received bond issues or bank loans to front fund development activities. These bonds range from fairly small (1 million) to very large (half a billion for the Central Loop).
You have to ask yourself whether or not focusing so intently on downtown development when there are so many pressing neighborhood needs is a wise or equitable decision. True, the Loop looks better than it has in years and residential development is booming. But, the changes downtown raise as many questions, however, as they presently answer.
What is the real cost of the downtown development boom? Who is benefiting? Who has been left out? Why has downtown development soared while many neighborhood TIFs languish? And finally- Once the real estate market was rolling downtown, was it necessary to continue to throw so many public resources at downtown??
In summary, we have learned three important lessons in Chicago.
Demand accountability. Open up the process to people directly affected. Have oversight panels for each TIF. Ensure taxpayers get early warning about new development. Make TIF recipients keep their promises.
Affordability. Minimize displacement and encourage the use of TIF to develop more and better affordable housing.
Lastly, demand direct benefits. Use TIF dollars to create good paying jobs and for job training. Use TIF for public improvements or to encourage projects that meet the needs outlined in plans that are developed with the community themselves.
TIF is not a magic bullet, and it takes enormous political will to make it work for everyone.