If ever there was a community in need of economic development, it’s West Englewood.
It’s riddled with vacant lots. Those that aren’t turning to swamps or being used as fly dumps are littered with rubble, broken glass, plastic bottles, and piles of soiled clothes. Since the beginning of 2008, more than 1,300 properties have been foreclosed on here, and countless homes are boarded up, vacant, or clearly occupied by squatters. The roads and sidewalks are crumbling; on the side streets you can hear cars rattling over potholes a block away. On the major thoroughfares, like Damen or 63rd, most of the storefronts still standing are boarded up, gated off, or both—even the liquor stores and churches. At the corner of Damen and 62nd, an abandoned car is parked at an abandoned service station.
The city of Chicago has a program to eradicate blight and stimulate new development. Between 2004 and 2008 it spent about $1.5 billion in property tax dollars on communities Mayor Daley and his aides designated as needing a shot in the arm.
Yet only about $33,000—or 0.002 percent of that $1.5 billion—went to the 15th Ward, which includes most of West Englewood. It ranks 49th out of 50 wards on the list of communities receiving those funds, just ahead of the middle-class 41st Ward on the northwest side. The 41st Ward didn’t get any of that money because its longtime alderman, Brian Doherty, is opposed to the program. But the other wards not receiving much in the way of TIF funds include depressed communities such as Ashburn, Roseland, Little Village, Auburn-Gresham, and West Pullman.
On the other end of the spectrum are the three wards that encompass downtown Chicago. They shared roughly $626 million of that $1.5 billion, or about 43 percent.
We’re of course talking about Chicago’s tax increment financing program, which collects more than $500 million a year. Unlike funds collected through property taxes and distributed through a public budgeting process, TIF money goes into special funds controlled by the mayor and distributed with minimal public oversight.
By law the program is supposed to help blighted areas that wouldn’t attract sufficient economic development “without the benefits of tax increment financing”—that is, areas that won’t improve unless the city ponies up to get rid of “dilapidation,” vacant buildings, and environmental problems and bolster infrastructure. Mayor Daley, its biggest proponent, has long claimed it’s done just that. “Most of [the TIF money] is pledged for economic development in depressed areas, to bring jobs back or keep jobs there,” he told Chicago Public Radio last fall.
But it’s clear that the money is not reaching many of the neighborhoods that need it the most. We’ve been writing about abuses of this flawed program for years, so we knew it was bad. But until now even we didn’t know it was this bad.
Through a Freedom of Information Act request, we recently acquired records from the city showing exactly how TIF money was spent in all 156 TIF districts that existed from 2004 through 2008—information never before released to the public. We asked for the expenditures broken down by ward, but city officials told us they only kept the information by district and didn’t have any way of knowing exactly what TIF-funded projects were in which wards. Instead, they provided a set of formulas showing the portion of each district in each ward.
So we conducted an analysis to get a sound estimate of where the money’s going, applying the city’s formulas to the district totals. For example: $1,548,011 was spent in the Bronzeville TIF district during this period. Portions of the district are in three wards: the Second (24 percent), the Third (53 percent), and the Fourth (23 percent). That works out to about $371,523 going to the Second Ward, $820,446 going to the Third, and $356,042 going to the Fourth. It’s probable that the money wasn’t distributed in this exact proportion, but the city said that’s the best it can do.
Our analysis shows that the program has become one of the chief ways the city pays for basic infrastructure improvements and repairs such as new el stations, greenery, street paving, wheelchair-accessible sidewalks, and ornamental street lamps.
But only in select wards.
In fact, it’s not just poor areas that are skipped over. Middle-class neighborhoods, including Chatham, Beverly, Rogers Park, and Lakeview, don’t get much investment from the TIF program either.
While the City Council has the authority to correct these disparities in spending, it’s not using it, either because the aldermen lack the will to battle Mayor Daley, who controls the purse strings, or because they don’t understand the program.
Alderman Toni Foulkes, who represents the 15th Ward, says she’s asked city officials to help her get more resources into her community. But she was just elected three years ago and says she’s still figuring out how TIFs work. “It’s a pretty tough system to navigate,” she says. “You don’t walk in and know everything.”
Anthony Beale has been alderman of the Ninth Ward, which includes Roseland, since 1999, but he says he’s not concerned that his ward only got roughly $1 million in TIF money from 2004 to 2008, ranking 47th out of 50. “It takes a while to get a TIF going, especially in a struggling community,” he says.
But Alderman Robert Fioretti, whose Second Ward was the biggest winner, is almost sheepish about the disparity.
“I didn’t create the TIF program,” says Fioretti, who was also elected in 2007. “TIFs were around long before I got into office.”
There are two good reasons that much of the money intended for poor wards is spent in wealthy ones. One has to do with how the program’s designed, the other with how it’s used.
The TIF program works by freezing, usually for up to 24 years, the amount of property taxes that the schools, parks, county, and other governmental bodies can collect in a designated area. That’s the TIF district. If property values there rise, producing higher tax revenues, the extra funds go into a TIF account. The money in that account is supposed to be spent in that district, though it can also be transferred to an adjacent TIF district through a process called porting.
The more valuable the property in the district, the more TIF dollars are generated. This wouldn’t be a problem if TIF districts were created only in communities that pass what’s become known as the “but for” test—”but for” the TIF, they’d receive insufficient investment to improve.
However, the definition of blighted is remarkably broad in the state law governing TIFs. In addition to areas with dilapidated or unused properties, those where “structures have become ill-suited for the original use” or need new “doors, windows, porches, gutters and downspouts, [or] fascia” also qualify. In Chicago, officials have decided the term applies to bustling portions of the Loop, the near west and south sides, Wicker Park, and even Lincoln Park. The property values in these wealthy and gentrifying neighborhoods climb, producing more tax revenues, which produce more TIF dollars, which produce more investment, which produces more development in these wealthy and gentrifying neighborhoods.
By contrast, if a poor community doesn’t grow—if it stays poor—it doesn’t matter how many TIF districts it has because they won’t be gathering much in new property tax dollars. And any extra tax revenue that might’ve been collected and spread around the city from, say, the Loop stays in the Loop.
So as long as Mayor Daley continues to rely on TIFs as the city’s main economic development program, rich neighborhoods will get more investment and poor neighborhoods will get less.
Some of the program’s supporters say that over time the whole city benefits from TIF-funded investments, even if they’re concentrated downtown. “I do consider myself an advocate of the TIF program, but I’ve also said no to many dozens of TIF requests,” says Brendan Reilly, alderman of the 42nd Ward since 2007. His ward includes a good chunk of the Loop and the Gold Coast—not exactly underdeveloped areas, though portions of five TIF districts run through them. About $28 million in TIF money was spent there from 2004 to 2008.
“There is a much larger portion of the funds going downtown, but if you look at how they’ve been used in the last few years, the benefits extend to the whole city of Chicago,” Reilly says. He points to the Riverwalk, a promenade along a portion of the Chicago River that was built with TIF money—at least $6.7 million in 2008 and 2009, according to city records, with the total cost anticipated to run as high as $60 million. “Certainly that benefits the residents of my ward, but it also benefits everyone in the city. It draws more tourists who generate more tax revenues for city coffers. I try to make sure we use the downtown TIF money for the greater public good.”
That may be, but critics have questioned whether that’s the best use of precious taxpayer funds. One skeptic was former alderman Isaac Carothers, who represented the struggling 29th Ward on the west side until he pleaded guilty to bribery in January. “We just passed a budget here when we were talking about the city being short of money, and here, $50 million, $60 million coming from we don’t know where, from the sky,” Carothers griped at a City Council committee meeting in 2008. “What about the projects in our wards?”
Moreover, as popular as the Riverwalk may be, it’s hard to argue that it’s spurring economic development in a blighted area. And unlike projects funded through the city’s regular budget, none of it was subject to public scrutiny: the council didn’t have to approve the expenditure.
For more than two decades the details of the TIF program have been kept under wraps. Unlike expenditures from the regular city budget, which have been revealed in an online procurement database and in annual budget reports and audits, details about how and where TIF money was spent were never revealed. Once a year city officials did release confusing reports about how much each of the scores of TIF districts (there are now about 160) received. But they never made any attempt to put together for public consumption a comprehensive accounting of the funds.
Then last fall several aldermen alerted the Reader to the existence of a single budget showing how the city planned to spend TIF dollars collected from 2009 through 2011—and which areas were the big winners and losers in the program Mayor Daley has called the only economic development game in town. After we badgered city officials for weeks, submitting a Freedom of Information Act request—and then appealing their denial of that request—they released a copy of the budget. Our analysis showed that downtown was slated to get far more investment than the city’s neighborhoods.
We followed up with another FOIA request for a database of how money was actually spent for every TIF district and ward from 2004 to 2008. After a few weeks the city complied.
The records handed over by the city show the program has yielded all sorts of concrete infrastructure upgrades and amenities in the Loop and surrounding neighborhoods: A new park, named for Hillary Rodham Clinton, in the middle of the Prairie Avenue Historic District. Ornamental streetlights on Madison west of Halsted. A new traffic light at Washington and Aberdeen, right next to Oprah Winfrey’s Harpo Studios.
Other expenditures don’t have such tangible results. MillerCoors recently affixed its logo to the riverfront side of the building at 250 S. Wacker that, thanks to $6 million in TIF subsidies (and another $18 million in state tax breaks), houses the beer giant’s corporate headquarters. In return, MillerCoors has committed to employing 325 people here, though they’re mostly transfers from Denver or Milwaukee. (And the city hasn’t closely monitored previous job-subsidy agreements.)
The Daley administration has also repeatedly used TIF funds to move poor people out of gentrifying areas. For example, at Monroe and Green there’s a glittering condo building with a sign in front advertising “unobstructed views.” Up until 2006 a homeless shelter stood there. More than $2.5 million in TIF money was used to demolish the shelter, run by the Chicago Christian Industrial League, and move the agency to an impoverished area on the west side: the new facility is at Roosevelt and California, across the street from a grammar school.
In the South Loop the city used more than $2 million in TIF funds to get rid of an SRO hotel. In 2006, after fighting in court for seven years with the owner of the New Ritz, at 1007 S. State, the city acquired the building and told residents they had to find another place to live. About 100 of them were paid $475 apiece in TIF funds to help with relocation. The city then demolished the building. Over the last decade real estate in the South Loop has been hot, and the city initially floated the idea of allowing a new condo development on the site, but so far it’s still a vacant lot.
Not all TIF funds were spent downtown. About $400,000 went toward acquiring property, tearing down old buildings, relocating merchants, and covering administrative costs for the ongoing redevelopment of the Englewood shopping mall at 63rd and Halsted. Once one of the city’s busiest commercial strips, the mall had lost most of its merchants by the 1990s, and the city decided to rebuild it around a new $250 million campus of Kennedy-King College.
The campus opened in 2007, but the mall has yet to regain its old luster: Kennedy-King is surrounded by an expanse of empty lots, beauty supply stores, and fast-food joints. And when the college was moved it left behind another set of vacant buildings, Built in 1972, the old structures, at 69th and Wentworth, are being demolished at a cost to taxpayers of $6 million.
Mayor Daley likes to brag that his administration has upgraded infrastructure in neighborhoods across the city—laying new sewer lines, fixing sidewalks, building libraries and police stations. He and his aides have also spread around regular city funds—and kept aldermen happy—with what’s called the menu program. Each alderman gets the same amount out of the public city budget, currently about $1.3 million a year, to spend on nuts and bolts chosen off a “menu” from the city’s transportation department. Aldermen love the program because they can take credit for infrastructure improvements when they’re up for reelection; among the most popular are new street lamps, street and sidewalk repaving, and speed bumps. When the administration is slow in responding to their menu requests—as it has been during the last couple years—aldermen get indignant.
But TIF money is a different story. It’s not designed to be distributed equitably. Foulkes says she’s had to figure out not just the mechanics of the program but the politics of getting what she wants from city officials. “We have discussed that—where is the money?” she says. “Being a new alderman is about holding your cards close to your chest, taking baby steps, making sure they’re not taking things away from you.”
She says she’s optimistic her ward, the 15th, will have more money to work with since the City Council just approved a new TIF district centered at 63rd and Ashland. “We will be getting our share,” she says. “There’s no doubt.”
Unfortunately, there is. The 15th Ward will never get an equal share as long as wealthier communities—like the Loop —are allowed to have TIF districts.
Same goes for the Ninth Ward, on the far south side. It includes portions of five different TIF districts that have been around for years, but they still don’t generate much money because the neighborhoods around them are hurting. Last year Alderman Beale and city officials joined two of the districts together, expanding the size of the area where new property tax revenue will be captured by the TIF program. “We need more time,” Beale says. “We’re getting what we deserve but it takes a while.”
It’s not clear if Beale doesn’t get it or if he’s playing along for political reasons—he needs the the mayor and a majority of his council colleagues to back a plan to approve a new housing development and Walmart in his ward. But even if the southeast side miraculously becomes a mini Gold Coast, the Ninth Ward will be playing catch-up for years. Between 2004 and 2008 only about $1 million in TIF funds were spent there—roughly $357 million less than was spent in the Second Ward.
Doherty, the alderman who doesn’t play the TIF game, says he’s heard this sort of thing before: the Daley administration has convinced most of his council colleagues that they just need to be patient and play along. “A lot of them, when they rail against the TIFs, the administration’s thing is, ‘We’ll give you a TIF,'” he says. “The majority of my ward doesn’t qualify for the TIF, but the language is so subjective that everybody uses it. To lie and stretch the truth so I can get one—that doesn’t seem right.”
Not surprisingly, the aldermen whose wards are benefiting from the program say it works just fine.
Walter Burnett says his ward, the 27th, gets so much TIF money because of how wisely he’s used it in the past. When he first became alderman, in 1995, he put money into streetscaping and other neighborhood beautification efforts to push up property values, he says. “I think the success of our TIF is because of the work we’ve done,” Burnett says. “To me, TIF is an art. It’s something you have to make work.”
But the impact of a given alderman’s artfulness is questionable. The 27th Ward isn’t the only one that’s undergone beautification over the last decade—so has the area around 63rd and Halsted—but no place outside of downtown is generating anywhere near the same kind of TIF money. Burnett has more of it to spend than Foulkes because the West Loop is far wealthier than West Englewood.
Over time the TIFs in poorer areas may collect more money and generate more investment than they do now, but they’re unlikely to ever come close to what’s happening in and around the Loop. The 60th and Western TIF district, in West Englewood and Chicago Lawn, has been around since 1996, but it collected just $427,000 in 2008. The current boundaries of the Near West TIF district, in Greektown and the near west side, were also drawn in 1996, but in 2008 that district brought in $12,847,000. The districts are roughly the same size.
One common fallacy is that TIF dollars are distributed according to the aldermen’s clout. If this were so, the 14th Ward, represented by council dean Ed Burke, the finance committee chairman, would get the most TIF money. But only about $12 million in TIF funds was spent in the 14th Ward from 2004 to 2008, which puts it in the bottom half of the list.
Why? Because for all his clout Burke represents working-class communities that don’t generate a lot of TIF dollars.
Conversely the 32nd Ward, which covers parts of Roscoe Village, Wicker Park, and other thriving neighborhoods, received about $29 million in TIF dollars. It’s represented by Scott Waguespack, who regularly annoys the mayor by speaking out on such issues as the parking meter deal, the budgeting process, and the lack of transparency in the TIF program.
Some aldermen are starting to speak out about problems with the TIF program. Last fall 38th Ward alderman Tom Allen announced he was voting against the mayor’s 2010 budget and bashed the administration’s use of the TIF program. “Everyone in this room is nervous because we have been told that if anyone messes with the TIF, you are going to lose your park projects, street projects,” he said. “Did the city not exist before? We built buildings without TIF. It is all tax money. If you can call it an apple or orange, it is TIF money. We are not likely to lose this money. We’re playing a game. We are trying to confuse the public.”
Allen said the program had yielded “great projects” but needed reform. At the very least, he said, there should be a discussion about how the $500 million it generates every year should be used during a severe recession.
And 22nd Ward alderman Rick Muñoz has argued that while TIF started as a remedy for blight, it’s become an off-the-books kitty that allows Daley and cooperating aldermen to spend money on pet projects without the accountability of the regular budget process.
Muñoz says his ward ranks low on the TIF funding list—it got a little more than $1 million from 2004 to 2008, fifth from the bottom—because he’s only agreed to create TIF districts in select areas where he has a specific plan for development. Too many districts have been created in areas that aren’t really blighted, he says. “I don’t think we should put TIFs over whole neighborhoods and see what happens.” If that’s done, he says, “the TIFs just become slush funds.”
Ironically, Fioretti says he agrees with the critics, even though his ward benefits the most from the program. He says, “We need to shift budget funds to areas of the city that aren’t getting anything and are really hurting.”
Click here for more images of TIF winners and losers.
Click here for the database of all TIF expenditures from 2004 to 2008 by district.