Loopholes

If there’s one thing that even Mayor Richard M. Daley’s harshest critics give him credit for, it’s pulling Chicago back from the brink of economic decline. While other Rust Belt cities are struggling to redefine themselves, Chicago’s downtown is bustling.

New high-profile corporate headquarters–”from United Airlines to Boeing Co. to MillerCoors–”are perched atop a growing skyline. Decaying theaters that not long ago teetered on the brink of closing now draw decked-out patrons. Trendy new shoe stores, high-end cosmetic shops and clothiers lure a steady stream of shoppers to State Street.

Massive public spending through Daley’s go-to economic development program–”Tax Increment Financing–”has played no small part in fueling the downtown growth. It has been a major source of public investment and promoted by city officials as a key to bringing jobs and resources to reverse blight.

Critics, though, have questioned whether the Loop is really rundown, and they’ve pointed out the strain that the designation puts on the rest of the city. When a TIF district is created, the bulk of the property tax revenues in that area are withheld from public agencies, such as schools, and reserved for spending only in that one small taxing district. The challenge is that while the Loop has become a major economic engine, most of the new property tax revenue generated there stays there. Under normal circumstances, that money would have been thrown back into the city’s budget for economic development, public safety, education and other needs throughout neighborhoods.

From 2004 through 2008 alone, $1.2 billion in property tax dollars has been siphoned from the city’s budget, parks, schools and other local taxing bodies to exclusively prime the Loop and the Near South Side community to which it abuts. The small piece of land comprises only two of Chicago’s 77 community areas but accounted for 55 percent of all TIF money spent in those five years, according to an analysis by The Chicago Reporter.

Under state law, TIF districts can last up to 24 years. But even before the Central Loop TIF expired in 2008–”collecting more property tax than any other special taxing districts across the city–”city officials decided to capture even more downtown property tax revenue with two new TIF districts.

The spending has helped put Chicago on the map as an international city. The downside, however, is that the city has actually lost big under the strategy when it comes to jobs, according to the Reporter’s review of federal employment data.

Creating jobs isn’t the sole purpose of TIF; however, it’s a key component. Job creation in the Loop is critical considering that 29 percent of all jobs in the city are located within the 15-block stretch, bounded by Roosevelt Road to the south, the Chicago River to the west and Kinzie Street to the north.

Despite the billion-dollar investment, the Loop lost 12,296 jobs during the better part of the past decade and virtually all–”94 percent–”of the job losses affected Chicago residents compared with 6 percent by those living elsewhere. From 2002 to 2008, the bulk of those losses came from people living in predominately African-American communities. Those living across the South and Southwest sides took 84 percent of those losses during that time.

While job pay has improved from 2002 to 2008 with the number of jobs paying more than $40,000 a year growing, commuters and residents from a handful of white and racially mixed, gentrifying neighborhoods on the North Side have slid into most of those jobs. That has created a double whammy for job-starved communities across the South and Southwest sides, which in addition to losing ground in the downtown job market, have realized just 30 percent–”or $270 million–”of the TIF dollars invested in their neighborhoods from 2004 through 2008, the most recent years that the data are available.

Residents from communities that converge in the 6th ward–”which includes parts of Chatham, Greater Grand Crossing, Roseland and Englewood–”along with a handful of neighboring South Side communities account for 52 percent of those who lost Loop jobs from 2002 through 2008. And residents of Will County–”Chicago’s far south and southwest suburbs–”alone gained 840 more Loop jobs paying upward of $40,000 a year during that same period than the combined number of residents from 23 predominantly black communities on the South and Southwest sides of the city.

The whole point of TIF is to spur development in blighted neighborhoods. But the Reporter has found that many of the areas needing economic development money the most aren’t getting much; their sales tax revenue is shrinking, and the number of Loop jobs they hold are dwindling. At the same time, elected officials have failed to force businesses to set local hiring or wage standards, though many of these businesses are benefitting from millions of local tax incentives to move to the Loop.

If Chicago’s next mayor and Chicago City Council follow Daley’s lead, the Loop and its neighbor to the South are slated to continue diverting more public money from the tax rolls during the next year than any other part of the city. And while those stumping for Daley’s job have talked about leveraging TIF money to bolster city services, including increasing police presence in high-crime neighborhoods, there’s been little mention of whether candidates would cut off the downtown spigot and begin pumping money back into neighborhoods.

Critics point out that the Daley administration’s narrow focus on building up the downtown area has exacerbated unemployment in neighborhoods by stifling new economic development in other parts of the city.

By law, TIF money is supposed to be reserved for spending in dilapidated areas. But neighborhoods riddled with blight, such as Woodlawn, Roseland and Chicago Lawn, received just 11 percent of all TIF spending during the latter half of the decade, a Reporter review of city data found.

TIF funds were “supposed to be in areas that cannot develop private capital,” said Cook County Clerk David Orr at a fall news conference where he reported that the special taxing districts had diverted $520 million from the tax rolls in 2009 alone. “All of a sudden you have them in burgeoning areas,” he added.

Five new TIF districts were created last year; one of which is downtown. The four TIF districts already capturing property tax dollars in the Loop and Near South areas accounted for roughly one-fifth, or $96.4 million, of all of the special taxing district money collected last year. Like other areas that are more successful in raising money in the special taxing districts, city officials have been able to go on a TIF spending spree in city neighborhoods with some of the highest property tax wealth.

One example is the Near South Side, the community second only to the Loop when it came to TIF spending since 2004. It also happens to be Daley’s neighborhood. The bumper-to-bumper traffic along the stretch that picks up at the south end of the Loop is a testament to how leveraging taxpayer money can help lure new businesses, shoppers and residents.

A hulking retail corridor anchored by Roosevelt Road is the most obvious example of how public money can be used to lure new business. There, taxpayers quietly helped developers and corporations assemble property, and lay sewers, pavement and roadways to lure two new grocery stores and a Home Depot, which helped attract a Target store and more than a dozen other national-chain stores and restaurants.

Chicago residents had more jobs on the Near South Side where there was an overall 18 percent growth in the job market from 2002 to 2008. Citywide, the number of jobs grew by less than 1 percent, or 6,239, during that time. Those residents didn’t do as well, though, when it came to getting in on rising wages. The number of jobs paying $15,000 a year or less grew by 35 percent in the Near South TIF District between 2002 and 2008, federal data show. Citywide, those making $15,000 or less fell by 14 percent during that time.

Alderman Freddrenna Lyle of the 6th Ward, a native of Chatham, a solidly middle-class South Side community, says businesses receiving public subsidies need to agree to hire a certain number of Chicago workers and set higher-wage standards before their projects get approved.

She said that city officials often court companies with ready-made workforces. Taxpayers put up more than $15 million–”a $5.5 million TIF subsidy along with a $10 million fuel tax rebate–”to entice United Airlines to relocate it’s headquarters to the Loop in 2007. In exchange, company executives agreed to bring 350 jobs to its namesake building at 77 W. Wacker Dr. The only local hiring requirement was that Chicago workers fill half of the labor hours to rehab the airline’s six-story office space.

It’s not clear how many employees currently work at United’s headquarters. In all, the number of jobs in the census block where United is located, which is shared by Microsoft Corp.’s Chicago office and a handful of other firms, actually shrank by 537 between 2002 and 2008. And, in keeping with the trend of city residents bearing the bulk of the job losses, Chicagoans accounted for 72 percent, or 388, of those losses, federal data show.

Like other corners of the city, there are few job requirements in the heavily subsidized Loop redevelopment agreements drafted at City Hall, a Reporter review of public contracts found. Rachel Weber, a University of Illinois at Chicago professor who has closely studied economic development under TIF, calls the ongoing unwillingness by many aldermen to look at the quality of the jobs they’ve helped create during the past decade “the hidden elephant in the room.”

Weber said elected officials were captivated by the “edifice complex”–”or a desire to see new construction projects. At the same time, city officials exhibited little will to set local hiring or wage expectations.

City officials have been criticized for voting in lock step with the redevelopment strategy. And little opportunity has trickled down to workers in the Loop, particularly those earning $15,000 to $40,000 annually. Those jobs–”which fall closest to the pay rate that anti-poverty advocates describe as a living wage–”have been vanishing at the fastest rate.

In early November, the Chicago Community Development Commission, the board that gives the initial nod to public spending on TIF projects, signed off on what city officials call the “largest single TIF commitment for human capital development to date.” Under the deal, Accretive Health will “make its best efforts” to hire 51 percent of its workforce within the Chicago city limits in the next 10 years in exchange for a $6 million subsidy to consolidate its headquarters and training center on the fifth floor of 231 S. LaSalle St.

Last spring, fifth-floor tenants put up fierce resistance to Lyle when she sought to add some accountability by introducing a measure that would have set higher pay standards–”an $11.03 minimum wage–”for people working in commercial developments that received $250,000 or more in public subsidies. That proposal was spurred by a proposed Wal-Mart Stores Inc. expansion, which labor and living-wage activists have been pushing back against for years. They say it is a threat to depress wages. Lyle’s ordinance was shelved in the City Council’s Finance Committee after Wal-Mart agreed to pay its workers in Chicago $8.75 an hour, which is 50 cents above Illinois’ minimum wage.

“That agreement was never put in writing,” points out Booker Vance, the pastor of Chatham’s St. Stephen’s Evangelical Lutheran Church, and one of the city’s most outspoken living-wage activists. He has spent the past year pressuring elected officials to require that companies receiving public subsidies guarantee higher wages and commit to hiring local residents.

Community organizations and labor groups have launched a new community organizing campaign, New Chicago 2011, that’s calling on incoming city officials to spread the economic development money around to neighborhoods desperate for living-wage jobs and industry. The group is calling for more public investment in communities that are truly blighted. It wants mayoral candidates to commit to leveraging public investment to help stabilize wages and, ultimately, communities by supporting new living-wage and local-hiring standards.

“We want officials to answer the question: –˜What responsibilities do [publicly subsidized] businesses have?'” said Diane Doherty, executive director of the Illinois Hunger Coalition, a member of the campaign. “If there’s going to be economic development, how much are people from the community going to benefit from the jobs or the job training.”

New investment in truly depressed areas would also come at a critical time for communities with some of the highest unemployment rates in the country. It’s those same areas that are also swollen with low-wage workers. In places like Auburn Gresham, Englewood and West Englewood, 29 percent of all full-time workers received food stamps in 2008, according to census data.

To help balance his final budget as mayor, Daley plans to tap downtown TIF accounts. Even after withdrawing

$90.5 million, the Loop and Near South Side will still have the largest TIF accounts to play with.
“Yes, the city has dodged a bullet from becoming a Detroit,” said Alderman Ricardo Munoz. His Southwest Side 22nd Ward and a handful of predominately Latino communities that surround it have sustained some of the city’s most severe job losses, particularly in manufacturing, during the better part of the past decade. In South Lawndale, fewer than 16 residents held Loop jobs for every 1,000 residents in the community–”the lowest rate among the city’s 77 community areas. South Lawndale also pulled in less than 0.2 percent, or $4 million, in TIF investment from 2004 through 2008.

“We still have a long way to go,” Munoz said.

Contributing: Jeff Kelly Lowenstein. Ryan Jacobs, Louis McGill and Nick Moroni helped research this article.

Comments are closed.