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Where Appointed Officials Fear to Tread

In Oak Park, the school boards have demanded their money back from TIFs.


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On April 17, the day of Chicago's aldermanic runoff election, residents of Oak Park will get an opportunity city voters can only dream about: the chance to take a stand against tax increment financing districts.

Oak Park's three TIFs won't be on the ballot. But one of three slates of candidates running for the Oak Park Village Board is calling for the districts to be phased out and abolished. James Balanoff, Gary Schwab, Annabel Abraham, and Robert Milstein, all of Vision Community Action, want Oak Park's TIFs terminated as soon as any existing debts and obligations have been taken care of.

TIFs in Oak Park work pretty much the same as they do in Chicago, with one important distinction: Oak Park school officials have forced the village to acknowledge that TIFs divert property taxes from the schools. In Chicago, school officials afraid of upsetting Mayor Daley act as though TIFs are a magical moneymaking machine.

When the City Council or a village board creates a TIF district, it actually freezes the amount of money in property taxes that other taxing bodies--the schools, parks, libraries, and county, etc--can raise for up to 23 years. As taxes rise due to increased assessments and new development, all the new money goes to the TIF, to be spent at the discretion of the mayor or town leaders. In order to compensate for the money lost to TIFs the other taxing bodies have to raise their tax rates. In effect TIFs are tax hikes unlisted on any tax bill or budget.

TIF backers say the idea is to borrow tax dollars from the schools and parks and use the revenue to seed economic development that will produce more taxes when the TIF expires. In Chicago TIFs take upwards of $200 million a year in property taxes from the schools. Over in Oak Park the diversion has been offset somewhat because school board officials, who are elected rather than appointed, have fought back. Last year Oak Park's elementary and high school boards forced village officials to return roughly $450,000 in TIF proceeds to the schools.

Nevertheless, Oak Park schools are chronically short of operating income and have had to make $4 million worth in cuts over the last four years, raising class sizes. "I have three kids," says Sharon Patchak-Layman, a member of the Oak Park elementary school board. "When the downtown TIF was created [in 1983] my oldest children were in third and first grade and I remember officials promising there was going to be a big property tax windfall from the TIFs. Well, my kids wound up graduating from high school here and they never realized the benefit of that TIF."

Her youngest daughter, who's heading into high school next year, won't be the beneficiary of the TIF windfall either, given the Oak Park Village Board's 2003 decision to extend the downtown TIF to 2018. By law, it takes a vote of the Illinois General Assembly to extend the life of a TIF. But in 1999 legislators, acting at former governor George Ryan's request, voted to extend a TIF in Kankakee that happened to have been created in the same month and year as Oak Park's downtown TIF. Instead of limiting this extension to Kankakee's TIF, the lawmakers applied it to all TIFs created in December 1983, giving several municipalities, Oak Park among them, the option of extending the terms of their TIFs.

In 1993 the village created the Harlem/Garfield TIF and in 1995 it added the Madison Street TIF. The three districts now divert about $9 million a year in property taxes. And what have Oak Parkers gotten for their money? So far TIF funds have gone to build two parking garages, convert the old Lake Street mall into a street, construct upscale town houses and condos, and create the Shops of Oak Park, a strip mall at Harlem and Lake. TIF funds are also going toward the construction of a 200-unit upscale apartment complex at Harlem and Ontario that will include a Trader Joe's.

Oak Park's TIF boosters are quick to disassociate themselves from Chicago's program. As they see it, theirs is a model of restraint. "My view is that these are not subsidies we give--it's investment," says Ray Johnson, a pro-TIF village board member who's running for reelection. "The schools and the parks and the other taxing districts are coinvestors."

According to Johnson, the big apartment complex going up at Harlem and Ontario will go back onto the tax rolls in 2010, a year after it's finished, so the schools and parks will start receiving their full share of its property tax dollars well before the TIF's term expires. Chicago has never restored TIF property back to the tax rolls ahead of time.

So is Oak Park better for the TIFs? I suppose there's a public benefit in the parking garages. But it's hard to make a case for giving developers millions to build upscale housing in a town where the real estate market is already softening and the public schools are laying off teachers. As for the Shops of Oak Park, the village spent $6.5 million to acquire property and evict existing businesses (a Walgreens, a Bakers Square, and a Hallmark store), then turned around and sold the land for $1 million to a developer, who turned it into the strip mall, which he subsequently sold for $20 million. The mall contains a T.G.I.Friday's, a Claire's Boutique, an Old Navy, a Caribou coffee shop, a Pier One, a cell phone store, and a Gap, the last the only holdover from the old strip; it generates about as much in annual property taxes as the previous tenants. Was that worth $5.5 million?

Why should Chicagoans care how Oak Parkers are using their TIFs? For starters, the Oak Park TIF, like many in Chicago, violates the purpose of the program, which is intended to develop blighted communities that would otherwise have difficulties attracting development. But stretching the definition of blight to include Oak Park does a disservice to truly blighted communities like Austin, just across the border.

Beyond that, Oak Park's TIF is part of a larger contagion that's rapidly spreading throughout the metropolitan area. Target, Wal-Mart, Home Depot, and other large retailers are getting TIF financing to build stores throughout the suburbs. As one developer explained to me, big retailers have come to expect it. "You wind up subsidizing a developer's profits," he says. "It has nothing to do with need."

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