Pritzker signs tax law deeming some of Chicago’s most valuable property ‘blighted’

Chicago leaders have been unable to finish developing valuable land after 23 years and $331 million in taxes, but convinced state leaders more time and money were needed.

Chicago couldn’t finish redeveloping some of its most valuable real estate, just blocks from the Magnificent Mile, after devoting 23 years of property taxes toward the effort, but city and state leaders believe another 13 years of diverting $36 million a year just might do it.

Hidden away inside the 23 pages of Senate Bill 2052 is an extension for the Near North tax increment financing district until 2033. The district so far captured $331 million in property tax increases from other taxing districts, mainly Chicago Public Schools, and put the money towards economic development of the district.

The district was formerly the city’s notorious Cabrini-Green public housing development, sitting on some of Chicago’s most valuable land just blocks from the Magnificent Mile and a few ‘L’ stops from the Loop. The area’s real estate is quickly becoming highly lucrative, with new commercial and residential development.

Gov. J.B. Pritzker signed the legislation June 26, deeming the area blighted and unsafe, after the bill was passed by the Illinois General Assembly on May 23 with little fanfare.

Chicago Mayor Lori Lightfoot lobbied state lawmakers for the extension, which city leaders said was needed to continue to create subsidized housing. Her administration blamed federal regulations for the need to extend the district, saying a federal court order requires the redevelopment of the property for low-income housing.

Despite the focus on funding for housing development, increments collected in the district have been spent on other things, including projects at high schools and parks in the district.

Of the $331 million collected in the TIF district, almost $113 million remained unspent at the end of 2018, according to research by Crain’s.

Last year, the TIF district collected $35.7 million in property taxes. State law required the money to go to specific projects in the district and not to other city functions.

TIF districts throughout Chicago are a major barrier to the allocation of funds to other units of local government. TIF districts located in affluent neighborhoods captured nearly half of the $660 million Chicago collected in TIF revenue in 2017. More than $650 million – nearly one-third – of property tax revenue generated in Chicago goes to the city’s 143 TIF districts.

While they are supposed to be about developing blighted economic areas, TIF districts hinder local governments more than they function as a tool for economic success. While Chicago Public Schools become more financially strained, their ability to collect funds from property taxes is blocked.

Illinois has over 1,300 TIF districts throughout the state. The property taxes municipal governments capture by using them lead other government units, mainly schools, to replace the captured dollars by driving up tax levies.

TIF districts have a solid history of increasing property taxes but a poor history as economic development tools. They target large retailers at the cost of the established mom and pop businesses. A study of Chicago’s TIF districts echoed other research, finding, “Overall, TIF failed to produce the promise of jobs, business development or real estate activity at the neighborhood level beyond what would have occurred without TIF.”

It’s time for Illinois to retire a tool than can’t get the job done after 23 years, and to quit believing TIF will work if only another 13 years is invested.