CFL News
October 05, 2011

Aldermen Seek to Route TIF Funds to Schools

A group of aldermen Tuesday proposed an ordinance that would force the city to pour funds from special taxing districts into the city's cash-strapped public schools.

Source: Chicago News Cooperative

By Rebecca Vevea

With the Chicago Teachers Union and parents’ groups calling for Mayor Rahm Emanuel to pour funds from special taxing districts into the city’s cash-strapped public schools, a group of aldermen Tuesday proposed an ordinance that would force the city to do just that.

If passed, the Responsible Budget Ordinance would require the city to release 50 percent of the total amount of unallocated funds in tax-increment-financing, or TIF, districts that have more than $5 million in surplus funds at the end of each fiscal year.

“The day of reckoning on these TIFs has come,” said Ald. Robert Fioretti (2nd Ward) Tuesday at a news conference announcing plans to propose the ordinance.

An estimated $500 million of so-called surplus money sits in the city’s coffers in the form of taxes collected in TIF districts that has not yet been spent in them, Ald. Scott Waguespack (32nd), the ordinance’s sponsor, said Tuesday. City spokeswoman Kathleen Strand said the city does not yet have an estimate for whether a surplus of TIF funds could be declared when the year ends.

The measure–which the teachers union promoted in closed-door meetings with aldermen on Monday–faces long odds in the City Council. Ald. Patrick O’Connor (40th), Emanuel’s unofficial floor leader, said he is not sold on the idea of declaring TIF surpluses. The CTU has not proved the school district has been denied any money, he said.

Ald. Deborah Graham (29th) said Monday that she doubted the ordinance would pass the council.

Emanuel has dismissed the idea of declaring a TIF surplus, saying that he favors long-term solutions and not one-time fixes for the school district’s deficit.

Under the current system, TIF money is exclusively earmarked for capital projects, such as new construction and renovation. The city can use TIF funds for operational costs such as teacher salaries only after the mayor declares a surplus or the TIF district expires.

In 2010, then-mayor Richard M. Daley declared a TIF surplus for the first time since the city began using TIFs, returning $123 million to the city’s public schools. The school district has budgeted to spend that money in its current fiscal year.

Over the past 10 years, TIF revenues have generally exceeded expenditures, allowing balances to accumulate, according to the city’s Annual Financial Analysis.

The city began using TIF in 1984 to spur economic development in blighted or declining areas. Once the city designates an area as a TIF district, the amount of property taxes that the city, county, schools and other local governments can collect from it is frozen for 23 years. Any new tax revenue generated from rising property values — the tax increment — is collected by the city and must be spent within the district or in a bordering one.

The CTU and community groups have called for Emanuel to declare a TIF surplus and disperse some of the money to the schools. Chicago Public Schools recently closed a $712 million deficit for the upcoming school year in part by withholding a 4 percent contractual raise for teachers, setting off an ongoing dispute between the union and the City Hall-controlled school system.

Waguespack plans to introduce the surplus ordinance at Wednesday’s City Council meeting and he said 15 aldermen have agreed to support it, including seven who appeared with him at Tuesday’s news conference: John Arena (45th), Will Burns (4th), Fioretti, Toni Foulkes (15th), Joe Moore (49th), Proco “Joe” Moreno (1st) and Nicholas Sposato (36th).

On Monday, Carole Brown, a member of Emanuel’s “TIF Reform Panel,” in a presentation to the council’s budget committee recommended the city should declare between 20 percent and 30 percent of uncommitted funds from TIF districts as surplus.

O’Connor said the call for spending surpluses is based on an inaccurate assumption that schools are not getting all they are entitled to from the city’s tax levy.

“Quite frankly, I don’t think they understand they’re gotten every dime that they put forth in a tax levy,” he said. “They’re never been deprived of any money, so it’s kind of an argument, for me, falls on deaf ears.”

The Chicago Board of Education raises money from taxpayers by setting a levy on properties in the city. Bill Vaselopulos, the tax extension manager in the Cook County Clerk’s office, pointed out that TIF districts do not deprive the schools of their total tax levy. That is because property owners outside of TIF districts pay more in order to make up for the taxes withheld by the city from the properties inside the districts.

Even if the city did release surplus TIF revenue, it would still not be enough to cover the school district’s systemic financial deficits, analysts warn.

“TIF is not the answer to Chicago Public Schools’ financial problems,” said Laurence Msall, president of the government watchdog The Civic Federation. “There’s not enough money in the entirety of TIFs to offset those costs.”

Moore, the 49th Ward alderman, acknowledged that revenue from TIF surpluses alone is not enough, but he said the city could ease the cash crunch faced by city agencies if it would release money already collected from taxpayers, but not earmarked for use.

“It’s not a cure all, but it will help close the gap,” Moore said. “Those dollars are there. Let’s put them to good use.”

Hunter Clauss contributed reporting.