The Fullerton/Milwaukee Tax Increment Financing district is raking in so much in property taxes that city officials have managed to spend only half the money. Yet they now want to expand the district and rake in even more. “How can they take more money if they haven’t spent the money they have?” asks Carter O’Brien, who lives in Logan Square just outside the district.

Good question. O’Brien’s also wondering where the new money would be spent. As he and other city residents are learning, TIFs have generated huge sums, yet it’s difficult to find out how much money’s in a given TIF fund, much less how it’s being spent. Jason Hardy, a researcher for the Center for Economic Policy Analysis, has spent years studying TIFs and probably knows as much about them as anyone. He doesn’t like them. “They’re very difficult to regulate,” he says.

TIFs were designed to fund development within their boundaries. The Fullerton/Milwaukee TIF district runs roughly from Belmont to Armitage along Milwaukee, darting several blocks west along Fullerton and Armitage. The TIF was set up by the City Council to start on February 16, 2000, and won’t end until 2023. For 23 years the amount of property taxes the city gets from the area for schools, parks, police, and other services is frozen at the amount it was getting on February 15, 2000. Any increase in property taxes from then until 2023 (the “increment”) goes to the TIF. Of course since taxes will rise if the value of property in the area rises, property owners will see their taxes go up just as they would have without the TIF.

According to the county clerk’s office, which keeps track of these things, the area that’s covered by the Fullerton/Milwaukee TIF district generated about $4.1 million in property taxes in 2000. It generated $6.7 million in 2003, so $4.1 million went to schools, etc, and the extra $2.6 million went into the TIF fund. Over the past four years a total of about $6 million has gone into the TIF–money that would otherwise have gone to fund schools, etc.

What did the planning department, the main body deciding what TIF funds get spent on, do with the $6 million? According to city documents analyzed by the Neighborhood Capital Budget Group, a not-for-profit watchdog, the department set aside about $700,000 for grants to unnamed merchants who wanted to fix up their properties, and it earmarked another $2.45 million for the construction of a shopping strip at California and Armitage (there’s no indication whether that was in loans or grants). It’s not clear what, if anything, has happened to the remaining $3 million.

In fact, it’s not clear what happens to a lot of TIF money. There are now 131 TIF districts in Chicago, encompassing roughly 30 percent of the city’s geographical area. According to the clerk’s office, they siphoned off about $287 million in property taxes in 2003. To find out what I did about TIF spending I had to go to four different public agencies (the county treasurer, the county assessor, the county clerk, and the planning department) and two private ones (the Neighborhood Capital Budget Group and the Center for Economic Policy Analysis), then piece together the information. There’s no overall TIF budget that has to be approved by the City Council, though the aldermen have to sign off on the regular city budget every year. There’s no annual public hearing at which planning commissioner Denise Casalino lays out how her department intends to spend TIF money, though every year the department lays out for the public how it intends to spend its other funds. City, county, CTA, Park District, and Board of Education annual budgets are all openly scrutinized at public hearings, but not the TIF budgets.

What’s more, itemized tax bills sent to property owners in TIF districts state that the TIF receives none of their tax dollars (as I explained in my December 10 column). That’s simply not true–if you own property in a TIF district, the TIF is getting some, or all, of your tax dollars, no matter what your bill says. If you want to know how much goes to the TIF, you have to do some complicated math using information collected by an obscure section of the county clerk’s office–information that as far as I can see isn’t available in any printed document or on the county’s Web site. City and county officials say they don’t have the computer technology to break out TIF expenditures on tax bills, but you have to wonder whether someone simply doesn’t want taxpayers to know that TIFs are getting so much money at a time when schools are laying off teachers, the CTA’s cutting service, and potholes aren’t getting filled.

Now, I don’t want to suggest there’s no oversight. The City Council, the Community Development Commission, the Chicago Plan Commission, and the Joint Review Board all have to approve the creation of a TIF district. But no proposed TIF has ever been scotched. All of the people sitting on the two commissions and the board are mayoral appointees or appointed by mayoral appointees, and they generally give the planning department whatever it asks for. When it comes to spending TIF funds, the board and the commissions pretty much drop out of the picture. The Plan Commission has to approve major projects but not their funding. The aldermen do have some say in how TIF funds are spent in their wards, but according to the ones I talked to, they often don’t know what money’s available or what it’s being spent on. And when TIF districts cross ward boundaries they probably know even less.

In short, the planning department seems to be handing a lot of taxpayer money to developers, architects, planners, consultants, and lawyers with very little oversight. Many activists think TIFs generate nothing more than a giant slush fund.

When the state created the TIF program back in the 80s it enacted very specific guidelines. TIFs were intended only for “poor and blighted” communities that weren’t going to get much private investment without one. Municipalities that set them up had to be very specific about what the money they took in was funding, and the state had to approve the projects. But state legislators and administrators long ago diluted those rules. A TIF district no longer needs to be poor and blighted–there are now TIFs in some of the city’s wealthiest areas, including Lincoln Park and the Loop. There’s no longer any requirement that the city reveal exactly how it plans to spend TIF money or that the state approve a project.

When the Fullerton/Milwaukee TIF was created it was championed by the planning department and Alderman Vilma Colom, whose 35th Ward contained most of the district. The stated purpose of the TIF was to spruce up the community. It never got any more specific than that. At a public hearing in 2000 the Logan Square Neighborhood Association, a prominent community group, gave the TIF its qualified support. Speaking for the association, Kathy Tholin asked the city to create a citizens’ advisory committee to oversee the TIF and make sure funds weren’t used to “create upscale housing,” arguing that money that went to housing should be for affordable housing only. She also urged that TIF money be used to support three local public schools and “to expand job opportunities for local residents.”

In the five years since the TIF was created Colom has been voted out of office. No citizens’ advisory board has been created, and it would be hard to create one because the TIF district now runs through five different wards, thanks to the 2001 redistricting. According to planning department documents, none of the money that’s poured into the TIF has gone to local schools and none has been used for affordable housing. Yet Milwaukee Avenue looks much as it did five years ago.

Planning department officials say they have no specific projects in mind in the area covered by the proposed TIF expansion, which would be primarily west along Belmont to Tripp and filling in along Milwaukee. But few of the activists believe them. “The city won’t say what they’re doing,” says one, “so everyone’s wondering what’s really going on.” He notes that the expanded TIF district will include the Mega Mall, a big, bargain-priced shopping center at 2500 N. Milwaukee that was left out of the original TIF district. He and other residents suspect the city wants to use TIF funds to replace the mall with a high-end retailer. They also worry that TIF funds could be used to finance upscale condos near Belmont and Pulaski. “There’s a lot of speculation,” says the activist.

As with most TIF-related matters, the city only fuels such speculation by shrouding its plans in secrecy. Pete Scales, the planning department’s press spokesman, didn’t return calls for comment.

On January 3 the department held a public meeting on the expansion. About 50 people showed up and barraged officials with questions. “They kept telling us that this was really a matter of just correcting the TIF, just putting in properties that should have been included in the first place–as if that was going to reassure us,” says O’Brien. “From their perspective, the whole city should have been included in that first TIF. I kept asking, ‘Why are you expanding the TIF if you don’t know what you’re doing with the old one?'” He was told the department was still looking at ideas.

Art accompanying story in printed newspaper (not available in this archive): illustration/Wesley Bedrosian.