Every week, Tax Dollars and Sense offers a case study to analyze the problems with TIF. This week we will look at the Republic Windows and Doors project within the Goose Island TIF District.
Tax-increment financing provides potentially lucrative subsidies that benefit developers. In return for the benefits they receive, developers should commit to delivering on specific goals and provide regular reports on their progress towards meeting the goals. Contracts signed with subsidy recipients should require them to pay back part of their subsidy if they fail to deliver the promised benefits to ensure that tax money is being wasted. This is typically referred to as a “clawback.”
Chicago has included clawback language in a few redevelopment agreements, but in most cases they have lacked sufficient strength and enforceability. A good example of this is what transpired with Republic Windows and Doors.
Between 1996 and 2000, Chicago taxpayers paid out over $9 million in subsidies to Republic to help construct its Goose Island factory. As part of the deal Republic signed to earn that subsidy, they promised to “use commercially reasonable best efforts” to maintain 549 jobs at the facility through the end of the TIF agreement in 2019.
Though Republic clearly failed to meet that benchmark, the company paid no penalty. The TIF agreement had included a clawback provision if the company fell below the agreed-upon jobs target, but it only applied through 2006.
To add insult to injury, the city was not keeping track of whether or not Republic was meeting the terms of its contract. When the Chicago Reader obtained documents relating to the TIF district via a Freedom of Information Act request, it turned out that Republic has filed its mandatory annual reports on the TIF project only 5 of the 10 years it did business at Goose Island.
In 2009, the factory shut down and the hundreds of jobs that were promised were lost. And, despite not holding up their end of the deal, the company faced no penalty and our tax dollars were never repaid. The clawback language, despite being in the contract, was weak and had weak enforceability. Not to mention that this deal, along with all other TIF deals, is shielded from public scrutiny—making it that much easier for the City to look the other way.
Reclaiming taxpayer money from failed TIF projects is difficult under the best circumstances, but stronger protections—especially clear and unambiguous statements of what standards will be used to measure the success of subsidized development projects, and what penalties will be paid for failing to meet those standards—offer the public the best possible insurance against losing money on failed TIF projects.
AND the City needs to provide proof for the public, every step of the way, that our tax dollars aren’t being wasted on false promises.
To read more about Republic Windows and Doors, go here and here.