County Commissioner Gives Illinois Lawmakers an Earful over TIF Abuse

Published October 1, 2007

Rarely does a person get a two-hour, closed-door meeting with Illinois’ most powerful lawmakers. But Cook County Commissioner Mike Quigley (D-Chicago) was granted such a rare meeting to express his objections to the use of what may be the nation’s leading “economic development” tool: tax increment financing (TIF).

“I think the reason the state is getting interested in TIFs is because TIFs have an impact on the state budget,” said Quigley, who met with Gov. Rod Blagojevich (D) and top lawmakers in late June. “This is because of how the state education formula works. All these TIF districts have started to affect the state’s bottom line.”

In addition to Blagojevich, meeting participants included Illinois House Speaker Michael Madigan (D-Chicago), Illinois Senate President Emil Jones (D-Chicago), Minority House Leader Tom Cross (R-Oswego), Minority Senate Leader Frank Watson (R-Greenville), two top aides to Chicago Mayor Richard M. Daley, and four Chicago aldermen.

Standing Alone

Quigley has stood virtually alone among Illinois elected officials in forcefully challenging the use of TIF, which allows municipalities to earmark tax revenues from growth in property values in a designated area to finance development in that same area. He said many local and state politicians privately back him but are afraid to speak out because of politically powerful Daley, who has turned fully one-third of the city into TIF districts.

Quigley’s “A Tale of Two Cities: Reinventing Tax Increment Financing,” a report issued in April of this year, has made it difficult for Daley and other local and state officials to ignore his complaints.

The report notes the use of TIF by Illinois municipalities has exploded over the past two decades. In Cook County alone there were more than 370 TIF districts collecting more than $686 million in property tax revenue in 2005, according to the report.

“This adds to the incredible financial pressures facing almost every department of our local government,” Quigley said. “Health clinics have closed, schools are using textbooks held together by duct tape, and open space is not being preserved for the future.”

Big Tax Shift

Because local public school districts take the largest property tax bite, they lose the most when TIF districts are created. To cover the TIF loss, school districts and other affected taxing bodies–fire districts, library districts, and county governments–shift more of their tax burdens onto properties outside TIF districts.

In the case of Chicago, according to Quigley’s report, the property tax shift exceeds 10 percent.

“Right now 10 cents of every property tax dollar collected in Chicago goes to TIF districts,” Quigley said. “That’s more than for streets and sanitation. That’s more than Cook County collects in Chicago.

“The tax shift is huge, but almost no one knows it,” Quigley continued. “There is almost no transparency and accountability for hundreds of millions of TIF dollars, dollars that don’t get run though the budget process. It’s the antithesis of transparent and accountable government.”

Chicago has about 150 TIF districts, which include some of the highest-priced real estate in the city, such as the city’s famed business area known at the Loop.

“One-third of the city [of Chicago] is TIFs now,” Quigley said. “From a fiscal point of view, there are conservative [types] and tax-and-spend types [of people]. TIF is tax-and-spend. I would argue even a tax-and-spend person should be offended by this because almost nobody knows what’s happening.”

State Aid Shift

Because the state’s public school aid is tied to property taxes, the shift has an impact on the amount of aid the state sends to public school districts that have TIF districts in their boundaries, Quigley noted.

Quigley said he is also bothered by the apparent disregard for the purpose of TIF.

TIF was conceived as a tool to redevelop blighted areas, Quigley points out. The use of TIF by wealthy communities and in areas that are not blighted is an abuse of the intent of TIF. It also keeps blighted areas blighted because they do not receive the “leg up” they were supposed to receive.

Calls for Transparency

Quigley’s report recommends:

  • TIF information should be included on property tax bills.
  • The Illinois General Assembly should reform its TIF legislation to protect local governments from the effects of inflation.
  • TIF should be included in municipalities’ annual operating budgets.
  • TIF redevelopment plans should include specific goals and budgets, and should be subject to periodic review.
  • TIF information, including maps, plans, budgets, and redevelopment contracts, should be made available online.
  • The Community Development Commission, the city body that oversees TIF, should be abolished, and neighborhood-level institutions should be established in its place to govern and oversee the program.

Legislation Coming

Quigley said he received no commitments from the assembled politicians to reform the state’s TIF law. In fact, the Chicago representatives defended the way the city has used TIF. He said he expected that reaction because Daley’s rule is almost untouchable.

But Quigley also said he will continue to press the issue, including presenting legislation this fall to address his recommendations.

“I say put TIF information on tax bills, run it through the budget process, tighten definitions of blight and how this game is played, and give other local governments some sort of break,” Quigley said.

Steve Stanek ([email protected]) is managing editor of Budget & Tax News and a research fellow at The Heartland Institute.

For more information …

“A Tale of Two Cities: Reinventing Tax Increment Financing”: