As the teachers strike is poised to enter its 10th school day, the issue of a pot of money from controversial tax increment finance districts remains a point of contention between Mayor Lori Lightfoot and the Chicago Teachers Union.
Lightfoot has proposed tapping a record amount of TIF funds, which would return more money than ever before to the schools and city government.
The union says that’s fine, but accuses Lightfoot of attempting to recoup that windfall of TIF money by making Chicago Public Schools cover pension contributions for nonteachers that are now covered by City Hall.
On Tuesday, the issue was back in the public eye, as teachers rallied outside the site of a newly created TIF district for the Lincoln Yards megaproject. The development west of Lincoln Park is in line to get up to $1.3 billion in taxpayer subsidies. Last week, CTU highlighted The 78, another big development near Roosevelt Road and Clark Street that’s in line for up to $1.1 billion in subsidies.
Union leaders say Lightfoot needs to come up with another $38 million or so to meet its contract demands, and they’ve questioned the city’s priorities, contending that the subsidies are part of a “TIF scam” that amount to “giveaways to wealthy that deprive schools.”
Lightfoot, however, has maintained that the cost of closing the contract gap is closer to $100 million. And she also says the city already has offered to return as much as possible from the city’s 140 TIF funds to schools and other taxing bodies.
What’s a TIF?
Some background: TIF districts are a tool for cities to promote economic development in areas that are blighted or at risk of becoming blighted. When a TIF district is established, schools and local governments collect taxes for the next 23 years based on the area’s property assessments at the time of the vote.
As land values rise due to the new development, the extra property taxes that are collected as a result are poured into the TIF fund to be used for streets, roads, bridges and other infrastructure needed for the development to occur. TIF fund money also can be used for job training, affordable housing and the expansion or construction of schools, if the development leads to a bigger school population.
As federal and state funding for cities declined in recent decades, then-Mayor Richard M. Daley vastly expanded the number of TIFs, which now cover about one fourth of the city’s real estate, including some areas downtown.
Daley’s successor, former Mayor Rahm Emanuel, reined in spending money from those downtown TIFs and established a policy for returning TIF money to the schools and local governments every year. But Emanuel also led the charge to approve Lincoln Yards and The 78. He contended neither development — and the jobs they are expected to generate — would occur without the subsidies. Critics, though, continued to refer to the districts as the “mayor’s slush fund.”
The surplus
The city can redirect money from TIF districts that isn’t committed to specific projects. It’s called declaring a surplus.
Lightfoot has proposed declaring a record $300.2 million TIF surplus in 2020. That’s up from the $175.7 million this year that Emanuel included in his final budget.
As the biggest taxing body, CPS stands to collect $163.1 million of Lightfoot’s $300.2 million surplus.
CPS was counting on getting roughly $97 million from the TIF surplus, so Lightfoot is trying to free up $66.2 million more. That extra money already is figured into the contract offer made to CTU, the city maintains.
At the same time, however, Lightfoot wants CPS to reimburse the city $60 million to cover the school district’s share of pension contributions for CPS employees who aren’t teachers. Those workers aren’t part of the Chicago Teachers’ Pension Fund but instead are covered by the city’s pension fund for municipal workers.
The city has picked up those pension costs for years, but Lightfoot now wants the school district to come up with money.
The mayor faces a separate budget crisis at City Hall, and she’s looking for money to close that major shortfall.
The teachers union says that pension reimbursement is simply a “claw back” of the TIF surplus money that’s supposed to go to CPS. The union says the same thing about Lightfoot’s call for CPS to pay $33 million to defray the cost of police officers who work in the schools.
But Susie Park, the city’s budget director, said the requirement for CPS to cover costs for cops in schools goes back many years and is part of the current budget passed by Emanuel. The Park District, Chicago Housing Authority and CTA make similar payments for police protection, she noted.
Some critics say the city should abolish all TIF districts and allow the schools and City Hall to get more tax money each year. But when a TIF is set up, the city makes contractual commitments to developers to subsidize specific projects, and it also issues bonds that have to be paid off. So a blanket elimination of TIFs almost certainly would land the city in court.
“We couldn’t abolish the TIFs immediately,” said Jennie Huang Bennett, the city’s chief financial officer. “The fact that the mayor’s budget proposes such a significant increase in the surplus is a commitment to putting as much of those monies back into the various taxing bodies as possible, particularly in this budget year. And we are looking at TIF reforms going forward” aimed at spending TIF dollars in needier parts of the city.
Park, the budget director, said there will be $1.8 billion in the TIF funds at the end of the year. Of that, $1.45 billion is contractually committed or needed to pay off bonds, she said. Even if the city were to declare all noncommitted funds as surplus, that would only make available another $50 million. CPS would get about 52% of those funds.
City officials maintain that when used properly, TIF districts promote development that creates jobs and, after 23 years, results in significantly more in tax collections for the schools and other governments — even as critics question whether TIFs in better-off parts of the city are even needed to attract development.
But CTU spokeswoman Chris Geovanis said the controversy surrounding TIFs is related to the city’s “distorted priorities … that take from the poor and give to the rich.”
She described the use of TIFs in wealthier parts of the city as “a form of corporate welfare to the most wealthy and clouted political and economic interests around the circle of power that really calls the shots on how those funds are going to be distributed.”
Still, while nine people were taken into custody while protesting the Lincoln Yards development at Sterling Bay headquarters on Tuesday, the city can’t tap that TIF district for money. That’s because the TIF was just created in May and doesn’t have any money in it yet.
hdardick@chicagotribune.com
Twitter @ReporterHal
