The Better Government Association and Crain’s last week dropped a major investigation by John Chase and Danny Ecker on how $55 million in tax-increment financing—that was in theory intended for the South Loop Marriott Marquis (itself a controversial decision)—was instead passed through, almost instantly, to renovations at Navy Pier.
Why is it a big deal? After all, it’s essentially moving money from one Metropolitan Pier and Exposition Authority-controlled property, the hotel, to another, the Pier itself, from one economically healthy neighborhood to another.
Chase and Ecker get deep into that answer, but the short of it is, it’s not how TIFs are supposed to work. Whether that part of the South Loop should still be a TIF district or not, Navy Pier decidedly isn’t. One of the ongoing complaints about tax-finance increment districts is that they’re a “slush fund,” a phrase the Reader’s Ben Joravsky has been using for years. But the money is limited in how far it can slush—it can be “ported” from one district an adjoining district, but it has to stay in a TIF district. What’s new about Chase and Ecker’s investigation is that the TIF money got transferred from inside a TIF district to outside one—through the auspices of the MPEA, sometimes known as McPier.
The investigation also echoes another ongoing criticism of TIFs: paradoxically, their inflexibility. Because the money can’t move out of TIF districts or adjoining ones, it has a tendency to pool in them, particularly in wealthier areas. So money that might not be necessary for economic development in one neighborhood (oh, let’s say, the South Loop) might be unavailable for a place that needs it to finish an important project (let’s say… Navy Pier).
One of the defenses of TIFs is that the money TIF districts collect is spent on the same stuff it would be spent on anyway, from economic development projects to streetscape improvement to schools to parks to transit. And that’s true; TIF money is used for all of those things, which is one of the reasons why a TIF “surplus” is so difficult to calculate. But even if TIF funds are money the city would spend otherwise, the policy does shape where that money is spent.
The investigation serves as a good example of this as well. Last year, the Tribune’s Jared S. Hopkins and Heather Gillers reported on the status of the Marriott and its related projects, when the $55 million was reportedly going to the hotel. Note in particular the second paragraph:
To cover the cost of the new hotel, McPier not only used up the rest of the $450 million in borrowing granted by the state, but it also went even deeper into debt. Last year the agency took out a $250 million construction loan backed by revenues from the new Marriott.
Emanuel provided $55 million in revenues from three nearby tax increment financing districts. These funds are intended for neighborhood-specific economic development initiatives such as job training or low-income housing, but were sitting unused. About $14 million of it would have gone to the cash-strapped Chicago Public Schools if it was still unspent when one of the TIF agreements expired in 2014.
This in turn reminded me of an old Joravsky article about when the enormous Central Loop TIF expired in 2008. With hundreds of millions of dollars collected in it by 2007, Joravsky writes, “between the end of 2007 and the end of 2008 the Daley administration managed to spend more in the Central Loop than has ever been raised—much less spent—in TIF districts in truly poor and blighted Englewood, Roseland, and North Lawndale.” But you can’t port money from a TIF downtown to a TIF on the West or South Sides.
The investigation also dropped a day after the most recent TIF report from outgoing Cook County Clerk David Orr. The headline: TIFs brought in more money than ever in 2016—$561 million, a 22 percent increase over last year and representing about 10 percent of total property tax collections—just barely breaking the prior high set in pre-Recession 2007, even though the number of TIF districts has declined since 2010. The increase led Orr to repeat his ideas for TIF reform, which he’s been pushing for years.
This new investigation is a fascinating turn in the long TIF saga. And while it’s a new twist, it serves to highlight decades-old issues with the program, from where the money goes to where it can’t go.
4 days ago