Archive for the ‘Illinois’ Category

Cook County, IL Succeeds at Truth in Taxation!

July 11, 2014

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One year ago today, Cook County Clerk David Orr announced plans to print TIF revenue diversions on county property tax bills. We previously blogged about this effort, eagerly awaiting this TIF transparency enhancement.

Wait no longer! The Cook County Clerk’s office made good on its promise of taxpayer transparency and has issued property tax bills containing information about TIF for each individual property owner. For that we congratulate them on bringing needed sunlight to TIF in Chicago and other municipalities in Cook County.

We hope jurisdictions across the country take notice of Cook County, Illinois. Taxpayers have a right to know how their taxes get spent. With so much property tax revenue in Chicago never ending up in the city’s general revenue fund, printing TIF costs on tax bills enables citizens to make better judgements about the value of TIF projects and how their taxes get spent. We applaud such efforts.

For more Good Jobs First research on TIF revenue diversions in Chicago, see our 2014 report.

For more about how Cook County printed TIF on property tax bills, see the County Clerk’s website and watch the Youtube Video below:

New Report: Putting Municipal Pension Costs in Context: Chicago

April 4, 2014

Have secretive TIF accounts played a significant role in the underfunding of Chicago pension funds?

A new report out today, Putting Municipal Pension Costs in Context: Chicago, focuses on how Tax Increment Financing or TIF seems to be undermining the city’s budget and has been for the last decade. At a moment when politicians are talking about cutting retirement benefits for civil servants like Teachers, Firefighters, and Policemen, we think it’s useful to remind the public about what’s been dubbed Chicago’s Shadow Budget, none other than TIF.

There’s been no shortage of troubling issues surrounding TIF. We’ve blogged about them a number of times on this blog.

Nearly one out of every ten property tax dollars collected in Chicago doesn’t end up in the city’s general fund or with other taxing jurisdictions that provide public services. Instead, those revenues are siphoned off into what were once secret TIF accounts controlled almost exclusively by the Mayor.

While this report does not specifically call for the abolition of TIF in Chicago or oppose taking other measures to raise the needed revenues to pay for critical public services, we believe that as a matter of honest accounting and fair budgeting, TIF requires careful consideration.

TIF_Costs_Growth

TIF costs have grown significantly in recent years. They have for years exceeded the City’s annual pension liability. Our analysis shows that property tax diversions into TIF have exceeded pension costs in every year since 2007. For example, the city’s pension costs were about $386 million in 2012, while TIF diverted $457 million in property tax revenues in that same year.

TIF_Rev_vs_PensionCosts

When newly elected Mayor Rahm Emanuel took office, he convened a TIF review process in order to fix this so-called Shadow Budget. Although the City made TIF far more transparent as a result, the review did not make TIF any less corrosive towards Chicago’s budget. Recent new rounds of proposed subsidies for things like basketball stadiums and hotels raise serious doubts about whether TIF reform has actually materialized.

Aides to Mayor Emanuel have acknowledged that about $1.7 billion sits in TIF accounts, though $1.5 billion is obligated to various projects through 2017. But if the city is willing to consider breaking pension commitments, why should TIF spending not receive similar scrutiny?

Indeed, in California, Governor Jerry Brown didn’t rule out TIF spending to shore up budgets. Much like in Chicago, TIF in California was siphoning off an enormous amount of property tax revenue: 12 percent overall. When efforts to reform California TIFs failed, the state dissolved the authority of localities to have TIF districts and began the process of unwinding the existing debt obligations.

In the long run, local jurisdictions in California will see a 10 to 15 percent increase in property tax revenues over what they would have had with TIF still in effect.

Over the past decade or so, observers have noted that the City of Chicago had a revenue problem, but rarely have they noted the corrosive nature of TIF spending. According to a 2010 report on pensions issued under the previous Mayor of Chicago, pension funds began running into issues after the year 2000. It was during this period that the city began making what the report dubbed “inadequate contributions” to pensions. Is it a coincidence that property tax revenues lost to TIF more than doubled between 2000 and 2003 and quadrupled by 2007 to exceed half a billion dollars a year?

It’s hard to ignore the evidence that TIF impacted pensions: TIF costs grew, general fund revenues declined, and the city addressed its budget gap in part by making inadequate contributions to public pensions.

Cutting back on TIF in Chicago can and should play a role in shoring up the city’s financial situation.

Coverage of the report can be found at The Chicago Sun-Times & at PandoDaily.

Good Jobs First is a non-profit, non-partisan research center focusing on economic development accountability. It is based in Washington, DC.

Truth in Taxation, Chicago TIF style

July 12, 2013

In a landmark victory for taxpayer transparency, Cook County Clerk David Orr has announced that starting this year, the County’s property tax bills will show how much each property owner is paying into any of the 435 tax increment financing (TIF) districts now active in the County.

This is big news: Cook County is the second most populous county in the United States (after Los Angeles County) with 5.2 million residents. The County’s 435 TIF districts diverted $723 million away from schools and other public services last year. The County includes the City of Chicago which alone has diverted $5.5 billion into TIFs since 1986, and where parents and teachers are now demanding that the City declare a “TIF Surplus” and cough up some of the hundreds of millions of dollars former Mayor Daley squirreled away via secret TIF-revenue transfers.

For more about TIFs in Cook County and Chicago, we recommend taking a look at the County Clerk’s discussion on Youtube:

Striking Chicago Teachers Highlight TIF

September 14, 2012

This past week, the Chicago Teachers Union (CTU) strike has been making national headlines. But what major media outlets have overlooked is the role of tax increment financing (TIF) in worsening the fiscal situation for the Chicago Public School (CPS) system. The strikers, however, are making an issue of it. As Good Jobs First has documented time and again, TIF and other subsidies frequently divert property taxes away from school districts.

In Chicago, as well as Illinois generally which has about 1,000 active TIF Districts diverting over $1 billion each year, the problem is particularly severe: 10 percent of Chicago property tax revenues are diverted into TIF coffers. The CTU estimates that at the end of 2011, Chicago had $831 million in unallocated TIF funds sitting in bank accounts. Nearly half that money would have otherwise gone to schools. That number is also far bigger than the $700 million budget shortfall CPS had for the 2011-2012 school year which remains relatively unchanged for 2013. Instead, TIF monies are frequently utilized as subsidies for corporations.

Yesterday, thousands of teachers picketed a Hyatt hotel which had received $5.2 million in TIF subsidies chanting “give it back.” Speakers gave impassioned arguments against the use of TIF. The choice was not a coincidence: Penny Pritzker, a billionaire whose family owns the Hyatt chain, is also an appointee to the Chicago Board of Education.

Protestors contend that the TIF money used on the hotel would have been better spent on improving the education system. As one protestor commented, “I think it’s really important to bring awareness to the fact that, according to what I found out, $5.2 million has been given to developers [to build the Hyatt hotel]… That’s money that could have gone to classrooms, and computers, so many other things.”

Ultimately, all Illinoisans should also care about TIF in Chicago and elsewhere. The burden of school funding lost because of TIF property tax diversions is likely being made up for by all Illinois taxpayers.

Pritzker’s role on the board of education and Hyatt’s TIF funding are not the only reasons that labor is unhappy with Hyatt. A Unite Here campaign called Hyatt Hurts has been calling attention to what it alleges are unfair labor practices at the company and calling for a boycott.

We hope investigative journalists everywhere take notice: TIF has caused serious budgetary harm in Chicago and deserves more serious scrutiny in every school district.

PIRG Releases Report on TIF in Chicago as 3 Major Companies Return $34 million to Taxpayers

January 31, 2012

Chicago has long endured damage to its budget from Tax Increment Financing (TIF) chicanery. But with Mayor Rahm Emanuel pledging to take on TIF reform, change may be afoot. A new report released today by the Illinois Public Interest Research Group (PIRG) demands better transparency and accountability for TIF in Chicago. This includes incorporating TIF into the city’s budget process, linking spending to economic development plans instead of political patronage, requiring better outcomes, measuring outcomes, utilizing clawbacks for failure to meet benchmarks, and ending TIF districts once the economic development goal has been achieved. Much of what PIRG is asking echoes suggestions made by a panel appointed by Mayor Emanuel that studied the city’s TIF problems. Many of these recommendations have not yet been implemented.

In response to PIRG and other criticisms, Mayor Emanuel has pledged an improved transparency portal, better than the one we discussed last May, which was already a vast improvement.

And yesterday, to our surprise, recipients of major TIF subsidies have decided to return $34 million to the city. These recipients include the Chicago Mercantile Exchange (CME), CNA Group and Bank of America. CME’s subsidies were enabled by a controversial new state law. It’s not clear exactly why these recipients are choosing this particular moment in time to return subsidies, but reports indicate that shortfalls on job creation pledges and negative publicity may have played a role.

With 10 percent of Chicago’s revenues tripped up in TIF spending, it is clear that Chicago needs more transparency and accountability on TIF.

Sears, Tax Breaks, and Job Loss: Like We Said

January 5, 2012
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Credit: Made available through a creative commons license from Flickr user gardener41

For the latest evidence that unaccountable tax breaks fail to promote investment for job creation, shop at Sears—while you still can.

Gov. Pat Quinn’s signature had barely dried on the Illinois legislature’s lavish new tax-break deal to retain Sears Holding Corp.’s headquarters when the company announced store closures and layoffs. The deal, valued at up to $275 million in property and income tax breaks, was signed into law on December 16. Yet on December 27, the company announced that it would close between 100 and 120 Kmart and Sears stores.

Cynically, we note that the initial list of 80 closures does not include any Illinois stores, nor have any headquarters layoffs been announced… yet. But with Sears still losing market share, and reporting another decline in same-store sales (down 5.2% late 2011 over late 2010), how safe can Illinois jobs be?

We hate to say we told Illinois so. But as we forecast in our blog of last August: when a company is ailing and it asks for a tax break, the wisdom of the plant-closings movement tells us: tax avoidance can be one form of disinvestment, another early warning sign of job loss.

Put another way: if a company doesn’t see a future in the community or the state, why should it keep investing in the schools or roads or universities?

Indeed, inadequate reinvestment in Sears has been a major theme since hedge fund manager Eddie Lampert took control of the company. As the New York Times’ Floyd Norris pointed out in a December 29 column, between February 2005 and October 2011, Sears Holdings spent only $3.2 billion on capital expenditures (i.e., physical improvements) while taking $6.6 billion in depreciation charges (i.e., physical wearing-out).

A consumer behavior consultant with America’s Research Group told the Los Angeles Times: “They are not fixing their problems. The Sears apparel strategy is still not what the Sears customer wants. They have not spent the money to refurbish their stores to make the modern and contemporary for the under-35 shopper.”

Instead of reinvesting, Sears Holdings is reportedly soon to allow some its prize jewels, such as Kenmore appliances and Craftsman tools, to be sold by other chains such as Costco and Ace Hardware. Won’t that just further reduce traffic into Sears and Kmarts?

In lowering Sears Holdings’ credit rating, Fitch warned of “a heightened risk of restructuring over the next 24 months.”

Meanwhile, Illinois taxpayers, after giving Sears a retention package worth about $178 million in 1989 when it threatened to run away, have pledged up to $275 million more after a second runaway threat.

Fool me once, shame on you…

Chicago’s Mayor Emanuel Promises a Shake-Up of the City’s $1.2 Billion TIF Program

May 20, 2011

Yesterday, Chicago’s new mayor, Rahm Emanuel, took an important first step in improving city government by announcing reforms for Tax Increment Financing (TIF). Many have dubbed TIF Chicago’s “Shadow Budget” not just because its spending is out of control, but also because it’s been used as a political patronage piggybank. TIF has cost taxpayers $1.2 billion dollars across 159 TIF districts. Emanuel deserves high accolades for addressing this issue so quickly after taking office.

After taking the reins, the new mayor says he was shocked to learn that such a large program, about one-sixth of the official city budget, lacked basic standards like job creation and quality benchmarks. Emanuel was clear about what’s wrong with TIF and what needs to be done: “Over the years, it’s mutated,” he said, into subsidies for “downtown and high-rent areas.” Fixing TIF will require the program to “return to its roots” by targeting spending “for blighted economic communities” and ending the use of TIF “as a political instrument.”

Mayor Emanuel is taking various steps that Chicagoans should be enthusiastic about.

  • First, he vowed that TIF will no longer be used as a political bargaining chip.
  • Second, he promised that subsidies will not reward wealthy developers in Chicago’s Loop or other wealthy neighborhoods. (It’s unclear whether that proclamation also means that TIF subsidies will no longer be used to shift jobs from other parts of Illinois, as was the case in the controversial $35 million United Airlines deal.)
  • Third, he promised to focus use of TIF subsidies on creating high-quality jobs in blighted neighborhoods, which was the original intention of program.
  • Fourth, he appointed a task force to come up with ideas for improving the transparency and accountability of the program.

His announcement also came with an improved transparency website: www.cityofchicago.org/TIF. The effort is a good start. The website allows users to view and download subsidy information in a variety of ways. Users can search for and download digital spreadsheets of the data for their own analysis. It even allows users to peruse development documents signed with companies and disclosures about conflicts of interest and lobbying.

Unfortunately, the website isn’t perfect yet. For example, TIF districts and projects could be projected onto a single interactive map that allows users to delve deeper. The website lacks a section devoted to annual follow-up reporting on outcomes relating to jobs, wages, and clawbacks.

Again, congratulations Mr. Mayor. Reforming TIF will be no easy task, but Chicagoans deserve a transparent and accountable TIF program.

Shining A Light On $1.2 Billion In Chicago TIFs

March 3, 2011

A new analysis of the $1.2 billion Chicago has awarded in Tax Increment Financing (TIF) over the past 10 years has found that much of the money has been gone to large corporations and other institutions operating in thriving neighborhoods, not struggling businesses in blighted areas. These findings are not shocking: we’ve noticed the abuse of TIF around Chicago and other metro areas for years. So too have local observers like the now defunct Neighborhood Capital Budget Group and Ben Joravsky at The Chicago Reader.

The new study, conducted by journalism students at Columbia College in Chicago, analyzed hundreds of documents obtained through Freedom of Information Act requests. The students have also mapped the TIF deals—something the city has long declined to do—and posted the TIF agreements. See the map and the documents: here.

Of the 171 TIF deals provided to companies over the decade, the study found that more than half were clustered in or around Chicago’s vibrant central business district, the Loop. Chicago has 77 community areas, but few as prosperous as the Loop, whose residents (62 percent white) have a median income of $75,000. More depressed neighborhoods like Englewood (median income of $19,000, 98 percent Black), West Garfield Park ($23,000, 96 percent Black), and North Lawndale ($18,000, 94 percent Black) got only a handful of projects.

About $600 million went to private sector entities, accounting for the largest share of the $1.2 billion. These included subsidies to companies like United Airlines [Struggling Chicago finds $25 million for United Airlines] ($31 million), USG Corp. ($7 million), and NAVTEQ ($5 million). Some $100 million was used to lure companies to the city or to discourage them from leaving. In many cases, subsidies went to big box retail stores that supplanted small businesses. Target received at least $18.5 million at five locations throughout the city.

Housing developments received $340 million in subsidies, while $200 million went to non-profits, hospitals, and cultural institutions like the Chicago Symphony Orchestra. Many of these non-profits have enormous philanthropic bases. Numerous hospitals in Illinois are under scrutiny as to whether they ought to remain tax-exempt. Some housing developers used TIF money to create luxury condos. Other TIF deals have actually been documented to create blight.

Chicago has yet to implement its 2009 sunshine law and shed light on how taxpayer money is spent. The 2009 law required the city to put online searchable copies of every redevelopment agreement since 2004. Many were not posted and journalists at Columbia College had to undergo arduous Freedom of Information Act Requests to collect the information. The efforts of the students have both provided a useful analysis of the troubled TIF program as well as a valuable public data resource.

Naming Tax Credit Names

June 15, 2010

Corporate lobbyists have long blown a fog of fear, disinformation and confusion about public disclosure of corporate income tax credits.

It’s time to clear the air.

First, a definition: corporate income tax credits are dollar-for-dollar reductions in the amount of income tax a company pays to a state (or federal) government. A company can earn such credits by performing activities deemed to constitute economic development, such as making capital investments in new capacity, performing research and development, hiring new employees, and/or producing movies or commercials.

These credits are very costly; among economic development tax breaks, they are likely the fastest-growing revenue drain on state budgets over the past decade. For example, one state gives a credit of 5 percent per year for 20 years for new capital investment. That is, if a company has enough taxable income, over time, the state will pay the entire cost of a new facility in foregone corporate income taxes.

Corporate lobbyists would have us believe that letting taxpayers see which company is getting these credits, and the dollar value of the credits, would somehow violate confidentiality or poison the “business climate.”

Nothing could be further from the truth. (Of course, we also need disclosure of outcomes: were the jobs created? How well do they pay? Do they have health care?)

I offer two kinds of evidence: 1) almost every other costly economic development subsidy has been disclosed for decades; and 2) many states have been disclosing corporate income tax credits for years, and there is no evidence they suffered any “business climate” harm.

First, regarding other costly subsidies: If a company gets a property tax abatement or reduction, there’s a public record at the county tax assessor’s office. If a company gets an Industrial Revenue Bond, that’s an open record at the county development authority. If a company gets a training grant, that is visible at the Workforce Investment Board. If a company benefits from being in a Tax Increment Financing (TIF) district, copious records enter the public domain. If a company gets a discretionary or competitive grant, those files are usually very public.

So what’s the big deal about income tax credits? Remember: this is not about disclosing tax returns; this is about disclosing tax breaks.

Second, regarding states that have been disclosing corporate income tax credits (naming the company, specifying the dollar value of the credit), just take a look at this quick sampling our staff threw together in an afternoon:

Connecticut – see pages 406-407 re: urban/industrial and job creation tax credits

Florida – Qualified Target Industry Refund

Illinois – numerous tax credits and exemptions, including EDGE

Maryland – film, biotech, job creation, and research and development credits

Missouri – 20 different economic development programs, including film credits

Montana – Low Income Housing Tax Credit Program

New Jersey’s BRRAG Program

North Carolina – William S. Lee tax credits

Pennsylvania — more than 200 programs, including film and enterprise zone credits

Wisconsin — 107 programs, including film investment, film services, and dairy credits

Other states, such as Maine (since 1999) have been collecting and disclosing tax credit data, but they just haven’t put them online yet (the 21st century progresses slowly…)

The list will soon get longer. Subsidy disclosure bills are getting introduced more frequently in state legislatures, and they often call for making public the names of corporate tax-credit recipients. This year, Massachusetts enacted a law that will do so, and several other states took a step in this direction by mandating the publication of tax-expenditure budgets that show the total cost of tax credit programs.

Bottom line: the amount of company-specific tax credit data online is exploding. Anyone who claims it will violate confidentiality or hurt the business climate, well, that’s just so 20th century!

Heads up to state commerce secretaries: in the same way we have twice graded the states’ Recovery Act websites, we are coming back at you to rate how well you disclose on major subsidy programs, revisiting our State of State Disclosure report of 2007.

No calls, please; that’s all the hints you get.

Chicago Cuts Checks to Corporations, Not Schools Lacking Teachers

October 1, 2009

Chicago’s Mayor Richard M. Daley recently added insult to injury by awarding additional funds in a relocation deal for United Airlines. Daley gave another $10 million in subsidies –on top of the $25.9 million in TIF monies we previously reported– bringing the total two-year subsidy from the city of Chicago to United Airline’s parent company to $50 million. Politicians often claim that TIF and other development subsidies cannot distress budgets. If this were true, why are crucial city services being cut concurrent to lavish subsidies being given?

When tax base is diverted, other city services must be paid for either by raising new taxes or reducing existing services. Chicago Public Schools just passed a draconian budget that slashes teacher benefits. Experts point out that TIF has skimmed at least $500 million away from school tax revenues. Listen to neighborhood residents speak out against TIF diversion.

What is the result of these perennial budget issues linked to TIF diversion? This September students started school without teachers in neighborhoods with significant achievement gaps. Three weeks into the school year, students still lacked permanent teachers. At the same time, however, the city of Chicago had no qualms about giving a private interest another $10 million.


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