How Do TIFS Work?

WHAT IS A TIF?

TIF stands for Tax Increment Finance.

When a TIF district – say, this one is created –
The value of ALL the properties inside the district is assessed or calculated and the total amount of property tax generated by all those properties is noted – let’s call that number the BASE AMOUNT OF PROPERTY TAX REVENUES. The life span of a TIF district is 23 years. For the next 23 years all property revenue ABOVE this BASE AMOUNT is captured by the TIF district. This amount – the amount over the BASE is called the INCREMENTAL REVENUE. The process looks something like this:

The important thing to note is that the city and county are fueled by property taxes. Just about every thing we do or use in the city – police, fire protection, the public schools, public transit, the public libraries, our parks and the basic operations of the city and county – these are all powered by our property taxes. If you rent, then a portion of your rent will eventually make it into that pool, as the owner of the property you rent must pay property taxes. In Chicago some twelve agencies depend on property taxes to operate:

Here is another look at who relies on our property taxes for their operation:

So if TIF districts take property taxes “off the top” – how does this affect all those agencies that rely on property taxes for their operation?

HOW MANY TIF DISTRICTS ARE THERE?

There are 163 TIF districts in the city of Chicago. In 2011 they collected $454 million in property taxes.

Since the first TIF was created in Chicago in 1986, they have extracted over $5 billion in property taxes (according to the Cook County Clerk’s Office).

TIFs have grown through out Cook County, not just in Chicago.

WHO GETS TIF DOLLARS?

The Chicago News Co-op (now defunct) did an extensive research project to answer this question. using ONLY data from 2002 to 2010 they found that HALF of all the property taxes captured by TIF districts went to private businesses. What about the 16 years BEFORE that time period?

Here are some of the companies that have received property tax subsidies or other benefits from the TIF program in Chicago:

And there is:

• Hyatt Hotel Hyde Park -$5,200,000 [Download the development plan – Harper_Court-Hyatt_CDC]
• K-Mart -$3,700,000
• Quaker Oats -$13,000,000
• Union Station Health Club -$3,200,000
• Block 37 developers -$12,000,000
• Chicago Symphony -$2,500,000
• Sears -$13,700,000
• United Airlines -$32,000,000
• Rush Medical Center -$75,000,000
• Loyola University -$20,400,000
• Sara Lee -$5,000,000
• Wrigley -$15,000,000
• Home Depot -$8,000,000
• Keebler – $2,000,000
• Jewel/Osco – $9,600,000
• Target -$9,900,000
• UPS – $11,300,000
• Wilson Yard developer -$54,200,000
• Grossinger Auto – $8,500,000

Here is a humorous (but fact based) look at TIFs by Adam Verwymeren for the Medill News Service.

IT’S A STATEWIDE ISSUE

Across the state of Illinois some 445 municipalities have spawned 1,220 TIFs. According to the Illinois State Comptroller’s Office, 530 of these TIFs – or FULLY 43.4% – are out of compliance and had not filed their required annual reports or other paperwork at the time the last state report was issued (9/14/12).[ Download the report here: 2010-State_TIFNonComplianceReport]

IT’S A NATIONAL ISSUE

TIFs are in every state except two, Arizona and Wyoming.

[TIF Report Home Page] [Visit The TIF Reports web site to see our ongoing research]