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Emanuel and new aldermen to tackle city’s TIF subsidies

Updated: September 24, 2012 6:25AM

Mayor-elect Rahm Emanuel and some newly-elected aldermen say they are prepared to overhaul and rein in the city’s Tax Increment Financing system, which they say has grown into a tax-gobbling menace over the last 25 years.

“Over the years, it’s kind of morphed from a tool for blighted economic communities into an all-purpose vehicle,” Emanuel told the Sun-Times. “We need to return it to its original purpose — it should not be used for high-rent areas.”

Emanuel is not prepared to abolish the program, as some of the aldermanic candidates who ran anti-TIF campaigns would like, but he pledged to appoint a commission to recommend reforms and say which TIFs should end.

And he is telling candidates they must support his plan to overhaul the TIF system if they want his support in next month’s run-off elections.

Since they started under Mayor Washington as a way to help “blighted” communities, Tax Increment Financing or “TIF” districts have been molded over the last 25 years into what some aldermanic candidates call a “private slush fund” Mayor Daley used to reward developers and punish disobedient aldermen.

“They’re the fastest-growing part of the budget,” Emanuel said.

In a TIF district, the property taxes sent to the city and other taxing bodies are frozen for 20 years. Any revenue collected above that first-year level is put into a special fund to be used to encourage economic development in that district. That can include road repairs, street lights and other infrastructure improvements.

The 160 districts that now cover nearly a third of the city collect $500 million a year in property taxes that go into a quietly administered program run by Daley’s Planning Dept.

“Seventy-five percent of all commercial and industrial areas in Chicago are in TIFs now,” said Ald. Scott Waugespack (32nd), who was re-elected with two-thirds of the vote.

“Why not freeze it and hold a referendum — let the voters decide?” said Ameya Pawar, who won his shocker victory in the 47th Ward in part by pledging to “blow up” the TIFs. “We need an audit of how we’ve spent those dollars for 20 years: Who’s gotten the contracts?”

Walking around the bustling Lincoln Square neighborhood in his ward, Pawar asked why a few vacant storefronts prompted the administration to declare the district “blighted” and in need of a TIF.

In recent years as critics have tried to make TIFs an issue, Daley has begun spending more of those dollars on schools, parks and libraries. But the money was also given to the Board of Trade ($15 million) for improvements.

Both candidates in the 45th Ward, John Garrido and John Arena, have been running campaigns to reform the TIF program. Garrido said he would abolish TIFs immediately or at least suspend the program until it can be reformed. If economic development projects are worth doing, they’re worth doing out of the general fund, he said.

Arena says at the very least the city should agree to the Chicago Teachers Union’s proposal to cut the Chicago Public Schools out of TIFs. That would immediately stop diverting $250 million a year from the schools.

Back in October, Emanuel spoke out on the need for TIF reform, telling the Sun-Times, “It was always supposed to be used for blighted or underserved parts of city — it needs to be on the property tax bill so people can see how much it’s costing.”

While Emanuel is not prepared to take the revolution as far as Pawar and Garrido want to go, Pawar, Waugespack and other TIF critics say they are pleased Emanuel is on board for, at the very least, a thorough review of TIFs and reforms that will make them more transparent.

Daley has resisted proposals to spell out in the budget and on residents’ property tax bills how much money was going into TIFs. Emanuel embraces those proposals.

“Candidates on the North Side, the South Side, the West Side, have all come around to the fact that we need reforms on the TIFs,” Emanuel said.

Molly Phelan and Jim Cappleman, the candidates in the 46th Ward, both made TIF reform a cornerstone of their campaigns. So did Michele Smith and Tim Egan in the 43rd Ward and Mary O’Connor in the 41st.

The TIF program’s defenders in the Daley Administration call it the only tool to redevelop blighted areas. But the TIFs in the city’s genuinely blighted areas are the least profitable and raise little money to reinvest in those communities. The overwhelming majority of the $500 million the TIFs raise come from the TIFs in and around booming downtown.

Ald. Willie Cochran (20th) say TIFs are working just the way they are supposed to in blighted sections of his South Side ward.

State Sen. Heather Steans has introduced TIF-reform legislation in Springfield and has spoken with Emanuel about potential legislative fixes.

Emanuel proposed during the campaign using money collected from TIFs in some genuinely blighted areas to hire 250 additional police officers to patrol those areas, making them more hospitable for business. Emanuel said that would seem to him a legitimate use of TIF funds for economic development.

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