In Woodlawn, questions about the city’s TIF program

The historic Strand building on Cottage Grove Avenue in Woodlawn will reopen in early 2016 with rental units and retail space.

Photo by Max Herman

The historic Strand Hotel on South Cottage Grove Avenue in Woodlawn is being converted into affordable housing and retail space.

Woodlawn is a perfect example of a community that could benefit from the City of Chicago’s tax increment financing program, economic development experts say.

Vacant lots, abandoned buildings and empty storefronts define many parts of the neighborhood. And small-scale entrepreneurs are typically the only people doing business there, along with national chains like Family Dollar that target underserved neighborhoods.

But a Chicago Reporter analysis found that most of the money generated in Woodlawn’s oldest TIF district, which includes a swath of 63rd Street and Cottage Grove Avenue, has not been invested in the area. Of the $30.8 million in revenue generated by the district from 1999 to 2014, according to city data, nearly three-fourths of the money was either unspent or transferred out of the district to repay the city bond debt from the construction of a high school in South Shore, another struggling South Side community.

The city can use property taxes from a TIF district to pay project costs in adjacent districts. Mayor Richard M. Daley siphoned millions of dollars  from Woodlawn and some other TIFs in high-poverty communities on the South Side to pay for the high school. This was part of Daley’s citywide plan to renovate and construct dozens of new schools, something that is typically funded by school bonds. The money added up $10.4 million, or about one-third of the revenue generated in the Woodlawn TIF from 1999 to 2014. The tax district was created in 1999.

The issues in the Woodlawn district feed into an ongoing conversation about how the city administers its TIF program — and which neighborhoods benefit from it.

Woodlawn TIF pie chart

Bill Lester, an expert on how the special tax districts are used in Chicago, grew up in Hyde Park, next door to Woodlawn. Lester, a professor at the University of North Carolina at Chapel Hill, said city officials have been able to “get away with calling things blighted that weren’t really blighted” and have used the districts inappropriately in the past. “I think Woodlawn is really where the true intent of TIF is.”

For the past several weeks, the Reporter has been writing about the economic challenges in Woodlawn, which in many ways reflect the issues in other black communities in the city and nation.

Tax increment financing is designed to help attract development to blighted communities. But critics say Chicago’s program has too often used public subsidies in communities like the Near North Side and the Loop that already appeal to developers. By comparison, TIF investments have lagged in communities like Woodlawn where the need for economic development is most dire.

Ald. Willie Cochran, whose 20th Ward encompasses the Woodlawn TIF district, declined to talk to the Reporter. The Mayor’s Office and planning department, which oversee the city’s tax increment financing districts, emailed a list of accomplishments in the Woodlawn district, including the rehabilitation of a historic hotel on South Cottage Grove Avenue.

A TIF district promotes economic development through reinvesting a percentage of property tax revenue from the area back into the district rather than distributing the dollars to city and county agencies. Money from the districts have helped subsidize hotels, businesses and housing, as well as parks and street improvements in blighted areas.

Tom Tresser, co-founder of Chicago’s TIF Illumination Project, has called for more transparency in how the dollars are used. The financial reports for the city’s TIF districts state that money is committed to projects, but often don’t provide details about how the money will be spent, Tresser said.

The Woodlawn TIF district had about $11.4 million, based on 2014 figures, the most current numbers from the city. The average year-end balance of the Woodlawn TIF district was $10 million between 2007 and 2014. The district generated an average of $3 million a year during that time.

Areas with high property values generate more tax revenue for TIF districts. That is one reason why the tax districts can have a marginal impact on some struggling communities. But property values alone don’t explain why Woodlawn hasn’t benefitted more from its TIF dollars.

It’s possible that the city has had trouble finding private partners to come to Woodlawn, experts say, despite the allure of a public subsidy. High-quality grocers, sit-down restaurants and boutiques don’t appear out of thin air just because a TIF district exists.

Residents and community development experts say Woodlawn’s high poverty rate and issues with crime have stigmatized the community, making it tough to lure businesses.

TIF districts can help communities overcome “reputational issues” through providing dollars for public-private partnerships, said David Merriman, an economics and urban planning professor at the University of Illinois at Chicago.

“So when you have money that’s sitting and not being used,” Merriman said, “It’s fair to ask why — ‘What’s going on with the money?’”

The chief goals of the Woodlawn TIF district are to support homeownership and business development, according to a city planning document drafted in the late 1990s.

At the time, an eligibility study and redevelopment plan found that the proposed 330-acre district was rife with deteriorated and abandoned buildings. The city strategy for economic development included improving public infrastructure, investing in parks and open space, subsidizing private developers and helping homeowners improve their properties.

Some of the spending in the Woodlawn district lines up with its mission, including about $2 million in grants to fund homeowner improvements, $1.7 million for public improvements for streets and lighting and $1 million for a park renovation.

While the impact of the city’s TIF program on Woodlawn may be questionable, one project is generating buzz: the rehabilitation of the historic Strand Hotel at 6315 S. Cottage Grove Ave., along a major commercial corridor in the neighborhood. The Strand marks the first Woodlawn TIF project that will include new retail space and new businesses.

Last year, the district approved a $2 million subsidy to Holsten Development, which is scheduled to finish the hotel project in November. The Strand will be reborn as a 63-unit mixed-income apartment building with three ground-level storefronts.

Holsten Development acquired the building and nearby land for $1, though it was valued at $675,000.

The project wouldn’t have happened without TIF money, said Andrea Keeney, Holsten’s senior development manager.

“Two million dollars might not in the grand scheme seem like a lot,” she said. “But for a project of this size it’s representing close to 10 percent of the total budget. It was critical.”

She said city planners should use the Strand’s resurrection to help develop some of the surrounding vacant lots and empty buildings on Cottage Grove. Cheap land from the city and a few million TIF dollars can go a long way, she said.

But even then, she said, city officials and residents have to work hard to help companies see past the stigma in Woodlawn. The Strand could be a part of that pitch.

“I know sometimes developers are reluctant to go past 63rd,” Keeney said. “So we hoped this would be a catalyst for change.”

Planning and prioritizing how to use TIF dollars are critical to tapping Woodlawn’s potential, experts say. But Merriman questions how high on the city’s priority list the Woodlawn TIF has been since it was created 16 years ago.

“I think the mayor can commit to making the TIF plan come to fruition,” Merriman said. “And not everything works, but then the city needs to come up with a new plan and think about how to make it work.”

Dominic Surya contributed to this report.