North Side Group Sues City for TIF Abuse

What are the Future Implications for North Lawndale?

By Valerie F. Leonard

As you may have heard, Fix Wilson Yard, a residents group based in Uptown, filed a suit in the
Cook County Circuit Court last week to block a major mixed-use development on the Wilson
Yard site. Their suit alleges that the project’s developer improperly received a $51-million TIF
subsidy to finance it. According to an article that appeared in Crain’s Chicago Business
electronic newsletter December 3, 2008, Fix Wilson Yard disputes the city’s contention that the
six-acre North Side site would not have been developed if the city didn’t provide financing. The
article indicates that the lawsuit asks the court to prevent the City of Chicago from providing TIF
financing to the Wilson Yard project. The complaint also alleges that the city improperly
approved changes to the development—including an increase in its budget to $150 million from
$130 million—without adequate review of public input.

While I cannot comment on the particulars of the Wilson Yard case, I cannot help but reflect
upon our own situation here in North Lawndale. There are 7 TIFs in our community that exist
without any accountability to the local residents. By the time the TIFs expire, local property
owners will have spent hundreds of millions of dollars, with very few direct benefits, and even
less information. There are no TIF advisory councils; no public meetings regarding new
developments that will receive TIF funds; no evidence that North Lawndale residents are hired to
work for local companies that receive funds; no community benefits agreements; no
comprehensive economic development strategy. Our schools and parks are suffering, and will
have no alternative but to raise taxes and user fees because tax increases that would normally go
to these taxing bodies are held in the TIF funds. Clearly, there are many rooms for improvement.

For the purposes of this article, I will focus on the “but for” test that every TIF must meet before
approval. In a nutshell, the City must demonstrate that development in an area would not occur
unless the TIF is created. When I look at the TIFs in North Lawndale, I’m not convinced that the
only way to attract development here is to create TIFs. In fact, I don’t believe creating TIFs in
and of themselves will guarantee that investment will come. I will share two examples—the
Ogden/Pulaski TIF and the 26th and Kostner TIF.

The Ogden/Pulaski TIF was approved in February of this year. As a result of the creation of this
TIF, essentially all of North Lawndale is in a TIF district. While I would agree that there are a
number of blighted areas in the community, it is not all blighted. In fact, the data suggest that the
area was on the rise before the Ogden-Pulaski TIF was approved.

The Ogden/Pulaski Tax Increment Financing Redevelopment Area Project and Plan dated
August 3, 2007 indicates that the Project Area’s equalized assessed value (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 per acre 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. A recent article in the
Chicago Sun-Times indicated that the average property tax increase in Chicago for 2007 was
8%, while the average increase for North Lawndale was 31%.

The Ogden/Pulaski Tax Increment Financing Redevelopment Area Project and Plan also
indicates that there were 1,431 building permits issued for the area between 2000 and 2005. Of
that number, 435 were for new construction. Remember this activity occurred before the
creation of the TIF.

The 26th and Kostner TIF was created in 1998, and was retired earlier this year due to lack of
investment. A new 26th and Kostner TIF was subsequently created around a vacant industrial
parcel that had been the centerpiece of the original TIF. The new TIF is project specific, and will
only generate revenue from the properties that will be developed in the future, as opposed to the
existing properties in the surrounding neighborhood.

I have to wonder, if the developer can wait that long before the TIF gets enough money to
finance development in the area, if the TIF was necessary in the first place. If the 26 th and
Kostner TIF doesn’t have the resources now, does that mean that some of the funding for upfront
project costs could come from the adjacent Ogden-Pulaski TIF?

As I consider the examples above, I am left wondering how does the City clarify the “but for”
test to ensure that creating a TIF is the only way the property may be developed. Given the
current economy and collapse of the housing market, the TIF should be a tool of last resort rather
than the first line of defense—or shall I say “offence” in this case?