Orr: TIF reform worth $44M annually at no cost to taxpayers

April 15, 2014
Press Release
Real Estate and Tax

Cook County Clerk David Orr, responding to the city of Chicago’s plans to shift the burden of its pension obligations onto the backs of homeowners, city workers and retirees, called today for a renewed debate on Chicago’s TIF monies and offered new TIF solutions worth $44 million annually at no cost to taxpayers.


“Chicago homeowners are being asked to pay more for pensions without receiving any additional services while corporations and private interests in TIF districts continue to reap their rewards,” Orr said. “I believe there is a way to restructure TIF funds to ease the pension burden at no additional cost to taxpayers.”

Orr’s first recommendation is to pare down existing TIFs by removing some properties to immediately return money to communities. If just 10 percent of the TIF increment is returned to the rolls, this administrative move could result in Chicago taxing districts’ ability to levy an additional $38.5 million annually, of which $10 million would be available to the city and $24 million for Chicago Public Schools, according to an analysis by the Clerk’s office.

“While I applaud the mayor for returning TIF surplus to the taxing bodies, particularly the leadership from aldermen resulting in yesterday’s pledge to return the additional TIF revenue generated by a $250 million tax increase, I urge the mayor and the City Council to take a very hard look at the city’s 154 TIF districts and reduce the number of properties within those TIFs,” Orr said.

Orr’s second proposal requires the state legislature to take action to increase the frozen value of TIFs by the Consumer Price Index (CPI) each year and capture the increase as recovered TIF value. Chicago taxing bodies could recoup an estimated $5.7 million each year – $1.5 million for the city and $3.5 million for CPS – by increasing their levy and applying the increase to such things as pension costs. 

“At no cost to taxpayers, these proposals create new revenue streams that can offset the proposed tax hike,” Orr said. “The ways in which TIF dollars are managed and distributed must be debated before the city passes a tax increase.”

Clerk Orr’s office calculates tax rates, and offers the following estimates for the impact of the proposed tax increase on various Chicago properties: $48.62 on a $250,000 home; $135.02 on a $250,000 neighborhood business; $540.08 on a $1 million warehouse; and $27,003.90 on a $50 million downtown high rise.

“Mayor Emanuel’s administration has given us a glimpse of TIF information — far more than his predecessor – but the TIF mechanisms are far from transparent,” Orr said. “How can a device that originally was intended to rebuild and restore blighted areas be used to fund projects for multi-million dollar corporations, while residents and small business owners face higher taxes?”

Orr reiterates his stance that all TIF districts should be audited and those audits made available to the public – a recommendation of the 2011 TIF Reform Task Force not yet implemented. Chicago officials say $1.5 billion of its $1.7 billion TIF fund is committed to projects, but the public has no way to judge whether each project is worthwhile without a comprehensive audit and open debate.

“Even if TIF plans have been made, without auditing, scrubbing and transparency we shouldn’t blindly accept those plans as the best use of public dollars,” Orr said.

A recent report, by the Washington-based group Good Jobs First, said that TIF funds surpass Chicago’s pension liabilities. The amount of money the city’s TIFs diverted in 2012 ($457 million) was more than its pension costs ($385.8 million) by $71.2 million.

“The Good Jobs First report reiterates what many knew – the city’s TIF coffers exceed its pension debt,” Orr said. “Perhaps as importantly, it points out the many inherent flaws in TIF accountability and reporting, and reaffirms my belief that there should be an exhaustive review of every TIF project and TIF dollar spent.”

In California, TIFs were siphoning off 12 percent of property tax revenue and when reform failed the financing tool was abolished altogether, according to the Good Jobs First report. In some California municipalities, the report said, “TIF had become a major budgetary item: as much as 25 percent of property taxes were going into TIF accounts.”

“California was sinking under the weight of TIFs, and Chicago could, too,” Orr said.  “The California example underscores that the current TIF models in Illinois, which were developed in the 1970s, should be reformed to reflect the financial realities taxing districts face today.”

Orr urged city workers and retirees to do the math: “One, you pay more for a pension; two, your benefits are cut; three, you get a bigger tax bill. How many ways are you being asked to sacrifice?”

In 2010, Orr called for a moratorium on new Chicago TIFs saying the TIF system needed to be fixed.

Orr will release the 2013 TIF Report this summer, after the tax rates are announced and second-installment tax bills are prepared. Further details on TIFs throughout Cook County, including TIF reports for the 2006 to 2012 tax years, TIF maps, a video guide to understanding TIFs, and the Clerk's TIF Viewer, a search tool to find out if your property is in a TIF district, can be found on the clerk’s website.