Mayor Rahm Emanuel dipped deep into an often-criticized pool of tax dollars to cut a deal with the Chicago Teachers Union that may have averted the second school strike in his six years as mayor.
Emanuel reportedly will take $175 million from tax-increment financing districts — known as TIFs in the world of municipal finance — to get the $88 million he needs to boost teacher pay and per-student spending in Chicago Public Schools.
Where the rest of the roughly $90 million raided from TIF accounts will go is unclear, though a day after reaching a deal with CTU greased with TIF dollars, Emanuel unveiled a 2017 budget with major line items such as a new police training facility and increased spending on youth anti-violence programs.
With another $32 million in TIF money the mayor had already pledged to CPS, the district will take in $120 million from TIFs, CTU Vice President Jesse Sharkey said in a phone interview Tuesday.
“We need to have transparency with TIFs,” Sharkey said. “It shouldn’t have to be a high wire act with CTU and the mayor to get money from the fund that takes taxes from schools. It’s time we looked at reforming what has essentially become a slush fund for politically connected real estate developers.”
The union has consistently pointed to the pot of tax dollars skimmed by TIF accounts as a way to fund schools, and those accounts appear to be flush even as the city increases taxes and CPS copes with declining enrollment and layoffs.
Last year, Chicago’s TIF districts diverted $461 million from taxing entities such as the school district, county or libraries, on top of $1.3 billion already sitting in TIF accounts, according to city data.
Once the money lands in a TIF account, it can be spent on a broad range of “economic development” activities with minimal approval from anyone other than the mayor.
TIF districts were intended as an economic tool when they were created by state legislatures in the 1980s. The theory is fairly simple: The city designates an area as a TIF district, and freezes the amount of property taxes that go out to government units like cities, school districts or even libraries.
But when property values rise, any additional tax revenue goes into a TIF account to be spent on economic development projects — which can be defined very broadly — inside the district. TIFs were intended to target depressed neighborhoods, but critics have noted that nearly half of TIF spending is done downtown and in some of the city’s toniest areas.
Under Emanuel’s predecessor, Mayor Richard M. Daley, Chicago embraced TIFs like no other city. Today, there are nearly 150 TIF districts.
Emanuel has touted that under his administration, the city diverts a share of TIF spending for school construction in each district, but has taken hits over flashier projects that were to use TIF dollars, such as a stadium-hotel complex adjacent to McCormick place. CPS budget figures show that the schools system has received about $1 billion in TIF money for capital projects over the last decade.
Emanuel has even more control of TIF money that he designates as “surplus,” meaning the money hasn’t been committed to a specific project. How “committed” is defined also is vague.
For years, Emanuel had said TIF money would finance construction of a selective enrollment high school on the Near West Side, to be named after President Barack Obama. That project, estimated to cost $60 million, was not in Emanuel’s 2017 budget.
Emanuel also has shut down five TIF districts early, a move that liquidates their accounts and sends captured tax dollars back to the units of government that would have claimed them if the TIF didn’t exist.
TIFs have had mixed results as an economic development tool, said University of Illinois-Chicago economist David Merriman, though Emanuel is just one of many mayors nationwide who support TIFs enthusiastically. His recent moves to use TIF money to go to Chicago Public Schools shows his enthusiasm might be waning as the city has needed multiple tax increases to balance recent budgets, Merriman said.
“What the mayor is trying to do is making a statement that schools are important relative to what the TIFs were doing, which is basically what his critics have been saying for some time,” Merriman said. “Taking from the TIFs could be bad for economic development, but having a strike could have been bad as well, if people decided to leave the city.
“It’s an important concession, and a major change in policy,” he said. “The question is, is it going to hurt economic development in the city, and to what extent?”
Union leaders want to see the TIF taps remain open, with CTU member Ald. Susan Sadlowski Garza (10th) pressing legislation that would automatically direct surplus TIF money to CPS whenever the district is deemed to be in financial difficulty, without splitting the extra cash with the usual other public bodies privy to it. The measure boasts support from 40 of 50 council members but has been held up in a committee controlled by powerful mayoral ally Ald. Ed Burke (14th).