Are TIFs Really Worth It?

Yesterday, Chicago’s Inspector General, Joseph Ferguson, released a report, “Budget Options for the City of Chicago,” detailing a grab bag of solutions to Chicago’s ailing budget– to the tune of almost $3 billion. His recommendations include several options to increase revenue, increase efficiency and cut waste.

Perhaps one of the most contentious recommendations in the report is the elimination of ALL tax-increment financing districts. This means that the city would shut down all existing TIF districts and return the property tax revenue to the seven taxing bodies from which the funds were generated.

According to the report, in 2010 the City’s TIF districts collected $469.9 million in property tax revenue. Which means that since the City contributed 21.4% of the revenue to those districts, they would get back $100.56 million. The Board of Education and School Finance Authority would receive $252.81 million, Cook County $40.41 million, Chicago Park District $31.48 million, and so on. (For a complete breakdown, go here).

This is a significant amount of money. I’m not entirely sold on the idea that we need to eliminate TIFs altogether, but this report highlights that there is a tremendous amount of money being poured into TIF districts, with little public input and certainly very little accountability.

In his report, the Inspector General cites that “proponents [of eliminating TIFs] might argue that TIF diverts needed property tax revenue into projects that fail to generate economic development and subsidizes investment activity that would have occurred anyway… Additionally, some might argue that TIF raises the property tax burden on City residents by diverting property tax funds away from the Chicago Public Schools, the Park District, and other governments.This in turn causes these bodies to increase their property taxes to make up for the shortfall caused by TIF.”

That’s exactly right. How can the public be confident that a percentage of our property tax dollars are better spent on TIF projects rather than being used for our City and our schools and our parks, if we don’t know how successful the TIF projects are in bringing the promised jobs and economic revitalization? The answer, unfortunately, is that we can’t. We can’t because there is no public mechanism in place for holding developers accountable to the goals set forth for each TIF project. Therefore, the public is in the dark about how effective TIF districts and projects really are.  (Read our report called “Shining a Light on Tax Increment Financing in Chicago” for more on this issue).

In reality, TIFs aren’t going anywhere. But with continued progress toward transparency of TIFs in Chicago, citizens will be able to feel confident in knowing that each tax dollar used for TIFs is accounted for and being used for its intended purpose– and isn’t better served in some other capacity. So until there is a metric provided for the public to say “is it really worth it?” we will never really know.