Thursday, October 11, 2007
Taxes & Lies In Chicago
Mayor Daley has proposed the the largest property tax hike in the Chicago history along with tax increases on liquor, parking, telephone service, city stickers, bottled water, auto leases and DVD rentals, a total tax hike of $293 million. Cook County Commissioner Mike Quigley doesn't think that a tax hike is necessary:
The issue is the $400 million a year in property taxes that the city collects and spends from tax increment financing districts, sometimes known as TIFs.Ben Joravsky, who has written a series of stories on TIFs (the latest one on how an $8 million affordable-housing subsidy cost taxpayers $75 million) explains how TIFs work and how the local government lies about it:
This is money that has been siphoned off from much of the new development you have seen going up around the city in the past two decades.
Instead of flowing though the normal channels, where the money would be split among the city, Board of Education, Park District, City Colleges and Cook County, the city gets to keep the TIF funds in a separate pile that can be spent at the mayor's direction and without even showing up in the city's budget.
The money goes for a variety of purposes, some undoubtedly worthwhile, some questionable. Much of the money goes toward subsidies for the developers within the ever-expanding TIF districts.
The inaccurate bills are sent to people who own property in TIF districts. (Presumably people who don't live in a TIF are getting accurate bills.) TIFs are created by the City Council and Mayor Daley to pay for development within their borders. Many people hear that the property taxes within a TIF are frozen for the life of the TIF--at least 20 years, though it can be extended--and assume that means the taxes for people who live there are frozen. They aren't. As assessments rise the taxes for people in a TIF rise, just as they do across the city. What's frozen is the amount that goes to the schools, parks, city, county, etc. Any increase in tax revenue above that--the "increment"--goes to the TIF.Javorsky credits the mayor for forcing everyone from activists to aldermen (and, I would add, taxpayers) to play according to his rules. He's right. For Daley, TIFs are all about exercising power with minimal public scrutiny. Considering that both the county and state are considering tax increases, maybe this latest tax shock will change that, though I wouldn't bet on it.
Suppose you paid $2,000 in property taxes in 1990, when the city made your neighborhood a TIF. Assessments have undoubtedly gone up since then, so now you're paying about $4,000. But only $2,000 of that will be turned over to the schools, etc. The remaining $2,000 goes into the TIF fund. (In Joe's case it's the Bryn Mawr/Broadway TIF fund, named for the main streets in the district.)
But your tax bill doesn't tell you the TIF gets $2,000. It tells you the TIF gets zero. Worse, it tells you the full $4,000 is being distributed to the schools, etc. "If some accountant was doing this in the private sector for a corporation's statement to stockholders," says Ernst, "what would happen to him?"
And how will the $2,000 that goes to the TIF be spent? It will pay back money the city's planning department borrowed to "seed" or "leverage" development, as planners like to put it. The borrowed money can be spent directly by the city to install new sidewalks or streetlights or build schools (though that doesn't happen very often)--anything that will entice development or increase a community's economic value. Or the borrowed money can be turned over in the form of low-interest loans to developers to build shopping centers or malls or to rehab run-down buildings. The beauty of a TIF is that all of this development theoretically pays for itself because the loans are repaid out of the increase in property value that comes when a community starts thriving and pays more in taxes than it would have without the loans.
And it does pay for itself, to a point. The truth is that everybody pays one way or another for TIFs--because TIFs siphon property taxes away from essential services, and as the cost of those services rises, the increase has to be picked up by people who live outside the TIFs.