(The Center Square) – According to a new report from the University of Illinois Chicago, tax increment financing has led to significantly higher property taxes in the city.
Juan D. González, report author and senior fellow at UIC’s Great Cities Institute, said TIFs began as a well-intentioned and innovative method to revitalize neighborhoods and finance public infrastructure.
González said Chicago uses TIFs more than any other major city in the U.S.
“So it soon morphed into a tool that drove up taxes significantly for all property owners across the city, while it simultaneously diverted an extraordinary share of the property tax revenue away from the schools and other public services, González said.
According to the report titled ‘Chicago’s Runaway Development Tool: Who Paid and Who Gained from 40+ Years of Tax Increment Financing,’ TIF increased property tax rates citywide by an estimated average of 13.7 percent between 2014 and 2023.
UIC Great Cities Institute Associate Director of Workforce and Economic Development Matthew Wilson said the property tax base is frozen at its starting level when a TIF district is created. As property values rise, tax revenue generated by the additional value gets diverted to the TIF fund.
Wilson said Chicago’s TIF captures about $55 of property value for every dollar it creates.
“We found only about 1.8% of the growth that TIF captures can be actually attributed to the TIF investment. The other 98.2% would have happened anyway,” Wilson said.
Wilson said TIF is diverting the taxes generated by the increased property values away from schools and parks.
“So what happens is that the tax base is smaller, everyone’s tax rates have to go up. Everyone has to pay more in taxes to counteract the fact that money is being put into the TIFS,” Wilson said.
The report found that about 51% of tracked TIF project spending since 1986 went to downtown or nearby neighborhoods.
González called for greater accountability and transparency.
“The city’s record keeping is atrocious,” González said.
González said Illinois’ TIF law should be amended to reduce the size of TIF diversions.
“One way to do this would be to inflation adjust the TIF money that school districts take,” González said.
The report also recommended phasing out downtown TIF districts that achieved their original goals and directing more resources to small businesses and historically underserved neighborhoods.
