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Tax Increment Financing

Case study: The Central Loop TIF District

Every week, Tax Dollars and Sense will offer a case study to analyze the problems with TIF. This series will start with the most famous TIF district– the Central Loop.

The Central Loop TIF District was created in 1984 at the request of Mayor Harold Washington, who was worried that the shoppers were developing negative impressions of the downtown business district, threatening the economic vitality of the central city. As initially designed the district included a block of downtown land–known as “Block 37,” and bounded by Washington, State, Randolph, and Dearborn Streets– that the city intended to redevelop to bring in new businesses.

In 1997, with redevelopment of Block 37 still incomplete, Mayor Daley requested, and the City Council approved, an expansion of the district to include more of the northern Loop area. As property values in the district rose, the Central Loop TIF account took in larger sums year after year– to a point where it was bringing in over $100 million a year, close to 20 percent of the city’s total annual TIF revenue.

With the district due to expire in 2008, which would trigger a return of the annual revenues to the taxing bodies (city, schools, parks, etc), Mayor Daley lobbied the state legislature for a 12-year extension of the district’s life. Faced with opposition from the Governor’s office, Mayor Daley eventually consented to let the district expire.

The district’s expiration promised to return a large amount of money to the overlapping tax districts that had lost revenue from the Central Loop. Schools, parks, and the county, among others, stood to receive their shares of the $358 million the district had in 2008– less, of course, whatever funds were spent during the remainder of 2008. At the beginning of the year, about $100 million of the district’s remaining money was already allocated, leaving close to $250 million to potentially return to other local government bodies.

At the end of the year, however, none of that accumulated revenue reached the schools and other potential recipients. Over the course of 2008, the Daley administration spent not only all of the remaining money in the Central Loop District’s account, but also close to $3 million from neighboring districts, in a final burst of activity. Money went to politically connected developers and allies of the Daley administration. In total, more than 30 percent of the money the Central Loop district raised in its 24-year lifetime went out the door in the final 12 months.

Chicago’s TIF program has several problems, often linked with one another. TIF is too widely used, insufficiently transparent, insufficiently democratic, and lacking mechanisms to hold its beneficiaries accountable. By correcting these flaws, Chicago can return TIF to its original purpose– providing needed development funds in narrowly targeted circumstances.

To read more about the Central Loop TIF District, go here and here.

 

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About Celeste Meiffren

Celeste Meiffren is Illinois PIRG's Field Director. You can contact her at celeste@illinoispirg.org

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