These are hard times for local government and the taxpayers who fund it. The city’s schools are so broke they’re firing special ed teachers, the county is about to borrow $200 million just to cover its basic bills, and soaring property taxes are forcing longtime residents and merchants out of their homes and businesses. So what’s Mayor Daley planning to do about it? He wants to funnel at least $550 million in desperately needed property taxes into a new downtown TIF.

The proposed LaSalle Central tax increment financing district would cover the area running roughly from Randolph on the north to Van Buren on the south and from State on the east to Canal on the west, with LaSalle, Wells, and Franklin streets at its heart. According to Daley and planning department officials, the city needs the TIF–its 145th–to keep what’s traditionally been the city’s financial district from falling into blight. Planning commissioner Lori Healey says that the TIF would finance a range of development projects and help refurbish aging office buildings, which have been losing business to newer sites on Wacker.

Set aside for a moment the ques-tion whether an area that includes the Sears Tower, the Civic Opera House, and City Hall itself truly verges on blight–and for that matter, whether yet another TIF district would do anything but make matters worse. The real issue is whether taxpayers can afford one at a time when reassessments will send property tax bills rising as much as 100 percent.

To answer this question you first have to understand how TIFs work. As readers of this column know, TIFs are districts in which a cap is placed on the amount of property taxes that go to the schools, the parks, the county, and other taxing bodies. Additional property taxes generated in the districts go to the TIFs, which function as virtually unmonitored slush funds in the hands of the city’s planning department and the local alderman. TIFs were originally created by the state to help spur development in blighted and/or low-income communities that would have a hard time attracting development without extra incentives. But over the years the city has used TIFs to finance pretty much whatever the mayor and the aldermen want, including projects in upscale, tax-rich communities like Lincoln Park, Lakeview, and the Loop.

Daley insists that TIFs aren’t tax increases. But while that may technically be true, it doesn’t mean that they don’t cause property taxes to rise. Quite the contrary: home owners and business and commercial property owners are forced to pay more in property taxes in order to compensate for the millions being diverted into the hands of developers.

It’s hard to say exactly what the city is doing with the ever increasing funds in its TIF piggy banks. There’s no independent oversight of TIF spending–no annual budg-et statements or hearings, no city Web site tracking them. If you’re paying into one, it’s not itemized on your tax bill; the city would like you to believe that TIFs aren’t sucking up revenue that would otherwise go to essential municipal services. But based on annual statements provided by Cook County clerk David Orr’s office, TIFs diverted about $621 million in tax revenue over the course of 2004 and ’05. (I figure this year’s total diversion at more than $400 million, but we won’t know for sure until Orr releases updated fig-ures in the fall.) Broken down, that means that over the last two years TIFS have diverted about $304 million from the schools, $124 mil-lion from the city, $45 million from the county, $43 million from the parks, $31 million from the Water Reclamation District, $24 million from the community colleges, $12 million from Stroger Hospital and other county health facilities, $6 million from the forest preserves, and about $30 million from assorted other programs.

City officials say not to worry. They say we should think of TIFs as investments that will pay off in the future, when they expire and the development they’ve triggered showers the schools, parks, etc, with untold millions in increased property tax revenues. Of course, that’s little solace for the kids in wheelchairs who showed up at last month’s Chicago Board of Education meeting to protest the special ed cuts. The extra tax dollars theoretically created by TIF-funded development don’t flow back to the schools until a TIF expires–and their terms run for 23 years. And the city can always choose to extend TIFs. Mayor Daley’s clearly gearing up to extend at least a portion of the Central Loop TIF, set to expire in 2007. Over the last two years it alone has diverted about $162.3 million in property taxes.

Obviously, TIFs put public officials in a precarious position. The savvier ones know that TIFs drive up the overall property tax bill, which heightens public opposition to legitimate tax hikes when they need them. On the other hand, as aldermen keep telling me, TIFs are the only game in town when it comes to development tools. Officials at the bodies losing out are appointed by the mayor, so they almost always keep mum when it comes to the bite imposed by TIFs. Over a month ago, for instance, I called the Chicago Park District asking for comment on the expiration of the Central Loop TIF, which has diverted about $11.3 million from park programs over the last two years. A spokeswoman promised to get back to me. I’m still waiting.

There are three public bodies that have to approve a TIF before it’s established: the Chicago Development Commission, the City Council, and the Joint Review Board. The CDC is a board of may-oral appointees who rarely even ask challenging questions about the deals they’re supposed to oversee. The City Council almost never discusses the overall impact of the TIF programs or their connections to rising taxes. Instead the council treats TIFs as a matter of aldermanic privilege, akin to minor zon-ing variances. If a local alderman wants a TIF it’s generally approved without debate, and each alderman expects his council mates to do the same when it’s his turn. The Joint Review Board consists of representatives from the taxing bodies–the parks, the schools, the county, etc–whose property tax dollars are diverted to TIFs, so you’d think they’d have an interest in examining them closely. In fact, the board’s packed with lower-level bureaucrats also beholden to the city for their jobs. It routinely approves whatever the planning department recommends.

Cook County Board commissioner Tony Peraica, the Republican candidate for president of the board, says he plans to make TIFs an issue in his campaign. “That [a TIF] applies to LaSalle Street is outrageous. You have a wealthy area and you’re giving them tax incentives? Certainly, I would fight this.” Peraica says that if elected he’d at the very least appoint a representative to the Joint Review Board who would genuinely scrutinize TIF deals.

“I’ll stand up to anybody, certainly Mayor Daley, if I think it’s in the best interests of taxpayers of Cook County,” Peraica says. “We have to get beyond this fear of the mayor. We’re a people in a democracy that’s 230 years old behaving like we live in Mongolia.”

Art accompanying story in printed newspaper (not available in this archive): photo/Scott Olson/Getty Images.