Crain’s Business Chicago
A group of aldermen who frequently disagree with Mayor Rahm Emanuel are advancing a plan to reform the city’s much-criticized tax-increment financing system. And if it ever escapes committee, I could see it picking up quite a head of steam.
Under the proposed “back to basics” TIF ordinance, private development projects could receive TIF grants only if they “would not reasonably be anticipated” to develop without a subsidy—a so-called “but for” test. And TIF districts could be created only in neighborhoods that qualify as blighted.
That, in theory, is how TIF law works now. But Emanuel, and to a much larger degree predecessor Richard M. Daley, has been accused of bending the rules for projects in areas that don’t need help, particularly in the central area of the city.
“TIFs were designed and intended to be an economic development tool for blighted and undeveloped neighborhoods,” says Ald. Rick Munoz, 22nd, who introduced the proposal along with Leslie Hairston, 5th, Scott Waguespack, 32nd, and other members of the City Council’s Progressive Caucus. But in the 1990s, the program “morphed into a huge tax diversion plan” in which the city effectively speculated on growth in certain areas.
Here’s the proposal.
For a TIF district to be established, the city would have to find that blight is “reasonably distributed” throughout its area. Blight is defined as buildings that are vacant, environmentally obsolescent or so rundown that they need major repairs or even demolition. Also, the district itself would be required to have negative growth in property values for three of five years before its creation, or to lag growth citywide in three of five years.
TIF grants for private projects would have to meet all of those requirements, as well as the “but for” test. And the current proposal appears to apply to existing TIF districts, not just new ones.
Munoz said the proposed ordinance would not apply to public works projects such as streetscapes, schools and el stations. That’s significant because although Emanuel has approved grants for a few projects in and near the central area, such as the new DePaul University basketball stadium across from McCormick Place, he has pushed most of the money into public projects.
Still, continuing criticism has prompted Emanuel to generally ban new TIF projects downtown and to declare “surpluses” of hundreds of millions in TIF funds, moving the money into the city’s and Chicago Public Schools’ general budgets. That, in turn, drew blowback yesterday from the Civic Federation, which suggested that Emanuel either use TIF money for legitimate TIF projects or consider abolishing the districts.
The proposal was sent to committee for a hearing.