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Bad for Business

A TIFs blossom across the city, small merchants are dying on the vine.

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By Ben Joravsky

A community activist named Martin Wolke rose from the east side of Uptown in 1987 to warn residents of the dangers of a then little-known development subsidy called a TIF.

The particular TIF that alarmed Wolke was intended to build a strip mall at Broadway and Berwyn. It would, he predicted, displace local businesses, divert tax dollars from the schools, scar the area with tacky construction, and, worse yet, encourage the city to create more TIFs.

His critics, led by the late Kathy Osterman, then alderman of the 48th Ward, denounced Wolke and his allies as a radical fringe trying to stop development and deprive the neighborhood of desperately needed shops and services. They managed to convince reporters who should have known better, such as this one, to celebrate the TIF as a miracle tool for development.

Well, 12 years have passed, and guess what? Wolke was right. The miracle tool has become some forever-spreading virus that threatens to turn much of Clark Street, from Montrose to Howard, into one continuous strip mall.

"I feel even more strongly than I did back then," says Wolke, who works for an advertising agency on the north side. "Back then I had some perspective that some economically devastated communities might need TIFs. My view now is that TIFs just can't work."

The city's official line has not changed since the Organization of the North East (ONE), the group Wolke then worked for, waged its unsuccessful campaign against the Berwyn- Broadway TIF. Mayor Daley and his allies insist that a TIF (for tax increment financing district) is a subsidy miracle that spurs development, creates jobs, rejuvenates neighborhoods, and brings in classy chains without costing taxpayers a dime. In short, the city borrows money to finance a development project in a TIF district and repays the loan with the extra property taxes generated by the development itself.

Daley can't seem to get enough TIFs. In Rogers Park and Edgewater there are TIF districts (either adopted or proposed) at Bryn Mawr and Broadway and Berwyn and Broadway, on Peterson just west of Ridge, and on Clark Street from Montrose to Foster and from Gregory to Pratt.

Any others? Oh yes, the TIF at Howard and Clark--and the ones proposed for Wilson and Broadway and Lawrence and Broadway. The city's Planning Department insists that TIFs "will hold down overall property taxes and fund new schools and neighborhood improvement programs." Not surprisingly, Daley's City Council allies have joined the chorus.

"This is a great instrument for our area," says 47th Ward alderman Eugene Schulter.

"I see a TIF as empowering us further with the new and exciting mechanisms to shape our future," adds 40th Ward alderman Patrick O'Connor.

In reality, the effects aren't nearly so simple. With a TIF, for every gain there's a loss, or at least a displacement. According to state law, the city has the right to seize and destroy any property within a TIF. True, the city must compensate property owners for what it takes. But if property owners feel they have been unfairly compensated, their only recourse is to hire a lawyer and haggle with the city in court for a higher price. In the meantime they've lost their property.

The process is even tougher on merchants who rent. "We can never get back all the time and energy we put into building a business," says Nadeem Sharafi, who owns Chicago Auto Repair at 6146 N. Clark. "All of that just gets lost."

A TIF designation limits the options of merchants and property owners even if nothing gets built. Realistically, they can no longer sell or renovate--who would want to buy or finance a piece of property earmarked for demolition? No wonder so many merchants panic at the prospect of a TIF. For them it means legal bills and moving vans.

"At Berwyn and Broadway there used to be an empty Treasure Island alongside a string of undercapitalized small businesses," says Wolke. "It truly was a United Nations of business owners. There was a white Irish family that owned a bar, a Latino woman who ran a video store, an African woman who was a hairstylist, and a Korean man who ran a dry cleaners. These were hardworking people who put in 70-hour weeks and could have benefited from a subsidy." The dry cleaner got to stay on the site. As for the others--"Who knows what happened to them?" says Wolke. "The city just moved them out and they're gone."

In their place, the city subsidized the construction of a strip mall anchored by a Silo store, which eventually went out of business. The site is now occupied by an auto parts store. "Are we better off? I don't think so," says Wolke. "Do we need any more strip malls on the north side? You ask yourself. I remember someone in the community 12 years ago said, 'Broadway needs another strip mall the way William "the Refrigerator" Perry needs another Twinkie.'"

The counterargument back then was that the storefronts on Broadway were old and obsolete and the community desperately needed classier venues to shop at. If the price for development came at some hairdresser's expense, so be it.

A similar argument is being raised to support the TIF districts along Clark Street. City planners have labeled almost all the businesses from Montrose to Pratt either old, obsolete, or dilapidated. Many of the merchants feel the city's just looking for excuses to get rid of them. "They say the buildings are old. Well, of course they're old--the city's old," says Henry Younan, who owns P & W, a liquor store at 6733 N. Clark. "They say they're dilapidated. If they're so bad give us the subsidies and we'll fix them up. What they really want is bigger businesses. They just want to move us out."

Younan inherited the liquor store from his father about ten years ago. "I heard an alderman at the City Council say we need a TIF 'cause we want to get rid of bad businesses," he says. "What does he mean by bad businesses? We don't sell to minors. We're licensed. We don't allow anybody to stand outside and drink on the street. Are we supposed to get rid of all the liquor stores in Chicago?"

The TIF would also hit hard at many of the garages on Clark. "Suddenly Clark Street is too good for auto repair shops," says Sharafi. "I don't get it. Where are people supposed to go to fix their cars?"

Sharafi says he bought his auto shop 11 years ago. "I employ people from the neighborhood, I pay taxes, I'm a good neighbor. Why would they want to get rid of my business?"

The city has no specific plan for the Clark-Ridge TIF, though a preliminary draft proposes to replace most businesses (including Sharafi's auto shop and Younan's liquor store) with a mix of housing and retail.

In the past, the city won local support by promising to bring in major chains. "I still don't understand why it's in the city's best interest to replace a small locally owned video store with a Blockbuster," says Wolke. "Would we prefer to have people who are employed by McDonald's, Blockbuster, the Gap, Starbucks, or whatever? Is that our vision? I think communities are better off with locally owned stores. I think they're going to be much more interested in hiring locally. I think they're going to stay longer once the economy changes. They'll have deeper roots and more of a commitment."

At the very least, the city should ask itself what the benefit is of subsidizing the construction of one business that simply displaces another.

"What happens to the Specialty Video store when Blockbuster comes in? Or what happens to the little clothing store when we get the Gap?" says Wolke. "Let's say they were to put a Barnes & Noble on Clark Street in Andersonville. What would that do for Andersonville? What happens to Women & Children First [a local bookstore]? Would you be forcing them out of business? The city could say, 'Well, who cares what happens to them? That's just life--businesses are always going in and out of business.' I don't agree with that attitude, but you have to ask the city, 'Well, even if you couldn't care less about the loyal businesspeople in your community, what's the benefit of creating an empty storefront at one end of Andersonville just to bring in a chain at the other?'"

The city rarely answers such questions since they're rarely asked, at least not by the City Council, which routinely approves almost any TIF district Daley requests. But the issue's far from dead on the north side, where ONE continues to mount a vigorous campaign to give locals more of a say in how TIF dollars are spent.

ONE's strategists are realistic enough to think they'll never convince the city to rescind TIFs, or even to stop adopting new ones. Instead, they try to pressure the city into setting aside most of the money raised from TIFs for existing businesses. "It's time to slow down and consider the consequences of these policies," says Tom Walsh, a member of ONE. "It's really an issue of where and how public dollars are spent. It makes all the sense to me that the people who live within a community have first say."

Art accompanying story in printed newspaper (not available in this archive): photo/Jon Randolph.

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