CITY HALL — Mayor Lori Lightfoot last month unveiled long-awaited plans she said would restructure how Chicago subsidizes massive private developments with tax dollars originally intended to fight urban blight.
Lightfoot’s administration said the changes were a first step toward fulfilling the mayor’s campaign promise to impose “rigorous standards that eradicate waste and abuse and ensure investments in economically distressed neighborhoods” for the controversial tax increment financing program.
But the measures have left experts and TIF-reform advocates less than inspired. One group that has kept a close eye on city TIFs said it is especially disappointed since Lightfoot rode into office promising she’d transform the program, which they contend has been abused for decades.
“We had high expectations at the start of the Lightfoot administration,” said Nathan Ryan, a spokesman with Grassroots Collaborative, a coalition of 11 community groups and labor unions that has opposed using TIF dollars to help fund private development. “What we are seeing is Lightfoot following a path laid out by (former Mayor) Rahm Emanuel.”
Lightfoot has been walking the line between reformer and powerbroker for more than a year, and her proposals for the TIF program have become somewhat symbolic of that tense effort.
As a candidate, she blasted using at least $1.6 billion and up to $2.4 billion in city subsidies to fuel two massive developments set to transform the North Branch of the Chicago River and the South Loop. Yet as mayor-elect, she allowed the subsidies to move forward after extracting some promises from the developers and vowed to work with activists pushing for “affordable housing, park space and the responsible use of tax increment financing dollars.”
Now with her first TIF reform package, she’s navigating a narrow path by tightening the rules permitting funds from Chicago’s TIF districts to be used to subsidize private development but not going far enough for many of the activists she vowed to work with just 10 months ago.
This is “the first chapter of a novel of TIF reform,” Deputy Mayor Samir Mayekar said.
TIFs have become a flashpoint in Chicago in the past few years in part because while millions of dollars have been spent on special projects, city and school finances have continued to struggle.
By law, TIF districts capture all growth in the property tax base in a designated area for a set period of time, usually 23 years or more, and divert all that growth into a special fund for projects designed to spur redevelopment or for public projects such as schools or bridges. Chicago has 163 TIF districts, which collected $841 million in 2018, the last year data is available.
Two major developments have become poster children among some for the abuse of TIFs: First was up to $1.3 billion in incentives the city awarded developer Sterling Bay’s Lincoln Yards megadevelopment just west of Lincoln Park; the second was the city’s OK to award up to $1.1 billion for “The 78,” a mixed-use development in the South Loop that is under construction.
In both cases, residents and experts aired concerns that the developments, both of which are in well-to-do neighborhoods, would likely have gone forward regardless of the city subsidy.
“The big problem with the Lincoln Yards TIF, in my mind, was that it was smack dab between the two hottest real estate markets in the city: Lincoln Park and Wicker Park,” said TIF expert T. William Lester, a professor at the University of North Carolina, Chapel Hill. Lester was retained by the Chicago Lawyers’ Committee for Civil Rights, the group representing Grassroots Collaborative and another community organization in their suit against the city over Lincoln Yards.
Under Lightfoot’s new rules, the city Department of Planning and Development will conduct a robust “but-for” analysis before private applicants for TIF funds are OK’d. The idea behind the test is to determine whether the development would not occur “but for” the government subsidy.
State law requires cities to conduct the tests to determine whether development within a proposed TIF district would not take place unless the district is established. Lightfoot’s rule calls for that analysis for individual projects that request a TIF subsidy, according to the new rules.
“These changes are meant … to guarantee that TIF funds are only used for projects that wouldn’t otherwise move forward,” according to the mayor’s office.
While experts said Lightfoot’s plan to increase transparency and oversight of the city’s TIF dollars is a step in the right direction, they questioned the extent to which her administration’s use of the tool will benefit residents in parts of the city that have historically seen the least investment.
TIFs are “by nature” an inequitable tool, producing projects that are best positioned to generate revenue if situated near parts of the city that are already booming, said Rachel Weber, a professor of urban planning at the University of Illinois at Chicago.
“You have to be able to attract private investment for property values to go up,” said Weber, who served on former Mayor Rahm Emanuel’s TIF reform task force. “If developers aren’t interested in building, if new residents are not interested in coming, there’s not as much potential for property values to go up, which means there won’t be as much money in those TIF accounts.”
It also remains unclear whether the new rules would have blocked the subsidies for Lincoln Yards and The 78. Asked directly about that by The Daily Line, Mayekar declined to comment.
“These changes seem set up to allow subsidies for more projects like Lincoln Yards,” Ryan said. “She’s talking the talk but not walking the walk.”
Mayekar said “these are the types of changes” critics have called for and said more changes are coming.
Role of AECOM criticized
Some of the criticism about Lightfoot’s changes center on her administration’s decision to sign a two-year, nearly $300,000 contract with multinational engineering and design firm AECOM to help city officials decide which private developments should receive TIF funding.
AECOM has become a lightning rod for criticism by progressives after Emanuel tapped the firm to build the controversial $95 million police and fire training facility in West Garfield Park. The contract with Lightfoot’s administration calls for the firm to develop a database of real estate and market data that city officials will use to determine whether private developments require TIF subsidies, Mayekar said.
The confluence of the two projects has some progressives, including Ryan, fearing AECOM has a conflict of interest, a charge Mayekar dismissed since all AECOM will be providing to the city is data and crafting a database for officials to use.
If AECOM has a role in helping the city craft new standards, they could ultimately benefit from that analysis if they are hired to build TIF-funded projects, Ryan said.
Focus on equity
Among the biggest changes Lightfoot called for is beefing up the role of a committee chaired by Mayekar that determines whether to approve requests for TIF funds. The panel will “center equity in its decision making,” according to the mayor.
Using an analysis developed by Chief Equity Officer Candace Moore, the committee will only approve expenditures if “they are aligned with the administration’s commitment to promoting equity citywide,” according to the mayor’s office.
But there are no members of the Grassroots Collaborative or other activist groups on that committee, another source of frustration for Ryan and other members.
Ryan said Lightfoot should have held hearings on the South and West sides on the TIF program before determining what changes she would make to the program.
“The best way to find a solution is to consult the people who are impacted by the policy,” Ryan said.
However, before the committee considers a subsidy from TIF funds there will be a “robust community process” and the feedback will inform the committee’s decision, Mayekar said.
Lightfoot’s changes have already resulted in changes, including the green light for a $10.1 million TIF subsidy for an affordable housing complex in Logan Square that had been stalled for several years is now moving forward, Mayekar said.
The committee will also prioritize projects that are part of a district-wide approach to economic development, as opposed to “one-off, developer driven” projects, Mayekar said. As part of that effort, Planning Department officials are developing a “comprehensive vision” for development in each neighborhood, according to the mayor’s office.
Heather Cherone is The Daily Line’s managing editor and City Hall reporter.
This story was produced by the Better Government Association, a nonprofit news organization based in Chicago.