The Truth About TIFs

A new study suggests Chicago’s massive use of the controversial tax-financing program doesn’t benefit the city.

A girl walks by an empty lot at 4703 West Madison St. in Chicago’s South Austin neighborhood. TIF money and city land—a total of $1.7 million in City Hall commitments—was earmarked for a badly needed Save-A-Lot grocery store, which was to open here in June. The developers walked away. Now a new team is proposing an even larger Save-A-Lot a block away, and asking City Hall for $2 million.   Photo: Alex Garcia/Chicago Tribune

Tax increment financing—the oft-maligned public financing method that the Chicago City Council says motivates economic development in underdeveloped neighborhoods—turns out to have virtually no impact on jobs in Chicago, according to the most recent comprehensive TIF study.

T. William Lester, an assistant professor at the University of North Carolina at Chapel Hill, compared Chicago’s TIF-designated districts with non-TIF districts across three parameters—employment change (from 1990 to 2008) and business creation and building permit activity (from 1994 to 2006). “Chicago’s use of TIF has not resulted in positive net employment benefits,” he says. What’s more: “Building permit activity—which is the category that is most likely to be affected by TIF—is very close to zero and insignificant.”

Why? By Lester’s calculations, in 2011 only 42 percent of TIF expenditures in the city went to “traditional economic development”—proven job-creating stuff such as subsidies for retail development. Meanwhile, 38 percent went to public facilities (upgrades to public schools and parks) and 16 percent to infrastructure (streetscaping and lighting)—things the government would have paid for anyway.

Ameya Pawar, the 47th Ward alderman and a TIF reform advocate, confirmed that the majority of TIF spending in his ward has gone to public works, not direct economic development. Though a citywide economic development plan would be more equitable than the byzantine TIFs, he says, “the system we have took 30 years to build—it’s a long-term proposition to change it.”

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