Progress Illinois

With his public opinion at an all-time low and questions circling about his "creative" city financing, Chicago Mayor Richard Daley is making the media rounds -- sitting down with both WLS' Bill Cameron and WBEZ's Eight Forty-Eight in recent days. Not surprisingly, Daley is trying to blunt criticism that his shadowy tax increment financing (TIF) system has become a major drag on the city's finances, contributing to this year's historic $520 million shortfall. Instead of coming clean on the public funds that he's skimmed off the tax rolls, Daley is making more bogus claims to divert attention from his "glorified slush fund." Here's some excerpts from his conversation with WBEZ's Allison Cuddy, along with our responses:

DALEY: Most TIF funds don't generate any money. Most TIF funds are used for schools, parks, libraries, ex-offender programs, job training, economic development to keep jobs here. And I'll go over each TIF to show you that.

CUDDY: But you generate about a half-a billion in TIF funds per year.

DALEY: Not quite. No, I don't think so.

CUDDY: And you have about a billion in cash.

DALEY: No I don't think so. I don't think it's that high. Most of it's pledged already for a school, a park, a library. Most of it's pledged for economic development in depressed areas to bring back jobs or to keep jobs there.

The mayor doesn't "think" that his TIF network siphons off around a half-million dollars per year?  In 2008 alone, the TIF system siphoned $552 million off the tax rolls, based on annual reports signed by Daley himself. Cook County Clerk David Orr also tracks the numbers and reports that $555 million was diverted in 2007.

And what about the surplus Cuddy cites?

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Is Northwest Side Ald. Tom Allen (38th Ward) emerging as the Chicago City Council's leading tax increment financing (TIF) watchdog? Since Mayor Daley began to detail just how bad the city's finances have become, Allen has been one of the most vocal critics of the mayor's decision not to crack open his $1 billion "piggy bank" to ease the financial crisis. The Sun-Times' Fran Spielman caught his latest remarks during a budget hearing yesterday:

It was opening day of City Council budget hearings, and Chicago aldermen were loaded for bear [...]

They railed about the mayor’s plan to spend all but $730 million of the combined, $3 billion in Chicago Skyway and parking meter proceeds while allowing tax-increment-financing (TIF) districts to siphon $540 million-a-year away from the city’s property tax base.

“We should re-name it the ‘Over-tax fund’ — OTF. How can we with a straight face tell the citizens of Chicago that, ‘We have $1.1 billion of your money stuffed under our mattress, but don’t worry. We’re gonna give you $35 million in [property tax] relief?’ ’’ said Ald. Tom Allen (38th).

City officials have tried to quash the suggestion; for instance, CBS 2 reported their response this week that TIF funds are off limits and can't be tapped for general operating expenses. Perhaps if more local reporters understood how TIF districts operate, they wouldn't be so quick to take the bait.

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Last week, we documented how the Reader's stellar investigation into Mayor Daley's $1 billion "shadow budget" had reinvigorated the public debate around tax increment financing (TIF) -- just in time for the city's budget talks with aldermen.  Over the weekend, FOX Chicago Sunday's Dane Placko picked up the ball, saying that "every Chicago taxpayer should read" the latest article by Ben Joravsky and Mick Dumke. With the city's financial problems coming to a head, Placko told viewers, "Imagine how this budget would look if we weren't dealing with this huge TIF problem." Considering that TIF siphoned $552 million off the tax rolls last year alone the possibilities are indeed vast.  He then touched on an issue that we've written about extensively, noting that "a lot of the money is going to corporations to remodel buildings and such." Watch it:

PLACKO: In this week's article, the Reader outlines how the city maintains what is essentially a second budget, which it refuses to release. Even aldermen only get to see TIF information for their own wards. Not the big picture. And this is significant because the mayor controls a pot of TIF money that has grown to $1 billion, one-sixth the size of the entire budget. With so much money going to TIF, property taxes in non-TIF district have to go up to cover the money that's not going to the general revenue fund. Imagine how this budget would look if we weren't dealing with this huge TIF problem -- and a lot of the money going to corporations to remodel buildings and such.

"People have been getting upset about TIF for years," co-host Jack Conaty added, "I think it's going to peak here shortly."

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During Mayor Daley's budget address yesterday, we listened closely to see if he would make any mention of Chicago's other budget: the $1 billion in taxpayer dollars currently sitting in off-the-books tax increment financing (TIF) accounts. To no one's surprise, the mayor glossed over how this mayoral "piggy bank" -- which last year siphoned off $552 million from local taxing bodies like the schools and parks -- factored into his long-term thinking about the city's finances. That's because the mayor already has his own quiet plans for handing out the public funds, according to documents (PDF) obtained by the Reader's Ben Joravsky and Mick Dumke. They explain the significance in their new, must-read cover story:

[T]he money's supposed to be used to subsidize economic development in depressed communities that would otherwise receive no investment. But according to aldermen, and as the TIF documents we obtained show, the program is used to help clout-heavy developers and corporations, pay for basic infrastructure and services without the public oversight given the official budget, and strengthen the political position of the mayor. [...]

By moving more necessary expenditures into the secret budget that he ultimately controls, the mayor also wields even more power over every public entity, from the City Council to the public schools to the Park District. At various times at least half a dozen aldermen have told us that mayoral aides pressure them on key votes—such as the ordinances for funding the Olympics or moving the Children's Museum to Grant Park—by either promising to give their wards more TIF dollars or threatening to take TIF dollars away.

Bingo. While we have no way of tracking which TIF projects successfully deliver an economic boost and which don't, we do know this: The TIF system allows Mayor Daley to curry favor with Chicago's corporate elite while keeping the City Council in lock-step with his agenda.

In recent months, we've repeatedly highlighted how tens of millions of dollars from the downtown TIF accounts are regularly used to subsidize the renovations of swanky new corporate offices in the Loop.  It's infuriating to watch these giveaways (United Airlines secured $50 million from the city in just the past two years) at a time when Chicago faces a $520 million budget shortfall.  During an appearance on WFLD's Good Day Chicago this morning, the Better Government Association's Andy Shaw used our favored term for this ongoing practice: "corporate welfare." "We are subsidizing wealthy developers and all kinds of people who are friends and cronies of the administration when our taxes are sky-high," he said, holding up a copy of Joravsky and Dumke's article. "And this is wrong because we need transparency here." Watch it:

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As Mayor Daley unveiled his latest budget today, the big news surrounded his proposal to pull $370 million from the reserve fund created by Chicago's parking meter lease to help balance next year's $6.14 billion budget.  But as we listened to him address the City Council this morning, we wondered if he'd make mention of the city's other major reserve, the $1.4 billion that's squirreled away in off-the-books tax increment financing (TIF) accounts. After all, wouldn't this be the perfect opportunity for the mayor to make the case to skeptics -- Tribune columnists David Greising this week called the corporate TIF giveaways "a racket" -- that his economic development strategy is actually paying off?

Not surprisingly, Daley didn't deliver.

While he disclosed that $8 million in TIF funds will flow back into the general fund after two districts are retired, the mayor didn't make a single mention of how he plans to leverage the TIF system at large.  Listening to his speech, you'd never know that the TIF network is the single largest tool that the city has at its disposal to balance the budget and jumpstart the local economy.

So why the silence?

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Yesterday on WBEZ's Eight Forty-Eight, Tribune business columnist David Griesing came on to discuss a timely issue: the incentives used by the City of Chicago to lure large corporations to downtown office buildings.  This is a topic we've written about regularly over the past year, as we've watched MillerCoors, Willis Holdings, United Airlines, and numerous other large companies receive hefty taxpayer handouts from Mayor Daley in return from moving their respective headquarters or operations centers to the Loop.  At a time when the city is deep in the red and considering painful cuts to services, the ongoing corporate welfare is hard to swallow.

At one point in the WBEZ segment, host Richard Steele asked Griesing whether the hundreds of millions we've forked over to these corporations "is worth it at the end of the day."  Griesing's answer: "Well it depends on who you're asking."  (Read his full response at the end of the post.)  But what Steele should have actually asked is this: "How do we know if it's worth it?"

Indeed, when the ink dries on the each of these deals, the debate in the press inevitably surrounds the cost-per-job estimates and the various long-term revenue projections stemming from the agreement. But what's missing is any method for examining the previous contracts. No one digs into the earlier relocations to see whether they fulfilled expectations and were ultimately worth the public investment. Instead, we're greeted with a perpetual refrain: "Trust us." "We know what we're doing." "Trust us."   

In the context of the United deal earlier this month, the Reader's Mick Dumke hit the nail on the head:

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With an Olympic development bonanza now out of the picture, there's been plenty of speculation over Mayor Daley's next move for boosting the city's sagging economy. Credit remains tight and the housing market is still  deeply distressed. But there are tools sitting in the Daley woodshed that could help ameliorate this problem; As we've pointed out before, the mayor is sitting on a $1.3 billion tax increment financing (TIF) surplus that could go a long way toward rejuvenating crumbling neighborhoods. The question is what will it take to get the mayor to finally dip into his honey pot?

Today, the Sweet Home Chicago Coalition ratcheted up the pressure on the mayor to begin spending in the communities that need it most. "Instead of waiting on the federal government to send us a stimulus package, we need to start our own stimulus," Ald. Walter Burnett (27th Ward) told members of the coalition early this afternoon as they rallied outside of a series of TIF-funded projects that transformed vacant Humboldt Park lots into thriving (and affordable) apartment buildings. Burnett and colleague Ald. Manny Flores (1st Ward) are currently crafting an ordinance that would require the city to commit 20 percent of all TIF revenues toward affordable housing.  Today, proponents of the plan built a symbolic yellow brick road paved with the TIF surpluses. Check out our slide show:

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Chicago's City Hall isn't the most hospitable place for progressives seeking transparency or inclusive public policy. But that didn't deter activists of all stripes -- from labor organizers and abortion-rights supporters to homeless advocates and public interest researchers -- from making their presence felt in the chambers this morning. Here's our roundup of today's City Council meeting:

"RIGHT TO KNOW"

With Ald. Ricardo Munoz (22nd Ward) projecting that he had 28 or 29 votes lined up to pass his "Right To Know" ordinance, UNITE-HERE Local 1 members entered the council chambers confident that hotels, including the infamous Congress, would finally be forced to publicize work stoppages to potential customers. Typically, if a measure is passed out of the Finance Committee -- as this one was last month -- it receives easy council approval. But as we've noted before, the business groups who have been lobbying hard against the notification law had a key ally on their side: Mayor Daley. Today, Ald. Ike Carothers (29th Ward) did the mayor's bidding by introducing a motion to refer Munoz' bill back to committee. Munoz attempted to block Carother's action and hold a vote today, but could not garner the majority necessary.

"The only tactic left at their disposal was defer and delay," UNITE-Here's Annemarie Strassel tells us. "We'll wait it out as long as it takes."

UNITED SNAGS $34.5 MILLION

Today, the full council voted on the $34.5 million incentive package being offered to United Airlines for agreeing to move its operational headlines to the Loop.   With no substantive discussion -- aside from Ald. Ed Burke's (14th Ward) assurance that the plan is "a good deal for United and a good deal for Chicago" -- the assembled aldermen agreed to fork over the taxpayer funds.  As we noted yesterday, there is no indication that the projected benefits will ever be tracked or the agreement enforced.

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Since news first surfaced about the deal in July, we've been following Mayor Daley's efforts to convince United Airlines to move its operational headquarters from the Chicago suburbs to downtown's Willis Tower.  At first, the city offered the corporation $25 million tax increment financing (TIF) funds as an incentive, most of which would go to refurbishing the new offices.  Apparently that didn't cut it, so in August Mayor Daley added on an additional $10 million in public funds to sweeten the deal.  Yesterday, the City Council Finance Committee advanced the proposal, as the Tribune's Hal Dardick reports.

We're thankful that Dardick has stayed on top of this story (neither the Sun-Times or Crain's appear to have written anything on yesterday's development), but we wish he would have provided a bit more historical context.  Specifically, the Tribune article failed to note that, since early 2008, Daley has forked over an additional $15 million to United in return for moving its corporate offices to another downtown office building:

- $5.47 million in TIF funds to help refurbish United's new corporate headquarters at 77 W. Wacker Dr. (Early 2008)
- $10 million for "improvements at 77 W. Wacker Dr." to be doled out in $2 million annual increments to offset the local tax on jet fuel. (July 2009) 

Combined with the $35 million incentive package now working its way through the City Council, that brings the total amount of public subsidies secured by United to over $50 million in less than two years.

In his article, Hardick goes on to quote City Hall's estimate of how the company's move to Willis Tower will result in a boost in tax revenue:

[T]he city will net $44.5 million in revenue during that period [the next ten years] because of the move, [Community Development Department deputy commissioner William] Eager said. If United stays for 15 years, the city will net $101.4 million, he said.

That sounds great in theory. But will we ever know if these benchmarks are met?  Will we ever know if the company retains the required number of staff at these locations?  

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Kudos to the Sun-Times for their headline on today's article previewing Mayor Daley's public budget hearing tonight: "A Meter Culpa From The Mayor."  Heh.

But then come these passages from Fran Spielman's actual article:

With a $520 million shortfall that can only be filled by tax increases and spending cuts, three nights of public hearings on Daley's preliminary 2010 budget are expected to turn into giant gripe sessions before City Hall lowers the boom. [...]

Even after wringing concessions from organized labor and drying up a "rainy day" fund created by the parking meter deal, Chicago has a $520 million budget shortfall in 2010.

With no obvious untapped sources of revenue, Civic Federation President Laurence Msall has warned that city government will be "forced to re-invent itself in the way it delivers services and eliminates services not critical." [Emphasis added]

By asserting that tax increases and spending cuts are the sole avenues available to close next year's budget deficit, Spielman reinforces the myth that Mayor Daley's overgrown tax increment financing (TIF) system simply can't be used to relieve pressure on the city's operating budget.  It's a myth the mayor has worked hard to erect and preserve.  Indeed, any mention of dipping into his TIF piggy bank is met with red-faced derision. 

But as we laid out earlier this summer, there are several avenues available to Chicago aldermen to free up TIF funds for operating expenses.  Here's the short version:

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