Alderman's shot at shorting TIF slush thwarted?

This is the story of a purported mayoral slush fund, an alderman's bold claim that he'd reform it, and little-known uses of your property-tax dollars.

Let's start with the taxes, and a term you might've heard: tax-increment financing, or TIF.

A TIF district is a special zone in which some of the property taxes paid by landowners are diverted away from schools, parks, and county services. The taxes are instead used within the zone to fund building development—by either reimbursing private developers for construction debt, paying for new streets and sewers, or both.

In Chicago, although the city council must approve a new TIF district, its placement and implementation are controlled by the mayor.

Critics say that TIF districts siphon away property-tax dollars for far too long—23 years minimum, as allowed by state law. During that time, a district can divert many millions of dollars—as much as $247 million, as in the Kinzie Industrial Corridor TIF district on the near West Side.

The rush of slush

Chicago created its first TIF district, called the Central Loop, in 1985 under then-Mayor Harold Washington. The city wanted TIF to fund the redevelopment of the now-infamous Block 37, at State and Randolph Streets. At the time, officials expected to discontinue the TIF district after just 10 years.

According to an article by Ben Joravsky that appeared in the Chicago Reader on August 5, 2009, "[Mayor] Washington promised that as soon as Block 37 was completed the TIF would be abolished . . . He predicted that this could happen by 1995."

Instead, the Central Loop TIF district tapped property taxes for 23 years—reportedly siphoning just under a billion dollars by the time its statutory life ended in 2008.

Because of loose limits on the type and number of construction projects that a TIF district can fund, the city can easily spend accumulated tax dollars on new ventures with no public input.

Due in part to this lack of oversight, "TIFs are a slush fund," said Tom Tresser, an activist with the TIF Illumination Project, in an interview. "There's lots of 'side bets' all over the city," Tresser said, in which city officials spend accumulated property taxes "for whatever they want."

But with the election of Mayor Rahm Emanuel in 2011 came the idea of limiting TIF slush.

Shortly after becoming mayor, Emanuel formed something he called the TIF Reform Panel. On August 23, 2011, the panel produced a report that said the city should establish "performance thresholds" for each of Chicago's 140-plus TIF districts. Each district, the panel wrote, "should be subject to strategic reviews" every five years.

"If the district has met its strategic objectives and the original intent of the TIF district no longer applies," the panel wrote, the district should be "considered for closure."

To Emanuel's credit, his administration has pulled the plug on one TIF district five years short of its 23-year statutory life.

But according to Cook County Clerk David Orr, Chicago's TIF districts continue to absorb property taxes and fund projects without clear justification.

“At what point," Orr said in a July, 2016 statement, "can a taxpayer easily get to the specifics of how certain projects are chosen?”

Which brings us to a recently-proposed TIF district: that of the Lathrop Homes redevelopment.

A model for "slush-free" TIF?

Lathrop is a largely vacant North Side public housing apartment complex owned by the Chicago Housing Authority (CHA). In 2006, the CHA announced plans to redevelop the 925-unit complex—and rent out a little over half of the 1,000-plus resulting units at market rates.

In March of 2016, the city announced its plan to place about two-thirds of the Lathrop redevelopment into a TIF district called the Diversey/Chicago River district.

City documents later showed that most of the TIF's accumulated taxes would repay lenders who gave construction loans to the Lathrop project's private developers.

Although the Lathrop complex spans both Ald. Scott Waguespack's 35th Ward and Ald. Proco "Joe" Moreno's 1st Ward, the TIF district would reside only within Moreno's ward.

Ald. Moreno said early on that he took seriously the critique of TIF as bottomless slush. At an April 5 public meeting, Moreno announced that he'd compel the city to close the Diversey/Chicago River TIF district immediately after it collected only $17.5 million in property taxes.

"I . . . want this TIF to not only have a sunset in years, [but to] have a sunset in dollar amount," Moreno said at the April 5 meeting. He said that once the district collects the specified amount property taxes, "the TIF is stopped"—ostensibly creating a "slush-free" TIF.

Moreno at CDC
Ald. Moreno speaks at the Community Development Commission's July, 2016 meeting.

Moreno's "sunset" intent first appeared in writing at the end of April, when the city's planning department released a proposed redevelopment plan for the Diversey/Chicago River TIF district.

The plan stated that the city "shall promptly adopt an ordinance dissolving" the TIF district after the Lathrop developers were paid $17.5 million. The plan did not, however, define "promptly."

Moreno later realized that the plan's language left a giant loophole through which TIF slush might continue to pour. "One person's 'promptly' is three days; another's is three years," Moreno said at a July 12 public meeting.

The July meeting was held to get an OK from the city's Community Development Commission (CDC) to send the proposed TIF district to the city council for approval.

At the meeting, Moreno proposed changing the plan's "promptly" to "within 120 days." The CDC adopted Moreno's new language in a voice vote.

Several weeks later, the city's planning department put Moreno's change into the TIF district's redevelopment plan. Instead of saying "the City shall promptly adopt an ordinance" to shut down the district, the plan now reads "the City will use its best efforts to adopt an ordinance within 120 days".

But because the new language says the city will use only "its best efforts," the city isn't any more obligated to terminate the TIF district than it was under the original language, said Paul Sajovec, chief of staff to Ald. Waguespack.

"The language regarding an intent to sunset [the district] when the fund has hit $17.5 million does not make it automatic," Sajovec said via e-mail.

The Reader's Joravsky had predicted such a scenario. In an April 8, 2016 article, Joravsky wrote, "Before it's over, I suspect the mayor and his lawyers will concoct some devious legalese that enables them to claim they're reforming this TIF while wallowing in the slush."

Ald. Moreno did not respond to requests for comment.

The Lathrop TIF district is headed for final city council approval in October, 2016.