Over 30% of property tax collected by the City of Chicago this year comes from TIF revenue
CHICAGO – Of the $14.4 billion in property tax billed in Cook County this year, a record $1 billion is due to Tax Increment Financing (TIF), says Cook County Clerk David Orr. This is a 17.9% increase over last year. TIF revenue has increased 17.6% in the City of Chicago this year while suburban TIFs are experiencing an 18.4% increase.
The Clerk’s full 2017 TIF Revenue Report shows Chicago TIFs will generate a record $660 million in tax revenue from its 143 TIFs in the 2017 tax year. This is a $99 million increase over last year and includes $40 million for the City’s “Transit TIF” located on the north side of the City. Last year, Chicago TIF revenue saw a similar increase of $100 million. By comparison, the 304 suburban TIFs are expected to bring in over $344 million, a $53 million increase over last year. Clerk Orr announced the findings of his report at a Tuesday morning press conference.
While there are twice as many TIFs in the suburbs than the City of Chicago, all the suburban TIFs combined are bringing in less than half as much revenue than the City of Chicago’s TIFs this year. This is primarily due to the large number of Chicago properties in TIF. This year, 1 in 4 properties in Chicago are in TIF districts. Nearly 84% of all TIF properties in Cook County are in the City of Chicago.
TIF accounts for 30% of City Property Tax Revenue
Over 30% of property tax collected by the City of Chicago this year comes from TIF revenue which accounts for over 10% of the total property tax billed for all taxing districts within the City. Conversely, TIF revenue accounts for approximately 4% of property tax billed in the suburbs. Countywide, TIF revenue accounts for 7% of property tax billed countywide. In the City, 1 in 4 properties are in TIF, while 1 in 22 suburban properties are in TIF, and 1 in 7 properties are in TIF countywide.
Every year, the City Council debates its annual property tax levy. While TIFs must go through an approval process prior to adoption, there is no annual debate as to whether TIFs should bring in more property tax revenue. Rather, the revenue calculation set in motion upon a TIF’s creation continues throughout the life of the TIF, which is typically 23 years.
The County Clerk computes how much the taxable value of each TIF has grown each year. This value growth, known as the Incremental EAV, is then applied to the composite tax rate of the properties inside the TIF to calculate the TIF incremental revenue. Municipalities don’t need to request or approve this TIF revenue each year, it simply flows in for the lifetime of each TIF.
North side transit TIF revenue growing fast
The City of Chicago established its first “Transit TIF” in 2016. The Red Purple Modernization Phase 1 (RPM1) Transit TIF is a mile wide and extends from North Avenue to Devon Avenue along CTA’s Red and Purple line tracks. In its first year, the Transit TIF generated over $18 million in its first year. Now in its second year, this TIF generated $40 million in incremental revenue, more than double last year’s revenue. Because of the unique distribution rules established for Transit TIFs, the TIF itself will net approximately $15 million of this total. The balance of the revenue brought in by this TIF this year will be distributed to the other taxing districts. Districts such as CPS, the County, the Forest Preserve, Metropolitan Water Reclamation, Chicago Parks, City Colleges, and the City of Chicago will receive incremental transit TIF revenue in addition to their normal annual tax levies. See Transit TIF Fact Sheet.
Transit TIFs are intended to provide funding for public transit projects and differ from traditional TIFs in several ways: they may run for 35 years rather than the typical 23 years, “blight” need not be demonstrated, and TIF revenues are distributed in part to the other taxing districts that intersect the TIF. The RPM1 Transit funds are intended to repay $622 million in transportation infrastructure loans which were set up as matching funds for state and federal grants.
TIF revenues increasing
Increasing TIF revenues in the City of Chicago are primarily due to two factors: 1) Levy increases by the City of Chicago ($53 million) and CPS ($154 million) to counteract pension deficits, and 2) An increase in the taxable value of property. As this was a non-reassessment year for the City of Chicago, taxable value increases are driven mostly by a 5% increase in the state-issued equalization factor.
The City of Chicago is currently being reassessed for next year’s tax bills and most areas are seeing double-digit value increases. Typically, this would cause a corresponding reduction in property tax rates, but because so many properties in Chicago are in TIF, taxing districts don’t have access to the value increases in the 25% of properties which lie in TIF when rates are calculated.
The highest performing TIFs are once again primarily in the central business district, though the Transit TIF on the North Side generated the 2nd highest revenue this year. Neighborhood TIFs on the South and West sides of the City continue to generate less revenue. For instance, the LaSalle Central TIF in downtown Chicago is the highest netting TIF in Chicago for the third year in a row, bringing in $57.6 million this year alone. Conversely, the Ogden & Pulaski TIF near the western edge of the City, will bring in only $22,000 this year and has netted only $8.7 million over the past 10 years.
Recommendations for TIF reform:
Clerk Orr recommends that unencumbered funds be declared surplus and calls on the City Council to reduce the number of TIFs in areas that have surpassed project goals. A complete review of all existing Chicago TIFs and a reduction in the number and size of TIFs would prevent an unnecessary burden on taxpayers.
“One in four Chicago properties are located within TIF districts,” Orr said. “The City Council has to vote to approve its $1.4 billion property tax levy each year in open meetings, but once a TIF has been created, additional tax revenue from TIFs pours in each year. This year, over $660 million– 30 percent more in property tax revenue- made its way to the City from Chicago taxpayers. These funds should be subject to the same vigorous debate as non-TIF funds. Development projects should not be simply rubber-stamped for approval.”
State officials also should amend TIF provisions to require a stronger check on development prior to the 23 -year life of the TIF. “Unless a municipality can demonstrate ongoing blight, taxpayers should not be required to continue funding additional development. Sunset provisions would ensure projects terminate after project goals are achieved.”
Making TIFs more Transparent
“In the past, I’ve called for a number of ways to improve TIF transparency and accountability, including greater public debate, including full City Council review of TIF funds during the budget approval process. I will continue to push for these things and so should other leaders.”
“TIFs can be an effective economic tool if used responsibly,” Orr said. “But TIF generated revenue flies under the radar of many taxpayers who don’t realize they’re paying additional taxes without the same oversight as traditional property taxes.”
The Clerk provides a number of TIF transparency tools, including the Clerk’s TIF Viewer, a TIF Property Search and an informative “Understanding TIFs” video, all available from the Clerk’s website. The City has made more TIF data available in recent years, “but there’s still no easy way for taxpayers to easily track precisely how TIF funds are spent,” Orr said.
TIF revenue is increasing in the suburbs as well. Of the over 300 suburban TIFs in Cook County, 74% saw their revenues increase this year, with seven suburban TIFs bringing in over $10 million this year alone. Of these, the top five TIFs this year are in the northern suburbs of Glenview, Hoffman Estates, Rosemont and Schaumburg. For more detail on suburban Cook County TIFs, see the 2017 Suburban TIF Overview and 2017 Suburban TIF Summary.
Additional TIF Information:
To view data on each TIF district, see these PDF sections of the TIF Report: Countywide summary, Chicago summary, Suburban summary, Tax Increment Agency Report, Chicago Overview, Suburban Overview, Transit TIF Fact Sheet, TIF FAQs.
The full press conference can be viewed here.
Visit TIF Viewer, a mapping application, to see TIF data at the map level and search by municipality, ward, address or PIN.
For a brief overview and refresher regarding 2017 TIFs, view our 2017 Quick Fact Sheet.
 Under the unique formula used for Transit TIFs, approximately $25 million of the Transit TIF’s $40 million revenue this year will be distributed to CPS and other taxing districts impacted by this TIF.