Archive for the ‘Tax Increment Financing’ Category

Kansas City Missouri Weighs Proposal to Cap Property Tax-Based Subsidies

October 14, 2014

Cerner's Subsidized Campus

The Kansas City, Missouri city council will take up a familiar issue in the coming weeks:  How much revenue should be devoted to economic development endeavors?  KCMO Mayor Sly James has proposed a limit on the amount of property tax available to subsidize development in the city.  His proposal, under consideration but not yet approved by the council, would cap the amount of property tax available for use as a subsidy at 50 percent of the total property value for any given project.

Property tax abatements and tax increment financing are commonly employed subsidies in the Kansas City area.  The Tax Increment Financing Commission and the Planned Industrial Expansion Authority both retain the power to approve subsidies that capture up to 100 percent of the total property tax value of a project.  Other taxing jurisdictions that rely on property taxes to fund public services – school districts, counties, and fire districts are shorted revenue by these diversions.

If approved, Mayor James’ proposal would cap these subsidies by prohibiting the KCMO city council from approving any deals made by the economic development entities in which more than 50 percent of the property tax is diverted from public coffers.  The Mayor’s reform proposal comes just a year after the City Council approved one of the largest tax increment financing deals in history for Cerner Corp., which stands to receive a $1.6 billion subsidy for the expansion of its corporate campus in South Kansas City.

Wasteful, inequitable subsidy awards are a predictable result when tax revenues are spent by special economic development authorities before even making it to state and local general funds.  Mayor James’ proposed cap is a good first step to ensure that at least some of the public’s money is reserved for public purposes.

 

Cook County, IL Succeeds at Truth in Taxation!

July 11, 2014

Screen Shot 2014-07-11 at 3.07.30 PM

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:

Report: Sprawling Job Piracy among Cities and Suburbs Can Be Ended

July 10, 2014

Denver Illustration191px

Washington, DC – The most common form of job piracy-among neighboring localities in the same metro area-can be ended, as agreements in the Denver and Dayton metro areas have proved for decades. The agreements prohibit active recruitment within the metro area, and they require communication and transparency between affected development officials if a company signals it might move.

Those are the main conclusions of a new study released today by Good Jobs First. “Ending Job Piracy, Building Regional Prosperity,” is online at www.goodjobsfirst.org.

The study finds that even regions like the Twin Cities, with revenue-sharing systems intended to deter job piracy, have rampant job piracy because they lack the procedural safeguards Denver and Dayton have. Multi-state metro areas like Kansas City suffer the problem on steroids because state subsidies fuel the problem.

Career economic development professional staff-not elected officials-are best suited to institute anti-piracy systems, although politicians and the public generally should be educated about the value of such agreements. Information-sharing about companies considering relocation is also key. And states need to amend incentive codes to stop requiring local subsidies to match state awards, to deny state monies for intra-state relocations, and to deny eligibility for such relocations to locally administered tax increment financing (TIF) districts. These changes will deter job piracy and promote regionalism, the study concludes.

“The anti-piracy agreements we describe focus on economic development professionals communicating openly with each other in a transparent system,” said Leigh McIlvaine, GJF research analyst and lead author of the study. “When local officials cooperate for the benefit of the metro area, they can better focus on attracting investment and jobs that are truly new.”

“We know from previous studies that intra-regional job piracy fuels job sprawl, harming older areas, communities of color and transit-dependent workers,” said GJF executive director Greg LeRoy. “By favoring retention, anti-piracy agreements help stabilize employment in areas that need help the most, and areas that provide more commuters the choice of transit.”

Good Jobs First is a non-partisan, non-profit group promoting accountable development and smart growth for working families. Founded in 1998, it is based in Washington, DC.

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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:

New Jersey’s Revel Casino May Fold

December 7, 2012

Revel CasinoNew Jersey’s embattled Revel Casino received more bad news this week.   State Senate President Stephen Sweeney has called on the Division of Gaming Enforcement to investigate the Casino’s “precarious financial position.”  Despite the fact that it has been operating at a loss in 2012, Revel management has claimed that its inability to make good on its construction debts and city property tax bill is a result of Hurricane Sandy.  Predictions that the casino will fold are growing louder.

The controversial project was awarded a $261 million tax subsidy by the state in 2011 to assist its investors in leveraging additional financing to complete its stalled construction.  While this recent news bodes poorly for investors and the state’s Economic Development Authority, it may be a relief for existing casinos in the region that are forced to compete with massively subsidized new development.

Calling All Citizen Journalists – Let’s Investigate and Expose TIFs!

October 23, 2012

GUEST POST BY TOM TRESSER

I’m looking for citizen journalists to help investigate and expose Tax Increment Finance (TIF) district abuse in Chicago and Cook County–and then across Illinois. You probably know that TIFs are an often abused mechanism for funneling property taxes to special projects–ostensibly to fight “blight” and put development in under-served areas. In Chicago companies such as Home Depot, United Airlines, the Chicago Mercantile Exchange, Coca-Cola, UPS, Jewel-Osco, Target and Willis Insurance (who bough the Sears Tower) hav eall received tens of millions of dollars of property tax gifts via Chicago’s poorly monitored TIF program. So much for blight and the under-served getting development help!

I’m working on a new social venture enterprise, The CivicLab, to be a place for ongoing civic investigation and innovation. Our first effort is the TIF Report which is looking at the impacts of TIFs on a ward-by-ward basis in Chicago. We are developing data scrapping and visualization tools to bring the TIF story to life here. We are looking for writers, coders, web developers, app developers and graphic artists to help with this work.

This is a rough draft of the poster-size graphic our team is working on to illustrate what TIFs are and how much property tax the 12 TIFs that cover the 27th Ward on Chicago’s Near North side have diverted from local government over the past nine years. The idea is to publish this information on an easy-to-navigate web site AND distribute several thousand of these graphic posters through out the ward and meet with community groups to walk them through the information.

I came to the TIF work via my efforts to derail Chicago’s 2016 Olympic bid in 2009. As a co-organizer for No Games Chicago I was part of a group of all-volunteer concerned citizens that thoroughly debunked the hype surrounding Mayor Daley’s pet project that consumed the city for two years and which raised $90 million for marketing and expenses.

Part of the frame for pushing the bid was that the city was broke, but we sorted through local finances and came across a pot containing $1.4 billion in property taxes! These funds were found in the combined bank accounts of the city’s then 160 Tax Increment Finance districts. We had to get the separate reports of these districts and open them up, one at a time, and total the “Fund Balance” figures for each district.

No one had done that. No one (outside of City Hall) knew that these bank accounts held so much money. This was especially galling since the city was closed for three furlough days in 2009, public health clinics were closed, public schools were closed and the public transit system was placed on a budgetary “doomsday watch” twice.

We realized that the city was lying about its financial situation and making it impossible to maintain and grow essential public services – and, instead, were showering hundreds of millions of public dollars on private developers and well-known and well-off corporations. We started to really look into TIFs and other corporate give-aways.

TIFs have been around in Chicago since 1986 but they really started to take off in the early-mid-1990’s – some would say co-incidental to the rise of pin-stripe patronage in Chicago. TIFs and local government

Finance used to be covered by Jackie Leavey and the Neighborhood Capital Budget Group, but they are out of business. When 5th District Congressman Mike Quigley was a Cook County Commissioner, he was deeply involved in TIF reform efforts. The two top experts in Chicago now would have to be political reporter Ben Joravsky (see his work at http://www.chicagoreader.com/chicago/the-chicago-reader-tif-archive/Content?oid=1180567) and Prof. Rachel Weber of the University of Illinois at Chicago (Prof. Weber is on the CivicLab Advisory Council).

TIFs are coming out of the shadows and a number of civic players are angling to end them, use them or re-direct them. The Chicago Teachers Union foregrounded TIFs in their recent strike communications and pointed out that the city couldn’t be THAT strapped for cash if a TIF in the Hyde Park community was poised to shower $5.2 million on the construction of a Hyatt Hotel on property owned by the University of Chicago. Sweet Home Chicago is a coalition of social service groups seeking TIF funds for affordable housing initiatives. And the RAISE Your Hand Coalition is a city-wide group of parents of public school parents who also want money in the TIF accounts to go the Board of Education.

We see this as a national effort because TIFs are in every state but two and are subject to widespread abuse and lack of accountability. If you are interested in joining this combination of old school investigation, new school data visualization, and community organizing, please contact Tom Tresser at tom@tresser.com or 312-804-3230.

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.

Kentucky Approved Massive TIF

July 9, 2012

Recently, the Kentucky Economic Development Finance Authority approved $709 million in tax increment financing, or TIF, for the University of Louisville Research Park.  It appears to be the largest commitment of public money through TIF ever in the United States.

This deal is different than many TIF giveaways, since the University of Louisville is a state institution not a private company, and the TIF money will be used for public infrastructure development. Nevertheless, the value of the TIF is significant.

The Research Park will cost more than $1.1 billion and will cover 1.3 square miles. Nine buildings will be dedicated to research and five to commercial activities, including a hotel. About 30 percent of the $1.1 billion investment will be privately funded and will cover the commercial development.  The $709 million TIF will pay for research buildings and other research support infrastructure.

The Research Park was approved as a “Signature Project” under a Kentucky TIF law which allows state TIF participation only in public projects. For 30 years, up to 80 percent of state and local tax increment at the site will go to the University, not to the State or the locality. Most TIF districts allow diverting property taxes, but because in Kentucky the State can also participate in TIF, the University might retain other taxes, including individual and corporate income taxes, limited liability entity taxes and sales taxes. The University can activate the TIF only after it invests $200 million in the project.

There is no ranking of the largest TIF districts in the country, but taking into consideration that other large TIFs never materialized (like the $408 million SunCal TIF in New Mexico), Kentucky might have just set a record for the most expensive TIF.

Abatements and TIF: Worse Than Ever for Schools

June 22, 2012

A study just released by the Census Bureau helps explain why property tax abatements and TIF are growing issues for people who care about public education.

For the first time in 16 years, it reports, local funding (65 percent of which comes from property taxes) provided the greatest share of school funding. That reverses a long-term trend in which state funding has become a larger share of the pie (with federal support accounting for only a small share).

But with states balancing their budgets in part by slashing aid to school boards and other local government bodies, local revenue matters more than ever.

That’s why costly long-term property tax abatements, routinely granted to large companies in the name of economic development, hurt schools more than ever. The same can be said for tax increment financing (TIF) districts, which can divert huge sums of property taxes (and sometimes others) for decades.

And that is bad news for real economic development that benefits all employers currently in a community. Schools also matter a lot for expansion and attraction. Because when an employer considers relocating to an area (and moving key personnel), the first thing those key employees want to know is: how good are the schools?  And the HR director wants to know: we will be able to hire well-educated new-hires? And they will also ask: has school quality been supporting strong home values?

Now more than ever, protecting the local property tax base from costly and unfair abatements and TIF matters for long-term economic development and a sound business climate.

See also Stateline’s coverage here.


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