While Mayor Daley has been asking for more of voters’ money than ever before, the city has more than a billion dollars in its bank that it hasn’t figured out how to spend.
The money is in tax increment financing funds that have racked up $1.28 billion in unspent money, according to an analysis of annual TIF reports released by the city this month.
Under the state law that governs TIFs, the city is supposed to return surplus money at the end of the year to be redistributed to various taxing bodies, such as the school district or the city’s general operating fund.
Although TIFs in other jurisdictions have returned money as proscribed, none of Chicago’s 161 TIF districts have ever sent any cash back.
Chicago avoids returning the money by declaring that all unspent cash is earmarked for future development projects.
“We are spending this money,” said Peter Scales, spokesman for the Department of Planning and Development. “It’s all earmarked for projects down the line.”
However, the city’s TIF revenues seem to be growing at a far greater pace than expenditures. Tax increment financing balances, which stood at $955 million in 2006, were up 34 percent since last year, leading some people to think the city is taking in more money than it knows what to do with.
“We’re told there’s no money, so they’ve got to raise your taxes,” said Jay Stewart, head of the Better Government Association. “But there’s a lot of money there.”
Some worry this money is open to abuse as there is little transparency in Chicago’s TIF program, plus, the money is largely controlled by the mayor.
“This is basically a big sugar bowl for the mayor to dip into for projects he thinks are good for the city of Chicago,” said Jim Nowlan, research director for the Center for Tax and Budget Accountability.
Nowlan and others pointed to the Olympics, worrying that if Chicago lands the games, Daley will use excess TIF money to pay for construction. Many critics also point out how unusual it is for a government to build up such a large surplus fund. Chicago’s budget is about $6 billion-the unspent TIF money is a fifth of the total.
“I think inordinate balances of money are considered inappropriate government finance management,” said Nowlan. “If you have a balance, you should return it to the taxpayers.”
However, some analysts argue it might be wise fiscal policy for the city to save up money for large capital projects rather than borrow or adopt a “pay-as-you-go” approach.
“They might be saving it up for a developer until it does the development, or they might want to bank that revenue for a project that is larger in expense,” said Norm Sims, the executive director of the Springfield-Sangamon County Regional Planning Commission.
Chicago’s TIFs have swelled so rapidly because money automatically gets added to the fund each year, regardless of whether there are specific plans to spend it.
Many municipalities in Cook County treat TIFs differently than Chicago does. Some village officials say they don’t approve a TIF until they put together a budget on exactly how the money will be spent. When the plan is finished, the TIF is dissolved and excess money goes back into the budget.
“Before we even start a TIF, we know how we’re going to spend the money,” said Chester Stranczek, a former mayor of Crestwood, a Southwest Side suburb that gave $4 million in excess TIF money to the village’s schools.
Chicago has never dissolved a TIF early. However, this year the mayor called for the end of three poorly-performing TIFs. Since 2001, 25 municipalities in the county have returned unspent money, according to the Cook County Treasurer’s office.
Mark Franz, village manager in Homewood, also on the Southwest Side, noted his town has given back nearly $40 million in unspent TIF money over the past 10 years.
“We’re obligated to do that,” he said. “I think the statute requires [the money] to go back to the taxing bodies.”
The 411 on TIF
Tax increment financing has become a hot issue in Chicago, drawing high-profile media and government critics. Detractors argue for more transparency and stress that the money ends up in a huge slush fund for the mayor to play with.
TIFs work by freezing the amount of money a district pays into city services for 23 years. As property values go up, the extra property tax money is used to pay for projects in the community. In theory, this system is supposed to be used in blighted areas to spur development. The reality is a little different, critics note.
TIFs now cover 30 percent of the land area in Chicago, and the city council continues to add new ones every year, making it difficult to keep track of all of them. The city provides some TIF resources, but their maps are often featureless and the information vague, creating more confusion than clarity.
Critics also point out that the tax increment financing system lacks transparency, since there are few details provided about what happens to the money in each TIF district. One member of the Cook County Board became frustrated with the way government administers TIFs.
Commissioner Mike Quigley’s staff has been working on a list of all TIF expenditures greater than $5,000, but even these figures lack specifics, since the city doesn’t have to give detailed information about what TIF money is being spent on.
For maps of TIF districts in specific communities in Cook County, visit the city clerk’s website at www.cookctyclerk.com/sub/TIF_maps.asp.