Chicago Neighborhoods Fight for $1.7 Billion in Unused Cash

Chicago, IL — On Nov. 13, outside of the Chicago City Council chambers, Amisha Patel was busy tying up loose ends.

Patel, 38, is the executive director of Grassroots Collaborative, a coalition of Chicago labor and community groups. Active since the late 1990s, the group had stepped into the limelight nearly a month earlier, hosting a rally that drew nearly 3,000 people and a bevy of politicians, including Illinois Gov. Pat Quinn.

The October event, called Take Back Chicago, kicked off the coalition’s campaign tackling low wages, rising rents and city budget priorities – issues the coalition members believe are driving low-income residents out of the city by the thousands.

The November City Council meeting was the culmination of the campaign’s first major push: To redistribute surplus money collected under a controversial property tax policy.

Economic development funds created under the policy, called tax increment financing (TIF), had an unspent balance of $1.7 billion at the end of last year. In the wake of record school closures, teacher layoffs, and other city service cuts, Grassroots Collaborative thinks some of that money should go back into city and school budgets, an option that Mayor Rahm Emanuel publicly dismissed this summer.

“Increasingly, Chicago is a tale of two cities,” says Patel. “One for those who have wealth and resources, and another for those who are struggling with poverty.”

A proposed ordinance to annually audit and redistribute the surplus TIF funds had been sitting in the City Council’s Rules Committee since July. Using an obscure procedural move called Rule 41, a group of progressive aldermen planned to call for a vote at the November council meeting to release the legislation from committee.

Though a solid majority of the City Council had sponsored the ordinance, a vote to release it from committee was expected to sharply divide the city’s 50 aldermen, who are all Democrats.

Proponents of TIF point out that it was created to attract private investment and new jobs to struggling neighborhoods. But, now, opponents say, the policy is hurting the low-income residents it was designed to help.

“The very thing that was supposed to reduce inequality actually deepens it,” says Patel. “Unless we take action now, low-income people won’t be able to live in this city anymore.”

The Tax Policy and Chicago

No city government has embraced TIF quite like Chicago, which has 154 active TIF districts. The policy originally worked like this: The city mapped out a TIF district in a blighted area and issued bonds to help finance private development in the district.

If property tax revenue in the district went up, whether because of inflation or the new development projects, the incremental increase went into a fund. That money was then used to pay off the bond debt. Anything left over could be spent on other infrastructure or development projects in the district.

Today, however, the city rarely issues bonds for development projects in TIF districts. But once created, the TIF districts still capture incremental tax revenue, to the projected tune of $430 million this year.

Misconceptions abound about the program, which is exempt from normal budget oversight and long lacked transparency. Money raised through TIF isn’t necessarily diverted from Chicago Public Schools (CPS), because there are legal caps on CPS revenue increases, according to Rachel Weber, a professor of urban planning at the University of Illinois at Chicago. She was a member of Emanuel’s TIF Reform Panel.

The program is also critiqued for supposedly lavishing millions on private downtown developments. But private developments pay for themselves and then some, says Peter Strazzabosco, a deputy commissioner in Chicago’s Department of Housing and Economic Development. “Virtually all TIF-assisted economic development projects are funded by their own increment—increment that wouldn’t exist if the project hadn’t been built.”

Perhaps the biggest myth about TIF is that it diverts tax dollars from low-income neighborhoods to downtown. Weber’s independent review indicates that’s not the case.

With few exceptions, TIF funds can only be spent in the district where they’re raised, the idea being that they create a virtuous cycle of economic development. “Taxpayers within the TIF districts should realize that their tax dollars are being spent to further improve their neighborhoods,” says Strazzabosco.

But letting each TIF district keep its own tax dollars is a double-edged sword, says Weber. “It can reinforce funding disparities, because neighborhoods with low income have very little increment,” she says. “It’s the antithesis of redistribution.”

Without a cash infusion from bonds, TIF districts in low-income neighborhoods struggle to attract critical private investment. Still, many TIF districts take in more than they spend each year, leading to the $1.7 billion surplus.

“There’s kind of a symbolic importance to the city having large sums in TIF accounts while closing schools. Grassroots Collaborative is taking advantage of that contrast to make a point,” says Weber.

Patel responds: “For those 30,000 school children affected by the closings, the importance of this contradiction is quite real.”

The Effort to Release TIF Dollars

Two weeks after October’s Take Back Chicago rally, the Grassroots Collaborative campaign to “discharge” the TIF surplus ordinance from committee was in full swing. A few days before Halloween, the coalition staged a protest on the second floor of Chicago’s City Hall, just outside the City Council chambers.

Activists dressed in “corporate vampire” costumes carried mock tombstones inscribed with the names of ordinances that were stuck in the City Council’s Rules Committee, whose leadership is viewed as loyal to the mayor.

“Rules committee is where good legislation goes to die,” Grassroots Collaborative’s Patel told the assembled crowd. “These aldermen are listening not to the voices of Chicago’s people, but to the dictates of the elite.”

The following week, volunteers with the Brighton Park Neighborhood Council, a Grassroots Collaborative member group, were on a door-knocking campaign in the southwest side neighborhood, collecting signatures in favor of the TIF surplus ordinance.

One of the volunteers, Jose Lopez, has lived in the area for two decades. He’d grown frustrated with city budget policies after a neighborhood campaign to improve Brighton Park’s only park with funds from nearby TIF districts failed. (The park, like most of the neighborhood, is not within a TIF district.)

“We’re one of the neighborhoods that nobody pays attention to because we’re Latino, low-income and Spanish speaking,” Lopez said as he walked to his assigned canvassing block.

His door-knocking partner was Jeanette Estrada, a college freshman studying nursing. Estrada graduated from nearby John Hancock High School, where she said budget cuts had hit the classrooms hard: “Our books were ripped up. All the supplies were old.”

The temperature had plunged that afternoon, and Lopez and Estrada were nearly alone on the sidewalks. At most houses, a mix of simple frame bungalows and brick two-flats, nobody answered the door. Several houses appeared abandoned.

At one neat bungalow with pink rose bushes out front, a middle-aged woman in a housecoat answered the door. She had never heard of TIF, but donned a parka to step outside and hear more. After Estrada explained in Spanish, the woman signed the petition.

“Every signature counts,” said Estrada, grinning as they moved to the next house.

TIF Dollars and the South Loop

Chicago’s South Loop, an upscale lakefront neighborhood adjacent to the Chicago Bears’ football stadium, has grown incredibly over the past 20 years.

“This was skid row in the early 90s,” said Joe Narducy, a 48-year-old union construction worker. Narducy worked on several of the condo developments that helped revitalize the South Loop while Richard M. Daley was mayor.

“It was just slummy. Everything they did with Daley – the planters, new streetlights, all that – has really changed it a lot.”

Many of those improvements were funded by TIF dollars. The Near South TIF fund is one of the oldest in the city. Since 1990, it has collected over half a billion in property taxes and bond sales. With an unspent balance of $197 million, it is by far the city’s richest TIF district.

Daley created the Near South district specifically to attract the Central Station development to the formerly blighted industrial area. Using municipal bond revenue, the city agreed to pay for 80 percent of the development’s first phase, mostly site preparation. When Central Station finished construction, Daley was one of its first residents.

Since 1999, another $19.8 million in TIF funds have gone to the 80-acre development. A spokesman for Central Station says most of that money, which the developer supplemented with $111 million, went toward affordable housing units and improvements to Lake Shore Drive.

Today, the South Loop remains fairly racially diverse: Though the number of white and Asian residents has skyrocketed, the neighborhood’s Black and Latino populations have not declined significantly.

For the most part, however, the South Loop is an expensive place to live. At Sky 55, a Central Station high-rise, monthly rents for one-bedrooms start at $1,600. The penthouse show-unit looks west across Michigan Avenue through floor-to-ceiling windows. Through them, the city stretches out to the horizon, invisibly blanketed by TIF districts.

Unease and a City Hall Vote

As the City Council vote approached, there were signs of panic in City Hall. Grassroots Collaborative had built a drumbeat on the issue, convincing more than 2,200 residents across the city to contact their aldermen in support of releasing TIF funds.

The council’s Rules Committee hastily called – and then canceled — a last-minute meeting. On the Friday before the full council meeting, Emanuel issued an executive order requiring most TIF districts with a balance of more than $1 million to release at least 25 percent of their uncommitted funds back to the city, schools and the taxing bodies that would normally get them.

The progressive aldermen pushed forward with the vote. “We want to codify it and bring it into law,” Alderman Ricardo Muñoz said in an interview the night before the vote. “This shouldn’t depend on mayoral whim.”

At the City Council meeting, Alderman Bob Fioretti’s Rule 41 motion to discharge the TIF surplus ordinance from committee sparked a heated debate on the floor.

Alderman Walter Burnett, Jr., who had co-sponsored the ordinance, voiced strong opposition. “I swear by TIF money. TIF gives me and my community power,” he said. “We put in libraries and parks, and we built schools out of TIF money.”

“The definition of a surplus is more money than you need,” progressive caucus member Alderman John Arena pointed out. “If you have put money toward a school or park or improvements that will create economic development, then I applaud you.”

He added: “At the end of the year, if there is money sitting in the TIF, it is not helping anybody.”

From the viewing gallery, CPS students on a field trip applauded remarks on both sides of the issue. Every alderman, it seemed, was in favor of more funding for neighborhood schools and parks.

Emanuel presided coolly from the Speaker’s chair. When one alderman asked if remarks should be limited to the procedural motion to discharge, Emanuel replied, “We’re having a debate about …” trailing off with a shrug.

When it came time to vote, the motion failed 36 to 11 (three aldermen were absent). Twenty-one of the ordinance’s co-sponsors voted against releasing it from committee. Two of them, Burnett and Alderman William Burns, had spoken onstage at the Take Back Chicago rally in October. Burnett did not respond to a request for comment.

Burns explained after the vote: “I wanted the mayor to declare a surplus.”

After that happened, Burns felt it was “political theater” to force a vote. “It was done in a way to make it seem as if some aldermen are more progressive than others.”

Fioretti defended invoking Rule 41. “This was about serving the people of the city of Chicago, making sure money goes to schools, and that we have a democratic process.”

After the vote, Amisha Patel met with several Grassroots Collaborative leaders in the hallway outside the council chambers. The mayor’s executive order had released a reported $49 million from TIF funds, half of which will go to CPS.

The other half will go back to the 15 citywide taxing bodies, such as the park district. Those taxing bodies will split the dollars under state law, just like normal property taxes.

“To even force a City Council debate around TIFs for the first time was amazing, and we’re going to continue to push,” said Patel.

“You don’t get to bury legislation in committee and think your work is done anymore.”