P r o p e r t y T a x . c o m   b y    F I T Z G E R A L D   L A W   G R O U P

P R A C T I C E   L I M I T E D   T O   T H E   T A X A T I O N   O F   C O M M E R C I A L ,  I N D U S T R I A L  &  I N V E S T M E N T – G R A D E   R E A L   E S T A T E            

E s t.  1 9 8 7 

City of Chicago 2021 Budget

Mayor Lightfoot has proposed a 2021 budget for the city of Chicago which proposes a moderate property tax increase with future levy increases tied to the CPI.

City of Chicago has excess TIF funds

As pandemic blitzes city finances, an unexpected cash windfall for Chicago government

The city’s 140 tax-increment financing districts held $1.79 billion at 2019’s end, far above what officials had projected. Will Mayor Lori Lightfoot tap some of that to help balance a budget hit by lower tax revenues?

This office building is rising at Fulton Market and Sangamon Street. City officials have used projects funded by tax-increment financing to encourage development in the former meatpacking district.
This office building at Fulton Market and Sangamon Street is among several buildings rising in the former meatpacking district and West Loop. City officials have used tax-increment financing to pay for infrastructure improvements in those areas.
Pat Nabong/Sun-Times

While Chicago city government’s finances flail in the face of a pandemic liable to blast a billion-dollar hole in City Hall’s budget, one part of its treasury is flush with cash — specially designated money that Mayor Lori Lightfoot might see as tempting to tap as she tries to balance the budget.

According to reports filed with the state, at the close of 2019 the city’s 140 tax-increment financing districts, known as TIFs, held a combined $1.79 billion — far above what city officials had projected.

The districts are a quilt of zones across the city where some property tax revenue is set aside for public improvements or to subsidize private development benefiting a neighborhood.

Budget officials are working to determine how much of a TIF surplus Lightfoot can declare for 2021, when she’ll need all the help possible to avert tax hikes, service cuts and layoffs.

But how the surplus is calculated and how spending priorities are assigned for each TIF are cloaked in secrecy. That makes it hard to to know how much the city can draw from TIF accounts for general spending.

“This is somewhat of an insider’s game,” said Laurence Msall, president of the Civic Federation, a budget watchdog group. “Although they provide detailed information about the funds, unless you’re inside City Hall, you don’t really know what projects are moving forward.”

According to a former city official who dealt with TIFs, capital improvements — say, a new library, sewer work or streetscape beautification — or private development such as new housing or a company relocation often were scheduled based on priorities set by the mayor or aldermen, with no independent review.

“Even if we hadn’t announced the project, we’d earmark money for it,” said the ex-official, who spoke on the condition of anonymity.

Graph not displaying properly? Click here.

In an interview, Susie Park, the city’s budget director, wouldn’t discuss the current balance of all of the TIF accounts or how much might be declared surplus and be snagged for other uses but said the city is working to identify those funds.

“We really go in depth on every TIF, project by project, and when the projects are expected to be delivered,” she said.

“Everything is on the table,” Park said regarding ways to deal with the budget deficit.

Even more than the schools, city government is vulnerable to the financial fallout of the pandemic because so much revenue — from sources like taxes on gasoline, hotel stays, retail sales and tickets to events — has dried up.

Park said proposals for spending TIF money need to be more than a wish list.

“It’s got to be enough that we actually have some funding ideas on the process,” she said.

Asked whether she views TIFs as a possible bailout source for the city, Park said no.

“TIF is an important economic development tool,” she said, adding that the mayor plans to use the districts and other funding sources to direct $250 million toward improving commercial blocks in 10 South Side and West Side neighborhoods in the next three years.

It’s unclear whether bigger budgetary issues might upset those plans. But the year-end 2019 balance in the TIFs that the Chicago Sun-Times identified from reviewing annual reports for each district shows they are cash cows.

The Sun-Times compared the $1.79 billion balance with projected balances in data published last year.

In the “TIF Projection Reports, 2019-2023,” available on City Hall’s website, the estimated balance for all districts was $934.9 million — a difference of about $855 million. But the projection reports deduct lump sums for specific projects, including money that might really be paid in later years.

It’s like looking at a person’s checking account at two different times: once on payday and another time after bills are factored in.

With the city’s finances, any delay in big-ticket items would dramatically swell cash balances.

For example, the TIF for the Kinzie Industrial Corridor is slated to spend $65 million through 2021 for a new CTA Green Line station at Damen Avenue. And millions more is budgeted for street enhancements and school expansions.

Another key TIF, called La Salle Central, which covers the heart of downtown, lists $140 million in projected costs through 2023 for reconstructing the Lake and Washington street bridges.

Reconstruction of the Lake Street bridge downtown is one of the key projects planned for the La Salle Central tax-increment financing district, which covers the heart of downtown.
Reconstruction of the Lake Street bridge downtown is one of the key projects planned for the La Salle Central tax-increment financing district, which covers the heart of downtown.
Pat Nabong / Sun-Times

The Canal/Congress TIF has millions slated for infrastructure work that benefits redevelopment of the Old Main Post Office and Union Station.

Chicago’s richest, most active TIFs are downtown or in gentrified areas.

By recording expected costs sooner than when they might be incurred, city officials have been understating TIF balances, according to a business leader, an adviser to several mayors, who said: “Technically, it’s accurate what they’re doing. But, from a timing and cash-flow perspective, it’s b—s—.”

Cook County Clerk Karen Yarbrough’s office looks at TIFs through another lens. The office reported Thursday that Chicago TIFs collected $926 million in revenue last year, a record and 10% more than in 2018. Chicago TIFs absorb 13% of all property taxes generated in the city.

Last year, Lightfoot declared a TIF surplus of $300 million. The city has been grabbing a TIF surplus annually since 2009, though none that high.

Because the money goes to all taxing agencies, not just city government, City Hall gets only about 25% of any surplus. Most of the rest goes to the the Chicago Public Schools.

In June 2019, with Lightfoot newly in office, City Hall Inspector General Joe Ferguson faulted the city for not implementing TIF reforms a panel recommended in 2011. Those included providing a clear assessment of infrastructure needs and publishing easy-to-understand TIF performance data.

Tax-increment financing districts are used throughout the country. In Illinois, the law says they must be used to combat “blight.” But local governments have been creative in deciding which projects qualify. Chicago has established TIFs to help refurbish old buildings downtown and to speed investments that draw people and jobs to emerging neighborhoods near the city’s core.

They work by siphoning growth in property tax revenue. When a district is created, the current property taxes from the district are used as a base. Eventually, as the tax base grows and the amount of property taxes in the district go up, that growth in taxes is diverted to the TIF.

The growth can come from higher tax bills in general or from new development.

In Illinois, TIF districts are established to last 23 years, but the Legislature can extend their life 12 more years.

There’s been criticism that TIFs have gotten out of control, diverting needed revenue from local government, subsidizing development that would have happened anyway and deepening the chasm between “have” and “have-not” neighborhoods.

Lightfoot has agreed — to a point.

“The days of the TIF slush fund are over,” she said in her first budget address.

The mayor has promised tough oversight of all spending plans and reorganized a TIF Investment Committee of key city officials that must sign off on expenditures and posts its decisions regularly on the city website.

But she hasn’t done enough to satisfy some academics and community leaders who argue TIFs are inherently racist, diverting revenue that could benefit communities of color. Lightfoot has resisted calls to scrap two potentially lucrative TIFs driven by private development — Lincoln Yards on the North Side and a project called The 78 on the Near South Side. Former Mayor Rahm Emanuel pushed those deals through the Chicago City Council before leaving office.

Rachel Weber, an urban planning and policy professor at the University of Illinois at Chicago, said years ago TIF districts were the “wild, wild West.” Even with increased scrutiny in recent years, development is still pushed by market demand, according to Weber, who said the TIF concept “rewards neighborhoods with the capacity to attract market interest. That’s not a way to engage in public investment need.”

Weber said she doesn’t think the program should be abandoned without having something better to replace it. She said she thinks the best solution for more equitable distribution of funds across the city would be higher property taxes, though she said there’s no way elected officials would opt for that sure-to-be-unpopular move.

During a protest in Lawndale in June of George Floyd’s death at the hands of a white Minneapolis police officer, the Rev. Ira Acree of Greater St. John Bible Church spoke of racial inequities in Chicago, calling for change or a discontinuation of the TIF program.

“It was designed to help poor people,” Acree said. “It was designed to lift up distressed communities, creating more capital investment. But instead they have took tens of millions of dollars that belong to us and invested in the more affluent communities. It’s time that Chicago stop the reverse Robin Hood practices of the TIF system.”

Others argue that Chicago needs TIFs as a job creator and a way to fund public improvements, sometimes with developers picking up the cost upfront and taking the financial risks.

The Civic Federation’s Msall said that drawing cash from TIF surpluses could hinder growth.

“The money comes from somewhere,” he said. “It comes from the city’s main economic development tool.”

Others who support TIFs say it’s important to remember that cities, beneficiaries of many development trends in recent years, didn’t always have such luck. Going back 40 years, it looked like Chicago was losing ground because of suburban sprawl and major employers leaving downtown. And it was easier to build on a greenfield than assemble smaller big-city parcels.

TIFs came along when the federal government was withdrawing support for urban renewal. As a market-based solution, it might have helped turn the tide.

City of Chicago TIF Balances

Fund/Project 2019 Actual 2019 Estimate
Kinzie $124,495,431 $65,788,400
LaSalle Centrl $118,187,536 $82,354,900
Near North $104,925,148 $79,710,500
River (S) $86,803,226 $52,424,300
Red/Prp Transit $71,128,072 $3,448,000
Central West $63,966,180 $44,362,200
River (W) $52,791,189 $27,165,600
Pilsen Ind Cor $50,562,328 $34,304,700
Canal/Congrss $44,056,903 $21,956,300
N Branch (N) $42,147,655 $2,734,200
Showing 1 to 10 of 140 rows
PREVIOUS1234514NEXT

In the table above, the 2019 actual balance is drawn from city reports filed with the state. The estimated balance is from the TIF Projection Reports 2019-2023 the city published last year.

Elvia Malagón’s reporting on social justice and income inequality is made possible by a grant from the Chicago Community Trust.

Go to Top