The property tax bill that a guy I'll call Joe recently received for his commercial building in Edgewater was quite clear as to how the $44,191.04 he owed would be spent. The Board of Education would get $21,630.96, the city $8,817.56, the county $3,242.82, and the Park District $3,127.44. The rest would go to, among other things, libraries, forest preserves, water-treatment operations, hospitals, pensions, and museums. It also had a line item for something called "TIF-Bryn Mawr/Broadway Ave," but it said the TIF, or tax increment financing district, would get $0.00.
Joe's bill is easy to follow and refreshingly precise, right down to dollars and cents. Except it's not accurate. Joe isn't actually paying $21,630.96 to the schools, for instance. He's probably paying them something like $19,000, though it's hard to say for sure. In fact, he's paying less to all the public entities listed on his bill--because he isn't really paying zero to the TIF. He's probably paying it about $4,500, though again it's hard to say for sure.
Joe's bill is one of tens of thousands of inaccurate tax bills the county sends to taxpayers each year. "Our tax bills are lying," says Ron Ernst, a northwest-side activist who's become something of a budget expert as he's battled the city on tax issues over the last decade or so. "They tell you they're spending the money one way, but they really spend it another way. You can call it what you will, but to me that's a lie."
City and county officials disagree with Ernst's choice of words. It's not lying--it's just "not the whole truth," says one county budget official sheepishly. But they all concede that thousands of property tax bills are at the very least misleading. "You're right," says Lisa Schrader, spokesperson for the city's Office of Budget and Management, when I tell her the TIF figure isn't listed on the tax bill. "You're absolutely right."
The county budget official is even more to the point. "Yes, it's misleading," he says, after asking to remain anonymous. "If you were to take every tax bill sent out to every property tax payer and add them up, you would find that schools and parks and all the other taxing bodies are supposedly getting more than what they actually get or what they're actually budgeted to spend."
"It's unbelievable that the city and the county get away with it," says Ernst. "People would be up in arms if they knew what was going on."
The inaccurate bills are sent to people who own property in TIF districts. (Presumably people who don't live in a TIF are getting accurate bills.) TIFs are created by the City Council and Mayor Daley to pay for development within their borders. Many people hear that the property taxes within a TIF are frozen for the life of the TIF--at least 20 years, though it can be extended--and assume that means the taxes for people who live there are frozen. They aren't. As assessments rise the taxes for people in a TIF rise, just as they do across the city. What's frozen is the amount that goes to the schools, parks, city, county, etc. Any increase in tax revenue above that--the "increment"--goes to the TIF.
Suppose you paid $2,000 in property taxes in 1990, when the city made your neighborhood a TIF. Assessments have undoubtedly gone up since then, so now you're paying about $4,000. But only $2,000 of that will be turned over to the schools, etc. The remaining $2,000 goes into the TIF fund. (In Joe's case it's the Bryn Mawr/Broadway TIF fund, named for the main streets in the district.)
But your tax bill doesn't tell you the TIF gets $2,000. It tells you the TIF gets zero. Worse, it tells you the full $4,000 is being distributed to the schools, etc. "If some accountant was doing this in the private sector for a corporation's statement to stockholders," says Ernst, "what would happen to him?"
And how will the $2,000 that goes to the TIF be spent? It will pay back money the city's planning department borrowed to "seed" or "leverage" development, as planners like to put it. The borrowed money can be spent directly by the city to install new sidewalks or streetlights or build schools (though that doesn't happen very often)--anything that will entice development or increase a community's economic value. Or the borrowed money can be turned over in the form of low-interest loans to developers to build shopping centers or malls or to rehab run-down buildings. The beauty of a TIF is that all of this development theoretically pays for itself because the loans are repaid out of the increase in property value that comes when a community starts thriving and pays more in taxes than it would have without the loans.
And it does pay for itself, to a point. The truth is that everybody pays one way or another for TIFs--because TIFs siphon property taxes away from essential services, and as the cost of those services rises, the increase has to be picked up by people who live outside the TIFs.
How much money a TIF siphons off depends on when it was created. The older the TIF district, the earlier the amount that goes to the schools, etc, was frozen. And if the district has boomed since then, a huge percentage of what's listed on the tax bills of people living inside its boundaries can go to the TIF. Some TIF districts were created in the 80s, so the schools, etc, are still getting the same amount from those areas as they did back then. In one Loop district as much as 75 percent of the property taxes now go to a TIF.
How does the city figure out who pays what? Every year Mayor Daley, Cook County Board president John Stroger, and officials from all the other public entities listed on tax bills sit down and figure out how much money they need for the coming year. The number crunchers at the county clerk's office figure out what tax rate will bring in that sum, and then they divvy up the total among the city's property owners. Property owners who don't live in a TIF will pay a bigger portion of these taxes than property owners who do--but it's hard to tell because the numbers on the bills of people living in a TIF hide that reality.
This budget manipulating might not be so bad if there were only a handful of TIFs or if TIFs existed only in the neediest parts of town--blighted areas, as the TIF law once called them. "Originally the notion was that 'but for this TIF, the project would not get funded,'" says Jacqueline Leavy, executive director of the Neighborhood Capital Budget Group, a not-for-profit watchdog organization. "The original guidelines have been changed over the years"--meaning they've gotten less restrictive. (If you want to know more about TIFs check out Leavy's Web site, www.ncbg.org, which profiles all the TIFs in Chicago.)
Even under the new guidelines TIFs aren't inherently evil. They do serve a function, particularly in low-income communities starved for investment. And Daley has used them to fund good things, such as the newly built Simeon Career Academy. But enough is enough.
Over the past 15 years Daley and the City Council have created 131 TIF districts in Chicago. They now cover roughly a third of the city, according to a NCBG study. Daley doesn't even pretend anymore that they're limited to blighted communities. There are TIF districts in the central Loop, just south of the Loop, west of the Loop, and in Lincoln Park, Lakeview, Edgewater, and other upscale communities. Why would the city want to waste its dwindling resources on subsidizing development in wealthy neighborhoods? If developers can't make money building there, they should go into another line of work.
The city does watch what TIF money is spent on. Each TIF is overseen by a governing council, and each TIF district has to be approved by three different public bodies (the Community Development Commission, the Chicago Plan Commission, and the Joint Review Board). But Daley either appoints the members of these oversight groups or he appoints the people who appoint them. In effect, Daley and his top aides determine how TIF dollars get spent. Ernst calls TIFs "slush funds."
And there's plenty in those funds. According to officials with the county clerk's office, last year TIFs siphoned off $287.4 million in property taxes--roughly 8 percent of the city's total property tax yield. They'll probably suck up even more over the next few years, as assessments go up and the city continues to create new TIFs.
Oddly enough, the city doesn't seem to know what to do with all of the millions of TIF dollars it's already collected. According to a July 12 article in Crain's by Greg Hinz, TIFs now have reserves totaling around $271 million. City officials say they'll eventually get around to spending it.
Well, let me make a few suggestions. The CTA's so busted it's raising fares and cutting services. The schools are so hard up they're laying off teachers and ending early-child-care programs. The parks are slashing programs and raising fees. Daley wants city workers to take unpaid furloughs. And, as I recently discovered, there's a monthlong waiting list if you want a city crew to get a wild animal out of your house.
Why aren't school, police, sanitation, and animal-control officials howling about the millions going to TIFs every year? "The Board of Ed, the parks, etcetera--they're allied with Mayor Daley," says Jason Hardy, a research associate with the Center for Economic Policy Analysis, another watchdog group. "He picks them. They aren't going to complain. They're part of the team." And most public servants, like most city residents, probably have no idea how much now goes to TIFs.
Ernst believes the city and county are intentionally withholding the information about what portion of our taxes goes to TIFs. "It's one thing to tell people they have to pay for schools or parks--these are very real, very concrete services that people would want," he says. "It's another thing to tell people that their property taxes are going to a TIF. Most people don't even know they live in a TIF. They'll see their bill and say, 'What the heck's a TIF?'"
City and county officials acknowledge that the tax bills are wrong but won't be specific about what can be done about it. Privately, each side blames the other for the inaccuracies. "They don't want people to know how much they're spending on TIFs," one county official said, referring to the city. A city official responded, "We don't make the bills--they make the bills. We wouldn't care if they put a TIF line item on the bill." The only thing they agreed on was that the computer technology might not exist to put accurate TIF information on the bills.
That explanation draws a laugh from Ernst. "The computers can tell you how much you have to spend on schools--but they can't tell you how much you spend on a TIF?" he says. "Why itemize tax bills at all if the itemizations are false?"
Art accompanying story in printed newspaper (not available in this archive): illustration/Wesley Bedrosian.