Better Government Association

Hey, brother, can you spare a billion dollars?

by Adam Verwymeren

Jul 23, 2008

While Mayor Daley has been asking for more of your money than ever before, the city is sitting on more than a billion dollars that it hasn’t figured out how to spend.

The money is in tax increment financing funds that have racked up $1.28 billion in unspent money, according to an analysis of annual TIF reports released by the city this month.

Under the state law that governs TIFs, the city is supposed to return surplus money at the end of the year to be redistributed to various taxing bodies such as the school district or the city’s general operating fund.

Although TIFs in other jurisdictions have returned money as proscribed, none of Chicago’s 161 TIF districts have ever sent any cash back.

Chicago avoids returning the money by declaring that all unspent cash is earmarked for future development projects.

“We are spending this money,” said Peter Scales, spokesman for the Department of Planning and Development. “It’s all earmarked for projects down the line.”

However, the city’s TIF revenues seem to be growing at a far greater pace than expenditures.

TIF balances, which stood at $955 million in 2006, were up 34 percent since last year, leading some people to think the city is taking in more money than it knows what to do with.

“We’re told there’s no money, so they’ve got to raise your taxes,” Jay Stewart, head of the Better Government Association. “But there’s a lot of money there.”

Some worry this money is open to abuse, as there is little transparency in Chicago’s TIF program and the money is largely controlled by the mayor.

“This is basically a big sugar bowl for the mayor to dip into for projects he thinks are good for the city of Chicago,” said Jim Nowlan, research director for the Center for Tax and Budget Accountability.

Nowlan and others pointed to the Olympics, worrying that if Chicago lands the games, Daley will use excess TIF money to pay for construction.

Many critics also point out that it is unusual for a government to build up such a large surplus fund. Chicago’s budget is about $6 billion; the unspent TIF money is a fifth of the total.

“I think inordinate balances of money are considered inappropriate government finance management,” Nowlan said. “If you have a balance, you should return it to the taxpayers.”

However, some analysts note that it might be wise fiscal policy for the city to save up money for large capital projects rather than borrow or adopt a pay-as-you-go approach.

“They might be saving it up for a developer until it does the development,” said Norm Sims, the executive director of the Springfield-Sangamon County Regional Planning Commission. “Or they might want to bank that revenue for a project that is larger in expense.”

Chicago’s TIFs have swelled so rapidly because money automatically gets added to the fund each year, regardless of whether there are specific plans to spend it.

Many municipalities in Cook County treat TIFs differently than Chicago does. Some village officials say they don’t approve a TIF until they put together a budget to decide exactly what to spend the money on.

When the plan is finished, the TIF is dissolved and excess money goes back into the city’s budget.

“Before we even start a TIF, we know how we’re going to spend the money,” said Chester Stranczek, a former mayor of Crestwood, a Southwest Side suburb that gave $4 million in excess TIF money to the village’s schools.

Chicago has never dissolved a TIF early, though this year the mayor called for the end of three poorly-performing TIFs.

Since 2001, 25 municipalities in the county have returned unspent money, according to the Cook County Treasurer’s office.

Mark Franz, village manager in Homewood, also on the Southwest Side, said the town has given back nearly $40 million in unspent TIF money over the past 10 years.

“We’re obligated to do that. I think the statute requires [the money] to go back to the taxing bodies.”