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When the city proposed creating a tax increment financing district in the historic La Salle Street area in May, it set off a debate between the city and property owners over who got to control the money the district would generate. It didn't, however, set off a debate over whether the district should be created in the first place. That's a conversation Cook County Commissioner Mike Quigley and the Neighborhood Capital Budget Group tried to start last week.
The question isn't whether the area qualifies. It clearly does, under the broad qualifications of the state law that regulates TIFs. The question is whether we should divert property taxes from the cash-strapped schools, the county and other local governments -- and pay higher taxes as a result -- in order to spruce up a downtown area that most people wouldn't consider to be truly blighted. That's a fair question, one that someone in government finally is publicly asking.
TIFs essentially freeze the taxes paid to schools, park districts, counties and other taxing bodies within their boundaries for 23 years. If you live in a TIF district, however, your taxes aren't frozen. They will grow due to appreciation, improvements and new development. The extra taxes you pay above that frozen amount go into the TIF pot and are spent by the city on specific projects within the TIF district.
The city now has more than 140 TIF districts, covering about a third of the city and about 8 percent of the city's property value. (In the interests of full disclosure, the Sun-Times built a new printing facility within a TIF district.)
Proponents of TIFs say schools and other governments aren't hurt because new development and appreciation wouldn't have occurred if not for the TIF. They also say taxing bodies come out ahead at the end of the TIF when newly reinvigorated properties are returned in full to the tax rolls.
That's the argument the city makes with the La Salle TIF. It says property values there are in danger of stagnating or declining, which would hurt all taxing bodies. But it's hard to believe that would happen in an area that incorporates the Sears Tower and City Hall. And creating the TIF there will divert a significant amount of tax dollars. The city says the La Salle TIF district will generate $550 million in its 23-year duration.
And if the city extends a TIF district -- as the mayor is considering doing with the Central Loop TIF, which expires next year -- the promised payoff to the taxing bodies from reinvigorated areas is delayed. The Loop TIF is probably generating more than $100 million a year.
The taxing bodies get a vote on an interagency review board, which approved the La Salle TIF on Friday with Cook County, for the first time, voting "present." But even if that board voted no, they could be overruled by the City Council.
One reason local city governments rarely complain is because most are controlled by the mayor or his appointees. Another is that the school district gets money from TIF districts and from the state that makes up for some but not all of the lost property tax dollars. Another is that the taxing bodies still get the money that they need from the tax base, but the parts of the city not subject to a TIF must make up for parts that are. That means local governments must set their tax rates higher, and that means our taxes go up.
Quigley introduced a proposed ordinance that attempts to give the county a greater say in the creation of a TIF. He also called on the Legislature to study the costs and effectiveness of TIFs and to amend the law to make sure they are created in truly blighted areas and to improve the transparency of the process. For instance, people who live within a TIF district aren't told what part of their bill goes to the TIF. Improving public input into how TIF funds are spent is also essential.
The Neighborhood Capital Budget Group has made a variety of other sensible proposals. One idea is to allow the frozen pot for taxing bodies to grow at the rate of inflation to lessen the TIF's impact. Another idea is to require municipalities creating a TIF district to spell out what it will cost schools, the county and everyone else who gets a cut of the pie. That would help the public understand the pros and cons of each proposal.
The ease with which the city has created new TIF districts is partly due to a misperception that it's free money. It's not. There are costs, and the public should be aware of them.