2003

Neighborhood Capital Budget Group

Chicago, Illinois

Acknowledgements

This TIF Almanac was made possible by contributions from:

Bank One Foundation

Chicago Community Trust

John D. and Catherine T. MacArthur Foundation

Northern Trust Company

Wieboldt Foundation

Woods Fund of Chicago

WPWR/Channel 50 Foundation

And NCBG’s Members

The opinions and findings contained in this report do not necessarily reflect the opinions of the contributors that funded this report.

The Neighborhood Capital Budget Group would like to thank former Director of Research Chris Schwartz for his relentless pursuit of accurate and reliable information and for all of the countless hours of research and writing that he put into making this TIF almanac a reality. Without his tireless efforts, this report would not have been possible. We also thank the members of the TIF Community Task Force, under the leadership of Joe Ann Bradley of the Community Action Group of Garfield Park and Brian O’Malley of NORBIC for their dedication and work on TIF reform.

What is NCBG?

NCBG’s History: The Neighborhood Capital Budget Group, a not-for-profit citywide coalition, was formed by grassroots community organizations and neighborhood development corporations in 1988. These organizations wanted local government to:

(1)Rebuild the aging and crumbling infrastructure in Chicago’s neighborhoods,

(2)Preserve and improve the day-to-day quality of life for neighborhood residents, and

(3)Reinvest in the basic public investments and physical improvements essential to retaining and attracting business and private development.

While NCBG advocates for increased public investment in the “bricks and mortar” of neighborhoods, the organization’s vision is to bring about comprehensive and strategic community revitalization. All the bricks and mortar in the world may not make any positive difference -- unlessthose investments are part of a vision of a vibrant community that better serves its long-time residents and offers educational, housing, and economic opportunity for all its members. The NCBG organizational vision holds that communities must be empowered to plan for, participate in, and benefit from the revitalization of the City’s neighborhoods.

Increased capital investment, that is, more and better public works projects, is a means to that end. The “bricks and mortar” investment that communities seek is crucial to achieving larger economic development and quality of life goals. For example, in demanding improved school facilities and the alleviation of overcrowding, our goal is to provide a world class education for all children in the city.

Initially NCBG focused on the City’s crumbling municipal infrastructure: the poor condition of city streets, sidewalks, sewers, public buildings, etc. Transportation infrastructure, especially the deterioration of the CTA’s rail lines, soon emerged as another high priority for Chicago’s neighborhoods. Later on, as City Hall turned increasingly to “tax increment financing” (“TIF”) to spur economic development and to pay for infrastructure improvements, NCBG became heavily involved in TIF.

Today, NCBG is made up of nearly 200 community and economic development organizations throughout the City’s 50 wards, working to increase public investment in all our neighborhoods.

NCBG provides research, policy analysis and organizing assistance to groups all over the City concerned about the City’s capital spending priorities, transportation infrastructure, TIF, and the condition of our school facilities. To get the kind of public investment neighborhoods need from government, communities need to be proactive and develop their own comprehensive community plans. NCBG also assists neighborhood organizations with developing such plans for their communities.

What has NCBG accomplished?

Over the past decade, NCBG has . . .

  • Opened up the City of Chicago’s capital budget to direct citizen input, with annual public hearings and a permanent citizens’ advisory council
  • Convinced the City to commit capital dollars annually to rebuild neighborhood infrastructure

Since 1992 the City has invested over $7 billion in neighborhood improvements such as streets, sidewalks, alleys, sewers, and public facilities like our neighborhood libraries.

  • Called attention to the deterioration and overcrowding in our public school facilities, and advocated for increased investment in our schools.
  • Published a major study on these conditions, entitled Rebuilding our Schools Brick by Brick. and periodic “report cards” on the Chicago Public Schools Capital Improvement Program.
  • Provided assistance to dozens of community groups and Local School Councils to increase the capital investment being made by the Chicago Public Schools
  • Successfully organized for the renovation of the CTA Green Line, a $420 million capital investment in important neighborhood transit.
  • Helped to win a $440 million “Full-Funding Agreement” from Congress for the reconstruction of the CTA’s Douglas Branch of the Blue line..
  • Helped to create "The Campaign for Better Transit," an initiative to help organize Chicago’s transit riders to work for an improved, expanded and more reliable mass transit system.
  • Convenes and supports a citywide Community Task Force on TIF, working to reform the City’s major economic development program and make it more accountable to citizens and taxpayers.
  • Provides the public with an array of reports and analyses tracking public spending in Chicago’s neighborhoods.
  • Created the TIF Bill of Rights (see page 5) and is working to implement it through the TIF Reform Platform (see page 6).

You can find most of NCBG’s major publications and more information on our organization at

or by contacting us at:

THE NEIGHBORHOOD CAPITAL BUDGET GROUP

407 S. DEARBORN, SUITE 1360

CHICAGO, IL 60605

(312) 939-7198; (312) 939-7480 (fax)

Using This Almanac . . .

This almanac isn’t meant to be read cover-to-cover in a single sitting. Think of it as a desktop resource that you come back to again and again when you have a new question, or a new situation presents itself in your neighborhood. There is basic “nuts and bolts” information about how TIFs work, real-world data about how much money TIFs have created for redevelopment in Chicago and how the money has been spent, “how-to” guides to help you organize locally, background on key City commissions, and material on related economic development alternatives. There is introductory information if you’re just getting started, and detailed explanations you won’t get from the City if you’re already familiar with the TIF program.

Perhaps most importantly, each section of the Almanac is organized as a fact sheet for you to copy and distribute at community meetings or to your neighborhood leaders. Each fact sheet is designed to work by itself, as a “stand-alone” handout, and contains references to other key sections that might help deepen your understanding of the issues.

Never hesitate to call NCBG at 312-939-7198 if you have questions or need help in your local efforts. Good luck!

About the NCBG Community TIF Task Force . . .

Each month for more than three years, NCBG has been bringing together people from all over Chicago to share stories and strategies, ask questions, and come home with new information about the City’s TIF Program. NCBG’s TIF Community Task Force has brought together people from residential, commercial, and industrial areas of the City in an effort to build a broad-based coalition with the common goals of increasing public participation in the TIF program, encouraging affordable neighborhoods, and bringing direct benefits to existing residents and businesses. The Task Force has taken a three-pronged approach to its work:

  • Accountability: Open up the TIF process to the people who are directly affected, both in the establishment of TIF districts and the ongoing decisions about how to spend the money over their 23-year lifespans. Develop and implement models for strong community oversight panels in each TIF district. Ensure that residents and businesses get “early warning” about developments in the TIF districts.
  • Affordability: Ensure that neighborhoods remain affordable to existing residents and businesses, and that development does not displace people from the communities where they have invested their money and time. Encourage the use of TIF to develop more and better affordable housing to meet the needs of Chicago residents.
  • Direct Benefits: Ensure that everyone benefits from TIF-funded projects, not only big developers. TIF dollars should be used to create good-paying jobs for low- and moderate-income Chicago residents, as well as for effective job training programs. Wherever possible, TIF dollars should be used to make public improvements – such as basic infrastructure, school repairs and construction, and park improvements – or to encourage projects that meet the needs outlined in plans developed by the communities themselves.

The NCBG TIF Task Force meets every fourth Tuesday of the month at 6:00 p.m. at 407 S. Dearborn St. in the 14th Floor conference room. For more information, or to confirm meeting dates and times, please call 312-939-7198.

NCBG’S TIF Bill Of Rights

Preamble

Tax Increment Financing or TIF impacts us as individuals and businesses. It is a tool that the government uses to bring development to parts of our communities where it might not have occurred otherwise. TIF works by redirecting newly generated property tax revenues in designated TIF districts away from general coffers of local taxing bodies and into a TIF fund that is used to subsidize new development. By design it raises property values and changes the makeup of our neighborhood or business district.

A TIF district, once designated, lasts 23 years. The process includes designation of a TIF district, a redevelopment plan for the TIF district, and redevelopment agreements with developers and companies who promise to fulfill some aspect of the plan in exchange for benefits from the TIF fund. Appointed officials who are not directly accountable to the public make too many vital decisions in this process.

To avoid abuses of the powers contained in creating and using TIF districts, we find it necessary to establish that we, the people and businesses living and working in areas targeted for TIF, hold certain rights:

Accountability

The people of Chicago have the right to fully participate in creating and implementing community revitalization plans in which TIF may be a tool.

The people of Chicago have the right to both full and clear information about what is being planned in our communities and how tax dollars are being spent.

The people of Chicago have the right to clear and measurable reporting on public subsidies and resulting benefits on a regular basis.

Affordability

The people of Chicago have the right to create local mechanisms to ensure affordability and accessibility for existing community stakeholders.

Direct Benefits

The people of Chicago have the right to require significant job creation and retention correlated to public subsidies.

The people of Chicago have the right to a variety of local job training options, linked to job placement opportunities.

The people of Chicago have the right to determine the infrastructure and public improvements that public subsidies should enhance.

The people of Chicago have the right to expect the City to be proactive in front funding neighborhood development when the community has a comprehensive plan.

NCBG’S TIF Reform Platform

Accountability

The City of Chicago must commit to informing the public in writing within 14 days of a consultant being hired by the City to prepare a TIF eligibility study. The “public” includes all those persons listed on the interested parties registry and all property owners within the proposed eligibility study area. A public meeting must be conducted no more than 21 days after the completion of the eligibility study. The minutes of that meeting must be included in the final redevelopment plan.

Every TIF redevelopment plan must include a section on land use and land acquisition intent. A map of existing land use and proposed land use changes must be included in every redevelopment plan. If the plan for a proposed TIF district does not recommend any land use changes or land acquisition, then the plan must specifically state that intent and include a map that shows no changes to existing land use or property ownership.

Citizens need to be informed of the status of each TIF district two times a year. The City of Chicago must commit to holding hearings for every TIF in each planning district two times a year with the developer, consultants, city departments and residents, business owners and local community organizations.

The City of Chicago must commit to getting taxpayers a high return on their investment. The City of Chicago must commit to formulating “claw back” provisions within every redevelopment agreement requiring developers and companies to pay the entire public subsidy with interest back if they do not fulfill their contract.

The Department of Planning and Development must set up a database that reports the wages, zip codes of new employees, location, and number of all jobs created with TIF funds. All entities receiving TIF assistance must provide the City with this information on a quarterly basis each year or be fined for failing to comply with reporting requirements.

Affordability

The City of Chicago must commit to an affordable housing set-aside of no less than 30% of every residential TIF redevelopment agreement, or a developer must set aside 10% of the total cost of the residential development into a low-income housing trust fund.

The City of Chicago should define affordable as those housing units that serve those with an area median family income of 50% or below when negotiating residential redevelopment agreements with developers and between 50 and 80% of family median income for non-rental housing.

Preference for development by local community development corporations or organizations who serve existing community residents.

Direct Benefits

The City of Chicago must commit to extending the living wage ordinance to all TIF projects.

The City of Chicago must commit to spending at least 10 percent of TIF funds on job training in very low-income and industrial TIFs. The primary consideration in evaluating the level of public subsidy should be the amount of increased employment opportunities for disadvantaged Chicago residents.

The City must commit to issuing a Request for Proposal to release job-training funds from TIF revenues to capable and competent non-profit job training agencies to provide skilled job training and placement in low income and industrial TIFs.

The City of Chicago must commit to disclosing the list of proposed public improvements to be paid for with TIF money and invite comment from those on the Interested Party Registry.

The City of Chicago must commit to front funding the Neighborhood Investment Program and the Small Business Investment Fund in every low- income and industrial TIF with a minimum investment of $5 million dollars per TIF. The City must issue a RFP for each TIF so that local non-profits can participate in the administration of the NIP and SBIF.

HOW TIFs WORK

What is a TIF District?

Page 8

Glossary of TIF Terms

Page 12

How Does the Property Tax System Work in Cook County

Page 13

The State TIF Reform Law

Page 19

What Areas Are Eligible for TIFs?

Page 23

Land Acquisition & Eminent Domain

Page 26

What is a TIF?

“TIF” stands for “Tax Increment Financing,” a special tool that the City of Chicago can use to generate money for economic development in a specific geographic area. TIF allows the City to re-invest all new property tax dollars in the neighborhood from which they came for a 23-year period. These “new” revenues – also called “increment” – arise if new development takes place in the TIF district, or if the value of existing properties rises, resulting in higher tax bills. These funds can be spent on public works projects or given as subsidies to encourage private development. But TIF also makes it much easier for the City to acquire private property and demolish buildings to make way for new construction.

With consistent community participation, TIF can be a tool for implementing a community-based revitalization plan through encouraging affordable housing development, improving parks and schools, fixing basic infrastructure, putting vacant land to productive use, creating good-paying jobs, and meeting other local needs.

Without strong and sustained public participation, however, TIFs can give the City power to change the basic character of a neighborhood against the wishes of those who live and work there, accelerate the pace of gentrification, and drive up property values to the point that existing residents and businesses can’t afford to stay in the community. In short, TIF is a mixed bag, and its success or failure depends on how active the community is in their planning and implementation.