TIF is Perhaps Too Much of Good Thing

"I think the whole TIF thing needs to be looked at," opines manufacturing consultant Monroe Roth at Thursday's North Business & Industrial Council forum. At a Grubb & Ellis commercial real estate forecast Tuesday, Prudential Real Estate Investors vice president of acquisitions Collete English Dixon compliments the theory behind tax increment financing before adding, "it is definitely a methodology that can easily be abused to the detriment of those who pay taxes."

TIFs freeze property assessments for tax districts, such as the Chicago Public School system, for 23 years. Taxes from the increase in assessments are funneled back into the TIF, usually to pay bonds issued to finance public improvement projects or developer subsidies. The result, Roth says, is a deteriorating school system and higher property taxes, which could result in the city losing population. For the first time in four decades, Chicago actually gained population in the 2000 US census.

The Chicago Association of Neighborhood Development Organizations was an early proponent of TIFs, says group president Theodore J. Wysocki Jr., with one caveat – that the financing mechanism be used strategically. "I think we've reached the point now where TIFs are an aldermanic badge of honor to see how many TIF districts each of them can get in their ward," Wysocki says.

The city had 112 TIFs as of September – an average of more than two per ward -- but the community development commission has recommended approval of several more in recent months. Critics say the "but-for" clause in the legislation -- redevelopment would theoretically not occur but for the creation of a TIF -- is too often glossed over.

TIFs may be coming under fire – other arguments against them are the legislative mandate to help "blighted" areas is stretched beyond credibility – but some counter they remain about the only weapon in the economic development arsenal. "The TIFs tend to get used because there aren't many other tools to use," says Don Turner, president of the Chicago Federation of Labor.

Adds John McCarron, vice president of the Metropolitan Planning Council and a fellow panelist with Dixon, "Much of the improvement you've seen in Chicago during the last 10, 15 years has been with TIF financing."Even Roth isn't ready to give up on TIFs entirely, suggesting a tweaking of the funding flow to deliver skills and job training at the front end of the district's 23-year life.