With the City Council rushing to create a whole new type of tax incrementing financing – just weeks after pushing through a new $100 million Community Catalyst Fund – this may be a good moment to consider the state of slush in the City of Chicago.
The first so-called Transit TIF, running from North to Devon avenues, doesn’t quite qualify as a slush fund, as TIFs now seem to function. For one, it’s explicitly dedicated to the modernizing of the Red and Purple lines, providing $625 million to help the city qualify for matching federal funds.
It also departs from the standard TIF program in other ways, as The Chicago Reader’s Ben Joravsky reported. It doesn’t pretend to finance economic development in underserved communities, and it doesn’t pretend to capture additional revenue resulting from the investments it drives. It’s just another way of collecting the increases in property tax revenue that would have come in anyway. And since that money will have to be made up by existing taxing bodies, it’s essentially a back-door tax hike.
Of course, there’s still the old TIF program, and as a slush fund it’s doing quite well, taking in $461 million last year, with the yearly take set to rise as property taxes go up. It’s a huge pot of money that Mayor Rahm Emanuel can tap into at will, whether on development projects or to fill budget gaps, as he demonstrated in this fall’s teacher contract talks.
Beyond that, Emanuel hasn’t replicated the success his predecessor had with massive slush funds, set up with the billion-dollar proceeds from the sale of the Skyway and the city’s parking meters. Instead, Emanuel’s setting up smaller pools of off-budget funds under his control, with little or no oversight.
Last month, the City Council pledged $100 million in city money for a Community Catalyst Fund to attract private capital to invest in neighborhoods. It’s the brainchild of City Treasurer Kurt Summers, who also chairs a parallel fund, the Infrastructure Trust. (Summers says that under-performing entity is soon to launch “the biggest lighting program in North America” – though cash-strapped Detroit has succeeded with a similar program, taking the cheaper route of traditional bond financing.) How the new fund will succeed in spurring economic development where TIF has failed isn’t clear.
Ald. Carlos Rosa (35th) warns that the Catalyst Fund “in fact amounts to a blank check from Chicago taxpayers to financiers.” He cites the lack of guarantees that the poorest communities will be served; a scale of investment that favors big businesses; and “little or no public accountability,” with a board appointed by the mayor and little protection against conflicts of interest.
In May, the council approved Emanuel’s Neighborhood Opportunity Fund, financed through so-called “density bonus” payments made by downtown developers (payments in exchange for the right to build additional height and density). It’s expected to generate $10 million a year, with 80 percent going to economic development in low-income areas. Emanuel can award grants under $250,000 without council approval. Noting the lack of oversight and transparency, Ald. Brendan Reilly (42nd) said, “Some people I’ve talked to have equated this to a slush fund.”
Now a third such fund is under discussion. In successful planned manufacturing districts along the North Branch on the Chicago River, where Emanuel wants to relax zoning rules so developers can build luxury high-rises, he has proposed charging a fee on non-industrial development to be invested, in part, in less successful industrial corridors in outlying areas. (The fund would also “support infrastructure improvements in corridors transitioning away from industrial use,” so it’s not a total loss for developers.)
There are many problems with this. The old, established manufacturers that will be run out of town pay good wages and benefits; new industrial developments tend to be warehouses, where the workforce is often handled by subcontractors and paid low wages with no benefits. And it’s not like the city’s population is growing, such that we need a slew of new high-rises along the river.
There will also be the usual questions of who decides how the money is spent, how much oversight and accountability exists – whether promised jobs actually materialize, for one thing – and ultimately who benefits from the new program.
Emanuel’s growing collection of slush funds raises questions not just of governance but of priorities as well. In a city struggling to provide basic services – where school budgets are being slashed and a serious anti-violence program seems beyond reach – and where revenue solutions targeting the wealthy are off the table, do we really need to empower our mayor to hand out more largesse to the business class?