2010

Lawndale Alliance Community Awareness Series

[THE TIME FOR TIF REFORM IS NOW]

The Lawndale Alliance has been studying the effects of TIFs on the North Lawndale community for
three years. The group hosted a TIF town hall meeting in the spring of 2009, in partnership with
DePaul University, Dvorak School and the Westside Association for Community Action to highlight
the results of an analysis of the performance of the 7 TIFs impacting North Lawndale for the year
ending December 31, 2007. In so doing the group examined the TIFs’ goals and objectives, most
recent financial results, track record in hiring and contracting minorities, women and local
residents; major projects, and the implications of legislative policies and real estate developments
on the surrounding community. The group’s findings are included in this informal report. An
update will be provided after the 2010 TIF Town Hall meeting, which will be held in June, 2010.
 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

Dedications
This TIF town hall meeting was part of a 3-part meeting series, dedicated in loving
memory of Rev. Mary Edwards, Co-Pastor of the West Side Center of Truth. Rev.
Edwards was faithful in everything she did, with her family, church, the community
and the Lawndale Alliance. Her presence is truly missed.

The TIF town hall presentation and companion report is dedicated to Ms. Jacqueline
Leavy, a local community activist, and former executive director of the Neighborhood
Capital Budget Group, for her leadership in providing education, training and
advocacy for grassroots organizations seeking greater transparency in the City of
Chicago’s capital budget, transportation and TIF funding.

2 | Valerie F. Leonard for the Lawndale Alliance Community Awareness Series

 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

Acknowledgments
The Lawndale Alliance would like to thank the following persons and organizations for
their contributions to the success of the annual TIF Town Hall Meeting.

DePaul University
Dvorak School
WACA Network
NCBG/UIC
CAN-TV
No Games Chicago
John Ziegler
Erin Sadzewicz
Larry Bennett
Stephen Alexander
Gladys Woodson
Zina Simmons
Mark Carter
Patricia Hill
Richard Barnett
Melissa Williams
Raynard Villa Hall
Derrick Space
Tom Tresser
Joe Ann Bradley
Millie Goldsmith
Renet Clines
Rev. Walter Harris
Deidre Green
Isaac Lewis
North Lawndale Community News
Krista Christophe
Debbie Cannon
Dorothy Williams
Corene Jenkins-Harvey
Samuel Muhammad
Adonya Little
Kirstin Williams
Beatrice Smith
Jacqueline Leavy
Bob Quellos

3 | Valerie F. Leonard for the Lawndale Alliance Community Awareness Series

 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

Table of Contents

What is a TIF?......................................................................................................................... Page 5

Pros and Cons of TIFs…………………………………………………………………………… Page 5

Findings for North Lawndale……………………………………………………………….. Page 6

Recommendations …………………………………………………………………………… Page 11

4 | Valerie F. Leonard for the Lawndale Alliance Community Awareness Series

 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

The Time for TIF Reform is Now

By Valerie F. Leonard
What is a TIF?

A tax increment financing district (TIF) is a community development tool meant to

encourage community revitalization in distressed communities. In Chicago, once an area is
designated as a TIF, an assessment of the equalized value (EAV) of all the properties in the
district is done, and the property tax rates frozen for the entire 23 year life of the TIF.
Property taxes generated as a result of this baseline assessment continue to go to the City’s
general fund, as well as other taxing bodies such as Chicago Public Schools, Chicago Park
District. Cook County, et cetera. After the TIF goes into effect, any additional taxes resulting
from changes in assessed property values, or future development, are held in a special TIF
fund to finance improvements within the district. Eligible costs include the costs of
administration, consultants, architects, professional services, studies, demolition, site prep
construction and rehabilitation, infrastructure, financing fees, relocation, job training and
child care. Infrastructure would include things like sidewalks, curbs, gutters, sewer lines
and light fixtures. The City of Chicago also provides related programs such as the
Neighborhood Improvement Fund (NIF) to help local residents finance exterior home
improvements. The Small Business Improvement Fund (SBIF) assists small businesses
finance improvements to their facilities, and the TIFWorks program provides funding for
job training for businesses located in TIF districts. Like anything else, there are pros and
cons of having TIFs.

Pros and Cons of TIFs

People who favor TIFs indicate that TIFs encourage growth and development that would
not occur if the TIF was not created. They also like the fact that funds from the local
community stay in the community to fund much needed improvements and residents can
see their property tax dollars at work. TIFs also supply a steady stream of income for up to
23 years, which is well suited for long term capital projects. Moreover, TIF funds are not
subject to the same restrictions as funding from other federal and state sources, so they
provide significant flexibility that the City would not have otherwise. Finally, funds from
the TIF program are tracked separately from the City’s balance sheet and budget, and do
not appear on the financial statements for the City’s general fund. This could have the effect
of making certain financial indicators appear to be stronger than they would if the TIF
funds were disclosed with the City’s other program funds. This would be especially
advantageous for marketing purposes in the financial markets.

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 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

At the same time, there are a number of people who do not like TIFs. The main argument is
that TIFs skim off money from the City’s general fund and other taxing districts such as
Chicago Public Schools and the Park District, who must in turn raise their own tax levies
and fees to cover shortfalls caused by the TIFs. In fact, one school of thought suggests that
TIFs are in effect a hidden tax increase. Another argument is that TIFs do not benefit the
low-moderate minority communities or residents that they were created to help. Instead,
the people who benefit are developers and large corporations. Still others argue that TIFs
are really gentrification tools that speed up processes such as eminent domain and
displacement of local residents and business whose tax dollars are funding the local TIF.
All too often community development and funding decisions are made without any input
from or notification of local residents. In fact, TIFs, if not used properly, can create a
situation of taxation without representation for the low and moderate income community
residents, while creating an environment that favors wealthy and/or politically influential
individuals, corporations and nonprofits.

According to the City of Chicago’s website (May 10, 2010), 167 TIFs have been created
since 1984. One TIF has expired, and 6 TIFs have been repealed or terminated. There are
currently 159 active TIFs covering approximately 40% of the land area of the City. Recent
budgets as well as the 2010 budget indicate plans to bring on 15-16 TIFs per year. At this
rate, every eligible land parcel within the city could be in a TIF area by 2025.

Findings for North Lawndale

The Lawndale Alliance hosted a TIF town hall meeting in the spring of 2009, in
partnership with DePaul University, Dvorak School and the Westside Association for
Community Action. The purpose of the meeting was to highlight the results of an analysis
of the performance of the 7 TIFs impacting North Lawndale for the year ending December
31, 2007. In so doing the group examined the TIFs’ goals and objectives, most recent
financial results, track record in hiring and contracting minorities, women and local
residents; major projects, and the implications of legislative policies and real estate
developments on the surrounding community. The group’s findings are listed below:

The City does an excellent job of outlining 23-year projected redevelopment costs in
the TIF Redevelopment Plans for each of the TIFs. The records that are available for
public inspection do not show budget versus actual expenditures. Nor do they
provide financial data for more than one year, which makes it difficult to analyze
performance over time.

It is understood that there is no way to accurately predict the number of

projects, revenues or expenditures in a given TIF district. A number of the
TIF districts have funded projects with expenditures that are greater than the
23-year TIF redevelopment project budget for the project area. For example,

the Sterling Park development has or will receive $23,000,000 in TIF

funding from the Homan-Arthington TIF, which has a $10,000,000
redevelopment budget.
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 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

Cineplex Odeon/ICE Theaters was awarded $3,300,000 in TIF

assistance from the Roosevelt-Homan TIF, which has a redevelopment
budget of $2,400,000.

While there are allowances to transfer funds between TIFs (porting), there
does not appear to be any provision to amend the TIF redevelopment
budgets to reflect the current reality.

The annual reports and TIF overviews provide significant details regarding the
financial transactions and performance of the TIFs. However

Not all annual reports are audited. One accountant indicated that the reports
are prepared at the City’s direction. They also note that they have not
audited, verified, or applied agreed upon accounting and testing procedures
to the data contained in the reports.

Financial reports record City land and property sales within the TIF, but do
not indicate the transaction amounts.

The City typically does not include programs such as the NIF and SBIF in the
redevelopment budgets, but routinely charges the TIF fund for these
expenses.

The City indicates that “Private Investment” could include other public funds
that are not from the TIF fund. However, no disclosure is made as to what
other public funds have been made available.

There is evidence that job training programs have been funded through TIFs.
However, neither the audited statements nor TIF overviews provide data as to what
the training programs are, how many jobs were created, or whether any local
residents were hired.

HUD Section 3 provides that developers of HUD-funded projects make a good faith
effort to hire low income residents of the communities in which the development is
taking place. A number of TIF-funded projects in North Lawndale also receive HUD
funding. The City’s TIF reports do not indicate the number of TIF-funded projects
that also receive HUD funding, or the number of local residents hired on those jobs.

Newly constructed “affordable housing” units are often beyond the reach of local
community residents, whose property taxes are helping to fund the local TIFs. For
example, The Chicago Coalition for the Homeless conducted a study of Chicago’s
TIFs and found that "the data shows that in a quarter of all wards where TIF-
subsidized affordable housing was constructed, for-sale units were priced for
households earning as much as 2.5 times the community’s median income. In

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 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

another quarter of those wards, TIF-funded rental housing cost as much $582 more
per month than the average apartment in the neighborhood."

The conditions in North Lawndale are worse. Data from the 2000 Census suggest
that North Lawndale had a high concentration of poverty, with a median family
income of $20,585. At the time, 3,958 (41.7%) of the 9,484 families were living
below the poverty line. Approximately 51.5% of the 3,422 families with related
children under the age of 18 were living below the poverty line. Two thousand,
nine hundred sixty-three (2,963) families, or 31.2% of all families, earned less
than $10,000 per year. Families making $20,000 a year can afford rents of about
$500 per month, and to purchase homes in the $71,000 range.

The local nonprofit agency whose plan drove the Ogden-Pulaski TIF sponsored a
design charrette in which the community preferred developments that were 20%
affordable. The distinction between low income housing and affordable housing
was not made to the audience.

The affordable housing units in the design concepts were affordable to people
making 80%-120% of the Area Median Income (AMI), which includes the
Chicago metro area. At the time of the charrette, this would mean that the
"affordable" units were in price ranges affordable to people making $60,000-
$90,000, which is 3-4.5 times the local median income. Bear in mind that before
the recession, North Lawndale had an unemployment rate of 23%, and ranked #3
in the city with respect to mortgage foreclosures. This issue was raised with the
local CDC, as well as the nonprofit planning agency that helped coordinate the
event. To the best of my knowledge, nothing is being done.

The State Code provides that TIFs be implemented in areas where “but for” the
creation of the TIF there would be no investment. The data suggests that, in some
cases, development in and near North Lawndale would have occurred without the
creation of TIFs. In one case the creation of the TIF did not lead to any investment.

Before the Ogden-Pulaski TIF was approved, the data suggested that the area
was on an uptick, using EAV as an indicator of growth. The Ogden/Pulaski
Tax Increment Financing Redevelopment Area Project and Plan dated August
3, 2007 indicates that the Project Area’s EAV per acre was $187,346, in 2005,
as compared to $405,529 for the City of Chicago. The revised Ogden/Pulaski
Tax Increment Redevelopment Area Project Plan dated November 7, 2007,
indicates that the Project Area’s EAV was $330,749 in 2006, as compared to
$475,323 for the City. In fact, the EAV in the Project Area (before the last tax
hike) grew at a rate of 77% in one year, as compared to the City’s 17%
growth in EAV for the same period of time.

Another TIF that impacts the North Lawndale Community is the 26th and
Kostner TIF (located primarily in Little Village). That TIF was created in

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 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

1998. It was retired earlier this year due to lack of investment. A new 26th
and Kostner TIF was created around a mostly undeveloped parcel of land
that was once used for industrial purposes. This TIF will be project specific,
meaning that the only properties that will be impacted are the properties
that will be developed in the future, as opposed to the existing properties in
the surrounding neighborhood. (I don’t know where they’re getting the
upfront incentives to start the project. )

The question remains, “ how does the City clarify the ‘but for’ argument such that we
know beyond a shadow of a doubt that the TIF is the only way the property may be
developed?”

The City and delegate agencies seem to only make appearances at meetings hosted
by elected officials or its delegate agencies. This can be problematic in communities
where the flow of information is inefficient. Moreover, this tends to politicize the
process of providing information and access to services to which tax payers are
entitled.

While a number of local residents and business owners have apparently received
assistance from the creation of the NIF and SBIF, there is very little evidence that a
broad range of community residents have access to the programs, or have
benefitted from the creation of TIFs.

Local TIF redevelopment budgets total $403.2 million and funding for NIFs, SBIF
and local schools total $13.25 million in 2006. Data for 2006 suggest that for
every dollar that goes towards financing and real estate development, only 3
cents benefit the local (North Lawndale) residents and business owners.

Some African American (North Lawndale) residents in the 22nd Ward who live north
of 24th Street have expressed sentiments of being left out of economic development
planning and activities in the Ward. In some instances, they have reportedly been
refused certain services from the 24th Ward (which is primarily African American)
because they don’t live in the 24th Ward.

There seems to be a conflict between TIF program goals and objectives regarding
employment of local residents and legislation regarding compensation for
construction workers

The stated goals of a number of TIF redevelopment plans are to increase

employment opportunities for the people who live in the impacted
communities. However, current and pending legislation favors unionized
labor on public works projects. Moreover, there is a push to expand the
definition of public works projects to include TIF districts and Empowerment
Zones.

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 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

African American construction workers and laborers are less likely to

be union members, but more likely to live in an Empowerment Zone
or a TIF.

Unless there is serious intervention, African Americans who live in

TIF districts or Empowerment Zones will have even more limited
access to construction jobs

The remaining employment opportunities will be in the lower paying

service sector.

10 | Valerie F. Leonard for the Lawndale Alliance Community Awareness Series

 May 10, 2010 [THE TIME FOR TIF REFORM IS NOW]

Recommendations

All TIF funds should be subject to annual audits. Financial reports should be
structured to provide information that would give an indication of the manner in
which the funds have been managed, as well as give an indication of performance
over time

Provide reports based on budget vs. actual revenues and expenditures,

including variances and explanations

Provide 2 year performance

Provide mechanisms to amend redevelopment budgets to reflect current

reality

The City of Chicago should use the TIF financial reporting as a marketing tool. They
should provide more information on land sales, the number of jobs created
employment and training programs, number of contract awards to minority and
women owned businesses.

The City should report the results of its activities to recruit, hire and train low
income residents who live in TIF redevelopment areas that also have HUD-funded
projects, and post them on their website. Ideally, this information should be
included in TIF reports.

There should be more transparency in the financial reporting process. The

following details should be disclosed

The dollar amounts for the sales of City-owned properties

Names of businesses, individuals and nonprofit organizations that have

formed partnerships to enter into TIF-funded transactions

Detailed breakout of the “Private Investments” that leverage TIF-funded

projects.

The City should execute legally binding community benefits agreements for every
TIF in the City as a part of the approval process.

The City should put mechanisms in place to mitigate politics from public
informational meetings regarding City programs and services

Schedule meetings with Chicago Departments through Chicago 311

Require City delegate agencies to share information in venues other than

those provided by elected officials and other delegate agencies
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Create a local website focusing on results of local TIFs, including NIF and SBIF
Programs

Develop a comprehensive economic development plan designed to increase the

capacity of local residents to directly benefit from the TIF programs.

Re-establish the Lawndale Community Conservation Council and staff from a broad
base of individuals, business leaders, nonprofit organizations, churches foundations
and City representatives

Establish TIF advisory councils for every TIF in North Lawndale drawing from a
diverse base of community stakeholders, including businesses, churches, nonprofit
organizations, foundations and City representatives.

Conduct more intentional outreach to African Americans living in the 22nd Ward to
participate in economic development opportunities provided by the Kostner Avenue
TIF.

Questions regarding these recommendations may be directed to Valerie F. Leonard

at 773-521-3137, or valeriefleonard@msn.com

12 | Valerie F. Leonard for the Lawndale Alliance Community Awareness Series