Chicago’s TIF program has long been criticized as a mayoral slush fund. Ostensibly a tool for redeveloping blighted neighborhoods, TIF enables any new tax dollars generated in a district—the so-called “increment”—to be fed back into a special fund that can only be spent in that district. This projected revenue stream can be used to back bonds to finance infrastructure and jump-start development. At least, that’s the theory. Many of Chicago’s most prosperous neighborhoods are located in TIF districts and have generated huge incremental revenues. The Central Loop TIF district took in nearly $1 billion over its lifetime. When the district was slated to expire due to a statutory sunset, the city created the giant LaSalle Central TIF—covering a booming part of the West Loop—to replace it. None of the taxes from new developments in these districts flows automatically to police, libraries, parks, or schools. The funds go into the city’s TIF account, and the mayor has discretion on how they’re spent. Some TIF funds have been used for construction of new schools, but more than half have been handed out as subsidies to private businesses. The true purpose of Chicago’s TIF districts—which now take in about $500 million per year—appears to be tending to high-end residents, businesses, and tourists, while insulating them from the poorer segments of the city.
Chicago is clearly afraid of sharing Detroit’s fate: losing wealthy residents and their sizable tax dollars. Mayor Emanuel is banking on the hope that keeping the rich folk happy will provide enough revenue over the long run to fund the social services that the less fortunate depend on. This is a big gamble: if the $100 million waterfront boardwalk and $54 million biking trail turn out to be boondoggles that do nothing for the one percent, the closure of dozens of public schools and thinning out of a police force during an internationally famous murder epidemic will be difficult to defend. Our guess is that Chicago will continue to hemorrhage the residents it has faster than it can attract high-income new ones.But if it pays off, Chicago will approach something like Mayor Bloomberg’s New York. Under Bloomberg, New York thrived as the “Luxury City,” home to a small contingent of super rich, accompanied by a large, struggling servant class. It’s possible, if not always easy, for these two groups to coexist, but the high taxes, regulations, and high cost of living have driven the middle class out in droves. The cutting edge of blue urban policy, then, is catering to the rich at the expense of the middle class.Cutting funds from schools, police, libraries, and parks while funding chic promenades and trendy nature walks to mollify the rich is not what many blue city voters think they’re voting for.[Rahm Emanuel image courtesy of Getty Images]