Chicago Mayor Brandon Johnson’s proposal to borrow $1.25 billion to sustain an array of housing and economic programs earned praise from some financial watchdogs ahead of its narrow passage out of the City Council last week. But some experts and alderpeople alike are kicking up doubt over a promise underlying the administration’s plan to pay the money back.
The City Council voted 32 to 17 on Friday to approve the spending measure after fending off multiple attempts from alderpeople to reduce the borrowing or tighten the City Council’s oversight of spending.
The massive 37-year borrowing plan relies on winding down the city’s dependency on the controversial tax-increment financing (TIF) program, which has long been criticized as a patchwork and politically based system for funding construction projects around the city.
During a hearing on the bond plan last month, Chicago Chief Financial Officer Jill Jaworski added her name to the list of TIF critics.
“TIF has funded many projects, but it’s a flawed instrument because of its geographic limitations,” Jaworski said at the hearing on March 22. She added that the special districts, which build up local economic development funds by collecting year-over-year growth in property tax revenues, are piddling in the neighborhoods that need the most government support, while wealthier districts close to downtown drum up “huge surpluses.”
TIF districts are enabled by state law to breathe new life into “blighted” areas and sunset 23 years after they’ve been created. But municipalities can add 12 years onto each district’s life if they get state lawmaker approval.
When a TIF district expires, the tax revenues it holds are released back to the city, school system and other local governments that levy property taxes in the area.
Letting dozens of districts dissolve when their expiration dates come due over the next several years and releasing the money back into the city’s general fund is the foundation of the administration’s plan to bankroll the projected $2.4 billion cost of repaying the bond.
“This is exactly what ratings agencies say we need: recurring revenues, not one-shots,” Jaworski said.
But wary financial analysts, TIF experts and even some alderpeople have warned that the city will get access to those recurring revenues only if city officials let the districts expire on schedule — which would be a sharp departure from the city’s past practice.
An Illinois Answers Project analysis of TIF districts shows that between 2019 and 2023, city leaders approved extensions for 26 districts, most for 12 years, while allowing 22 districts to expire.
As part of the bond proposal, city planning officials released criteria they’d use to decide whether to propose 12-year extensions for TIF districts. They include areas with low median incomes, high poverty and large concentrations of city-owned vacant lots.
However, the City Council has generally extended the lives of wealthier, more lucrative districts while letting districts in poorer neighborhoods sunset. The districts that were extended between 2019 and 2023 pulled in $426 million when adding up revenues from the year that the City Council voted on their extensions. Meanwhile, the districts that were allowed to expire during the same period pulled in less than $83 million during the final years of each of their existences.
Now, officials in the Johnson administration say they’ll stop extending the deadlines for TIF expirations. But not right away.
The planning department’s bond repayment model assumes that the City Council will stretch out another eight districts in 2024 and 2025, waiting until 2026 before switching to a policy of letting every remaining district sunset on schedule.
Peter Strazzabosco, a spokesperson for the Chicago Department of Planning and Development, wrote in a statement that the department could propose more TIF extensions after 2025 “subject to demographic and financial analysis by DPD to determine potential impact to the bond model presented to council.”
Any change in the analysis will have to be shared with the City Council, Strazzabosco said. Still, the strategy has made some analysts wary.
“Were I a ratings agency, I would just assume that none of those expirations are actually going to happen … and allow for an upside if all that actually happens,” said Matt Fabian, lead analyst at the Massachusetts-based research firm Municipal Market Analytics, which advises investors on municipal bonds.
“If this were … a government with a history of conservative planning and fiscal practice, then you could take these numbers more at face value,” Fabian said. “But it being Chicago, [it has] a history of pushing things into the future and using very sophisticated cloaking of what it’s actually doing.”
Strazzabosco said ratings agencies should be assured that city officials will not authorize any bond sales unless they can point to specific revenues to back them up.
“Bonds will not be sold until funds are actually needed, which ensures the city will understand projections prior to the sale,” Strazzabosco said. “If returning TIF revenues are less than anticipated, the city would issue less than $1.25 billion in bond funds.”
The City Council this year has already approved a three-year extension for the Fullerton/Milwaukee TIF district, which was set to expire in December. Planning department officials have declined to confirm which districts they’ll propose to extend. But the economic model they drew up for the bond plan includes what they’ve called a “stress test” that assumes 12-year extensions for five more districts this year — including the high-grossing Central West TIF on the Near West Side — while letting 14 districts lapse.
The planning department’s bond repayment model factors in extensions for an additional three districts in 2025 — including two on the city’s North Side — and assumes another eight will dissolve on schedule next year.
Letting any TIF expire carries political risks. City planning officials face formidable pressure from alderpeople who want to sustain TIF districts that raise money for local projects in their own wards.
Late last year, city officials secured a state law authorizing the extension of the Division/Homan TIF district in the Humboldt Park neighborhood. Ald. Jessie Fuentes (26th), whose ward includes most of the district, supported the bond plan but said she is a staunch advocate of extending the life on Division/Homan TIF, which is set to expire next year.
“We have a couple of schools that are in that TIF that are in need of infrastructure,” Fuentes said. “While I believe in … at some point transitioning out of TIF, right now we’re still in need of it for investments in the 26th Ward.”
The same state law that paved the way for the Division/Homan extension also greenlit another 12 years for the Lawrence/Kedzie TIF district, which siphoned off more than $12 million in local property taxes last year, records show.
A staffer for Ald. Rossana Rodriguez-Sanchez (33rd) advocated for the extension in an email obtained by Illinois Answers Project.
“I wanted to know how much is currently in the Lawrence/Kedzie TIF and whether anyone has formally requested an extension to the TIF?” Rebecca Rios, director of development for Rodriguez-Sanchez, wrote in a Nov. 7, 2023, email to Chicago Department of Planning and Development deputy commissioner Tim Jeffries. “If not, please let me know what the process is to request an extension.”
The law authorizing the extension passed the Illinois General Assembly days later.
Illinois Answers spoke with alderpeople representing 13 of the 19 TIF districts that are scheduled to expire at the end of 2024. Nearly all said they’re asking city planning officials for extensions.
Ald. Peter Chico (10th) said he wants the Lake Calumet Area Industrial TIF to stay so it can be tapped to pay for work on a soccer field. Ald. Silvana Tabares (23rd) and Ald. Marty Quinn (13th) are backing an extension for the 63rd/Pulaski district so it can pay for an annex at Hubbard High School.
The Greater Southwest Industrial TIF district in the city’s 18th Ward is set to end this year after having raised more than $15 million through 2022. Ald. Derrick Curtis (18th) said he supports the mayor’s push to end the city’s reliance on TIF for project funding — but not at the expense of the existing TIF districts in his ward.
“I would be one that would be selfish with my TIF,” Curtis said. “They’re very useful. I use TIFs for infrastructure, curbs and gutters that I can’t afford with my menu money.”
Each City Council member’s incentive to sustain TIF districts in their own ward can be powerful enough to transcend the elected official’s overall political views, said Rachel Weber, a professor at the University of Illinois at Chicago’s College of Urban Planning and Public Affairs who has studied TIF for more than two decades.
“To them, it just looks like an ATM that’s potentially spitting out money that they have some power over,” Weber said. “They want to negotiate with the developer that’s interested in building something in their ward, and TIF is seen as a very critical negotiating chip that allows them to horse trade.
“They don’t want to give that up when there isn’t a … replacement funding source,” she added.
Ald. Matt Martin (47th) said critics should be reassured by a recent amendment to the bond ordinance requiring city finance officials to come back with annual updates on the city’s repayment plan.
“Those reports will be an important tool to make sure we’re not saddling ourselves with debt that we’re not in a position to pay back,” said Martin, who supported the bond plan and said he does not plan to resist a pair of upcoming TIF district expirations in his North Side ward. “Collectively, it’ll be our responsibility to continue to make sure those safeguards are in place.”
Ald. Gilbert Villegas (36th) voted against the bond proposal. He told Illinois Answers that he was skeptical in part because it lacked something TIF districts guarantee: a marker of how much money he can expect to go to his ward.
“I have to be able to point my community toward where [the money] is going,” Villegas said. “And if it’s not a specific building or project, I’d like to see if there can be corridors created.”
City housing and planning officials bowed to alderpeople by guaranteeing council approval for bond-funded projects costing more than $5 million, and by beefing up transparency requirements in the ordinance. But they’ve balked at demands to show where in the city bond-funded projects will be built, maintaining that the point of the citywide bond is to break out of geographic boundaries.
Other alderpeople, like Ald. Brendan Reilly (42nd), have asked city planning officials to cement a list of the TIF districts they want to extend so the council can be certain the others will expire.
Planning Department Commissioner Ciere Boatright said during a hearing on April 11 that officials had a “draft list” of planned extensions but no public commitments.
The bond plan would be undermined if city officials are not exercising their power to extend TIF districts “very judiciously, very cautiously,” Weber said.
“You’ve got to wonder: if you’ve got to keep on extending a TIF district, then what’s going on there?” she said. “Twenty-three years is a long time already. TIFs were not meant to be used in perpetuity.”
Strazzabosco said city finance officials will “monitor TIF expirations each year and issue debt based on available revenue from this source. If the TIF expiration schedule changes, our debt issuance plans will change accordingly.
“DPD believes the bonds will offer greater opportunities than most TIF districts and that alders recognize this as well,” Strazzabosco said.
