CHICAGO — Citing the need for additional security after looting hit shops hard this summer, two new taxing districts are being proposed downtown.
One of the districts, stretching along Michigan Avenue from Randolph to Oak Street on the city’s famed Mag Mile retail corridor, is moving forward despite bypassing the lengthy process typically required to create the taxing districts. The other district would cover a single block along Oak Street between Michigan Avenue and Rush Street.
The taxing districts, known as Special Service areas, or SSAs, impose a tax on property within set boundaries — typically business corridors — on top of other taxes. The revenue from the tax is then spent within the boundaries to expand services like private security, street improvements, and business development.
On Tuesday, the Committee on Economic, Capital and Technology advanced measures calling for public hearings to debate the creation of the SSAs to the full City Council. The public hearings are required before ordinances can be introduced in City Council to create the districts.
Mark Roschen, assistant commissioner for the Department of Planning and Development, said the proposed SSA along Michigan Avenue would have a three-year term with an anticipated budget of $1 million from an estimated tax rate of just 0.0317 percent. The stated priorities of the SSA would be “increased security, customer attraction and beautification.”
The SSA “would address immediate needs that arose from an unforeseen and unprecedented drop in tourist spending and damage caused by unrest twice this summer,” Roschen said.
Special Service Areas are governed by commissioners, appointed by the mayor, who approve budgets and hire a service provider. The amount of revenue raised in SSAs varies depending on its location and tax rate: in 2018, tax rates in Chicago’s 52 SSA’s ranged from 0.205 percent in SSA # 73 in Chinatown to 2.362 percent in SSA #5 along Commercial Avenue in South Chicago.
The district stretches between Ald. Brendan Reilly’s 42nd Ward north into Ald. Brian Hopkins 2nd Ward. During the committee meeting Tuesday, Reilly said he supports moving forward with public hearings on the two proposed districts, but he has yet to commit to supporting their creation.
On Tuesday, Hopkins told Block Club he’ll coordinate outreach efforts with Reilly so residents can learn more about the proposed district. He said he’ll withhold his support for the district pending the ability of the Magnificent Mile Associations to restrict the tax to commercial properties and after gathering residential feedback.
Saying there are “technical challenges” to restricting the tax only to commercial properties in an SSA, Hopkins wants assurances that the process will be as “error-free” as possible so that there aren’t challenges from mixed-use buildings when the tax shows up on property tax bills.
Hopkins said the SSA could operate on the limited $1 million budget for three years before expanding to a larger business improvement district and downplayed concerns city residents may have over increased private policing in the area.
“Every SSA that I’m aware of that spends a portion of their budget on private security is satisfied with the arrangement and the residents and businesses within the SSA generally give it strong, favorable reviews,” he said.
The Department of Planning and Development typically requires an extensive process before the establishment of new SSAs, but the one proposed along Michigan Avenue by the Magnificent Mile Association is moving forward as an “emergency” pilot district on an expedited timeline, following the downturn in business during the coronavirus pandemic and widespread looting that took place over the summer.
Conversely, the Oak Street SSA was first proposed in 2019 and the Oak Street Council filed an application with the city in November of last year.
If approved, the Michigan Avenue SSA will be the first created on an “emergency” basis.
“This is being tested as a pilot program. The purpose of a streamlined SSA is to provide a temporary bridge mechanism until a longer term tool can be implemented,” said Peter Strazzabosco, spokesman for the Department of Planning and Development.
Normally, the department requires a multi-step process that takes over a year to complete. Applicants must form an advisory committee, conduct a feasibility study, hire a consultant to collect data and conduct two community meetings before submitting an application to the department that includes support signatures of at least 20 percent of taxpayers in the proposed district.
The Magnificent Mile Association submitted a feasibility study, gathered data on the property in the boundary and held a community meeting in September after submitting an application in August.
Strazzabosco said the department waived the requirement to include supporting signatures because the pilot SSA is proposed for a 3-year term rather than the typical 10-year term. Before the three years is up, the SSA would need to submit a standard application for a new 10-year term.
The proposed SSA along Oak Street in the Gold Coast would have an estimated budget of under $300,000 from a tax rate of 0.238 percent. The priorities of the SSA are to increase security through cameras and patrols and enhance customer attraction to retail businesses.
The ordinances calling for public hearings need to be approved by the full City Council. Following the hearings, ordinances creating the SSAs can be introduced to City Council and the districts could begin services in January if upfront funding has been secured. Tax revenues could begin to be collected in August of next year.
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