Cities across the nation were already operating under strained resources when the Great Recession of 2008 wreaked havoc on their budgets. For Chicago, in particular, the fallout triggered the eruption of several serious and complicated policy problems that had been slowly simmering for decades in the underbelly of Chicago politics.
Chicago is now suffering the cumulative effects of the problems relating to Chicago Public Schools, underfunded pension programs, deteriorating infrastructure, sharp declines in revenues, high operating costs, and pervasive violence in neighborhoods. Thus far, the response to these problems has largely been to cut vital services and force residents to pony up more money for dwindling city services. Chicago's political and civic leaders want us to believe that we must make difficult policy decisions according to how they see things. The reforms that have been implemented and suggested by our leaders place vulnerable groups at an even greater disadvantage and greater tax burdens on Chicago citizens who are not in the position to absorb these higher costs.
But, there are alternatives to more and higher taxes that should be explored to keep Chicago healthy and thriving.
To Tif or Not to Tif
The national economic crisis highlighted every deficiency in how the city does business. There is a desperate need for structural reform. Local media is full of daily proclamations from city leaders in which they portray government as stretching resources and developing more efficient spending policies. However, they have consistently ignored a major source of local revenue that could be easily tapped without increasing taxes or cutting services. Chicago has long been criticized for its use of incentives to promote business interests. This model of development assumes that if you stimulate business you create jobs and you generate more tax revenues.
Scholars and community leaders have raised red flags to bring our attention to the often problematic nature of business incentives, particularly Tax Increment Finance ( TIF ) districts. Despite widespread criticisms and findings surrounding the costs incurred by local governments as well as the diminished benefits, Chicago has distributed TIFs in a manner that has proven to be unsustainable and fiscally irresponsible.
In Chicago, there are approximately 150 TIF districts that retain a considerable portion of the property taxes collected in their communities for the purpose of reinvesting it in the district. In other words, there are millions of dollars in property taxes that never make it to the city's coffers. Instead, these monies are utilized to support redevelopment projects, which often include incentives to businesses in the area.
It would be easier to accept the city's sacrifice of these funds, if the funds were being directed at addressing blight and promoting economic development in distressed communities—unfortunately that is not always the case. Recent scandals have shed light on the lack of transparency in how TIF funds are approved and spent. We need to know the businesses that have benefitted from the policy and the size of the subsidies provided. Re-allocating the monies from these wealthy TIF districts—which are not blighted and fully capable of attracting and retaining private investment on their own—would add a considerable amount of funds to the city's general budget.
This enormous increase in revenue to the city could aid in alleviating the financial stresses related to the educational system, pension funds, infrastructure improvements, and the credit rating debacle.
While devising innovative strategies to stretch the city's diminishing resources—closing more schools, forcing city government workers to retire later in life, freezing current retirees cost of living adjustments, increasing fines and fees, etc.—our leaders are subsidizing private investments on a large-scale in a dubious effort to halt economic downturns.
By prioritizing the interests of their most wealthy constituents over balancing the budget, providing quality services, supporting vulnerable residents and promoting the long-term economic vitality of the city, Chicago's use of business incentives adds to its reputation of machine-like and shady politics.
Reductions in the city's use of incentives is not an attack on business. It is fiscal policy reform that is essential to saving the city's fiscal health. To continue business as usual would be grossly irresponsible and detrimental to the future of our city.
"It's Your Money: Illinois Election 2014 and Fiscal Crisis in Illinois" is the focus of a panel discussion Thursday, Oct. 23, 4-6 p.m. at Loyola University's Lake Shore Campus. The program is hosted by The Gannon Center for Women and Leadership and The Chicago Network.
The conversation will be moderated by Tracy Baim, publisher of Windy City Times. The panelists are G. Dennis Conroy of Metropolitan Family Services, Katie Drews of the Better Government Association, Greg Hinz of Crain's Chicago Business, and Twyla Blackmond Larnell from the political science department of Loyola University Chicago.
Longtime Chicago gay playwright and activist Nick Patricca is one of the organizers of the event.
See LUC.edu/gannon . The panel is in McCormick Lounge, on Loyola's Lake Shore campus. Seewww.luc.edu/media/lucedu/webteam/pdfs/lsc.pdf .
Twyla Blackmond Larnell is assistant professor of political science at Loyola University Chicago. She specializes in the study of local government financing. © tblackmondlarnell@luc.edu .
Nick Patricca is professor emeritus at Loyola University Chicago, president of Chicago Network and playwright emeritus at Victory Gardens Theater. © nicholas.patricca@gmail.com
