An interesting process played out this week in Chicago as Mayor Rahm Emanuel announced a spending freeze and phase-out plan for seven tax increment finance (TIF) districts. The Chicago Sun-Times reported that the move would free up $250 million from the TIF districts over the next five years for use in the overall city budget, half of which would go to the Chicago Public Schools.

While city budget problems led to the decision, there have long been calls for ending TIF districts that have served their purpose and improving transparency in TIF operations and spending. This is important because Chicago has 145 TIFs that generate between $350 and $400 million in annual revenue.

The mayor’s TIF plan is also reported to include:

  • Returning at least 25% of the unrestricted cash balance of healthy TIFs to local government
  • Establishing a TIF termination policy under which districts would be automatically shut down in certain circumstances
  • Providing more detail on TIF spending through the city’s open data portal

While TIFs are a useful tool for economic and community development, greater transparency and accountability are needed. As an article in Crain’s Chicago Business put it:

What’s needed is a rigorous process in which each project’s public benefit is clearly spelled out, spending is scrutinized, contracting details are disclosed, and annual reviews assess whether a TIF district is still serving the public interest.

A recent report from Cook County Clerk David Orr providing great detail on Chicago TIFs  can be found here. As Orr explained in the Chicago Business article:

It’s not so much that TIF money is spent downtown or on private development projects. The problem is a lack of transparency, democratic debate and accountability in the TIF program.

This is consistent with our four core principles of using specialized data and analytical tools to support decision-making and preparing for greater transparency and accountability in the use of incentives.