Can We Afford the 49th Ward RIF: Financing Chicago in the Post-Peak Oil Era

Mega-cities such as Chicago will confront major challenges in the Post Peak Oil era. The core problem facing our largest and most densely populated cities will be economic: we will have to meet rapidly increasing costs in day-to-day operation of our critical systems for transportation, water treatment, emergency response, sewage and waste treatment and disposal, law enforcement, and the maintenance of critical infrastructure necessary to deliver these services, in a climate of rapid and geometric increases in costs due to the draw-down of liquid fuels, production of which is projected to drop 5% a year or more from 2012 forward. 

Is it wise to divert future tax revenues to subsidies for private purposes, no matter what their merits may be, when Chicago currently is struggling financially and is unprepared for the post-Peak Oil era? At this time, the city's systems and infrastructure are in need of substantial repair and upgrading, and any further diversion, present or future, of public money to private purposes could further impair our ability to maintain a safe, orderly civil environment.

TIF and RIF financing mean the diversion of future tax increases (the "increment") from general revenues to private purposes, in this case the rehabilitation and winterization of rental properties in the 49th Ward. The amount of money involved is often substantial; in the case of the proposed 49th Ward RIF, up to $54 M will be diverted from general revenues in an era of steeply increased costs of operating the city in an era of steep reduction in available energy and vastly increased operating costs.

Additionally, other wards will also demand RIFs for similar purposes, which means that the amount of future property tax revenues diverted could be multiplied by 50, since many of the the south side and west side wards are burdened with much more rental housing stock in much worse physical condition than that of the 49th Ward. This could mean that, ultimately, up to $2.5 Billion could be diverted from general revenues to the purpose of rehabilitating rental properties, over the next 25 years,in addition to other subsidies for other private purposes, to the detriment of the City's ability to fund daily operations and make necessary investment in the upgrading and expansion of critical infrastructure to keep the city minimally safe and sanitary in an era of crippling shortages and rapidly escalating cost s for nearly all services and goods.

Given that Chicago's water and sewer infrastructure is decrepit and outdated, and will need substantial repair and upgrading to continue to meet current needs, and that its public transportation system is also in poor condition and ill-equipped to handle a steep and rapid increase in ridership that could occur if the cost of auto ownership were to become too expensive for low and medium income residents due to rapid escalation in fuel costs. Considering all of the foregoing, Chicago and the surrounding Cook County suburbs are currently ill prepared for the vicissitudes of Peak Oil and the terminal decline in oil and other fossil fuel production.

While the costs of running our city in such a manner as to ensure basic safety and sanitation will rise steeply and rapidly, tax revenues could well be in free fall due to declining incomes of residents and in business activity, as declines in fuel supplies will raise the costs of all business activities in proportion. Many businesses will fail and nearly all will face major challenges, while employment opportunities will wither. Property taxes, sales taxes, and all other taxes and fees will most likely have to be increased steeply to meet daily operational expenses and perform "patch" repairs in critical transportation, water, and sewer infrastructure, and expansion and improvement of these systems will quickly become prohibitive. The capital necessary for expansion simply will not be there because of the debt overhang from the early 2000s that has absorbed all the capital that otherwise might be available to invest in replacing aged infrastructure and expanding our utilities and public transportation. Yet this investment will be necessary if the city is to maintain services at their current level for the current population of approximately 2.9 million and surrounding suburbs that rely upon our water treatment and sewer systems. Additionally, massive investment in the regional public transportation system will be necessary for the system to accommodate new riders as driving becomes prohibitively expensive for tens of thousands more local residents than currently use the system.

Chicago will therefore have to find a way to finance vastly more expensive daily operations and maintain and expand as needed the utility and transportation infrastructure needed to ensure that the city will remain safe and livable with steeply reduced energy imputs from that point forward. There is at this time no substitute for oil and other fossil fuels that will meet all energy needs,, and plans for alternative energy, such as expanded nuclear capacity, will take at least a decade and most likely two decades to be fully implemented. Expansion of our power generating capacity will also be problematic because of the shortage of capital.

In short, the city will have great difficulty in funding its daily operations and in finding the capital to invest in necessary infrastructure repairs and upgrades, with the revenues that will be available for the purpose. It will most likely be necessary to raise taxes substantially just to maintain services at their current levels and make emergency repairs on critical infrastructure. Investment in expansion and upgrades of that infrastructure to meet the needs of an expanding population of ex-suburbanites and immigrants from other cities and towns, in an economy that is shrinking in response to steeply higher fuel costs, will require massive capital outlays that will be possible only if tax revenues increase steeply.

Any further diversion of tax revenues from public purposes to private purposes, by means of a TIF, RIF, tax abatement, or any other direct or indirect public subsidy, will mean that less money is available to prepare the City of Chicago's systems and infrastructure, which are already somewhat underfunded and have critical deficiencies, and that the city could end up in a financial bind impossible to negotiate as costs increase 25% or more and it becomes impossible to operate on the revenues available. This could mean steep reduction of necessary services, such as sanitation, emergency response, and law enforcement; and cascading failures in critical systems such as water and sewage treatment, and transportation infrastructure, greatly endangering the health and lives of 2.9 million (and possibly many more) city residents; and rendering the city much less attractive as a place to do business.

Our most important task in preparing for the post-peak era is rendering our community more resilient and self-reliant in a context where government subsidies and services may be steeply reduced, or non-existent. In the future that is almost upon us, our governments will be increasingly unable to function as they have for the past century, and will be unable to provide funding and assistance for any but the basic functions of a local government, and surely will not have the means to provide subsidies to individuals for private purposes, no matter how worthy.

For these reasons, any further diversions of tax revenues, present or future, for private purposes, would mean putting our basic services at risk and would endanger the health and lives of Chicago's 2.9 Million residents, and possibly many more in Cook County that are dependent upon the same systems for essential services. As it is, large diversions of revenues from the public till to private purposes have crippled Chicago financially, and retarded the city's progress in upgrading its critical infrastructure and funding daily operations.Therefore, the proposed 49th Ward RIF,  should be tabled, and no future TIF or RIF financing should be considered. 

Additionally, extant TIFs and other subsidies to business entities should be reviewed and re-considered in light of their true benefits, if any, and the negative offsets to those benefits, with the aim of reducing as much as possible the drain on public finances, and building reserves for the expenditures we will need to make to keep our city and its environs livable and economically viable.

Uptown Update: 70% of Property Taxes in Wilson Yards TIF District Go to the TIF

Those who believe that TIF or RIF funds are "free" money need to take a look at what is happening to taxpayers in extant TIF districts in Chicago.
 
Uptown Update's November 15 post displays a tax bill for a property in the Wilson Yard TIF District. As you can see, fully 71% of the amount goes to the TIF district, and away from the schools, the police department, the fire protection district, the libraries, the parks, and all the other critical services and public amenities that make Chicago a good place to live, work, and do business. 

No wonder Chicago is having serious financial problems. We have over 160 extant TIF districts, with more being planned, notably the 49th Ward RIF that will cover the entire ward. Additionally, some TIFs are renewed when their 23-year term expires.

Was the Target store on Broadway worth diverting so much money from the municipal services that we need to have a safe and sanitary environment? Do the 200 or so jobs the store supplies offset the reductions in services and hikes in taxes and fees made necessary by the loss of tax revenues?

Remember, every dime allocated to a TIF comes out of city revenues. There's no such a thing as free money. 

What Hath the Loyola TIF Wrought: The Blighting of Sheridan Road by Loyola University

Your Devon-Loyola TIF dollars at work at 6610-28 N. Sheridan Road- still a blighted eyesore three years later, pictured at the left.

The recent destruction of the two charming old commercial buildings at 6572-90 by Loyola University was an unpleasant reminder, to me, of the monstrous misallocation of taxpayer money that is the Loyola-Devon TIF, a $50 million taxpayer-funded windfall for the university that is paying for the renovation of four buildings on the campus and gives Loyola University control over 270 parcels of land lining Sheridan Road from Devon Avenue to Farwell, and along Devon Ave. from Sheridan to Clark. I

Why didn't the university buy and demolish the blight-pit pictured above instead? We would love to see this reeking slum kicked down and replaced with a garden.

It's rather difficult, at first blush, to discern a connection between the economic leverage the TIF granted the university, and the demolition of these buildings. These buildings have been Loyola's property for years, after all. But it's difficult not to think that the economic power and spare funds granted the university by the TIF were a big factor in the university's decision to demolish the properties instead of renovating them. Worse, the loss of these buildings augers very ill for the beautiful, colorful little building that remains, for the TIF grants Loyola control over the entire block, and given modern developers' preference for over-scaled mega-buildings in preference to small ones, it is likely that the university has plans for this block that don't include quirky little buildings.- plans it couldn't contemplate were it not for its access to tens of millions of dollars in public money. If there are plans afoot for a large building down the road, then this building will fall, too, and cost us a beautiful, irreplaceable building and two fine old local businesses.

There was a public meeting concerning the demolition, which was by this time a done deal, and the the university promised to install a garden, which promise they are now talking about reneging on. There was no legal ground to stop the demolition, for these two buildings, while lovely, were not "significant", and the university pointed out that rehabilitating them would cost $500K while demolishing them would cost only $100K. So last week, down they came, and what was once a solid wall of charming, densely decorative old buildings is a gap-toothed block of gravel and dirt lots. The only remaining buildings are the el station building with Harris Bank and McDonald's, Beck's Books, and the incredibly decorative and charming building containing two great local businesses, Affordable Optical and Carmen's. This little building has an incredibly colorful terra cotta facade and it is difficult to imagine that anything built beside it in the future will come near equalling it in beauty and charm.

Thus the charm and character of a neighborhood is lost, and the economic power granted the university by the TIF is used not to improve the area and foster local economic growth, but to blight the neighborhood. Developer Daniel McAffrey's The Morgan at Loyola Station, the beautiful new rental apartment building that went up on Sheridan just south of the Loyola el is a major plus for the area, but it's not a sufficient offset to the destruction the university is wrecking elsewhere along the street. It could also be argued that McAffrey could have developed this building without the TIF, though the funds could sweeten the near-term losses this property is no doubt suffering in the current soft rental market. The rehabilitation of the old Village Theatre-with $200K public money- as the new 400 Theatre is another plus, even though it's not particularly well-done, but it is offset by the blighted 4-plus-1 at 6628 N. Sheridan, whose rehabilitation is being funded by funds from the TIF, and at this point is, three years later, a decrepit eyesore. The construction is proceeding so slowly as to be invisible, and the building appears to be partially inhabited and is advertising apartments as being available for rent. The parkway in front of the building is a weedy patch strewn with litter. 1200 W. Pratt, the very last building in the strip of land controlled by the TIF, was a decrepit slum purchased at an absurdly inflated price and rehabbed slowly into overpriced condominiums by Lohan Realty, and is now a market rate rental. The ground floor retail spaces are still under renovation, and the broad plaza in front of the building, which could easily be renovated into a beatiful focal spot for this street corner, is still a patch of cracked old concrete. While nobody was gladder to see this mangy slum vacated and renovated than I was, except for perhaps my landlord, it's difficult to see how the TIF funding made any difference in the fate of this building.

In summary, the Loyala TIF district has produced very little in the way of economic development relative to the allocation of public money,and has done more to destroy the tax base than add to it; all in all, the only winner is Loyola, which has managed to get the taxpayers to pay for the reno of four large campus buildings with money that is badly needed for municipal services such as police protection and infrastructure repair. Such development as has taken place, like the Morgan, arguably would have taken place without it and might even have taken place sooner were it not for the university's control over the strip. The eyesore at 6610-28 was better kept and occupied before "rehabilitation" began. The corner of Devon and Sheridan is still occupied by a former fast food outlet, which has now been rented to yet another fast food outlet. The Weinstein Funeral Home is now vacant, and the property with its four parking lots fronting (and defacing)Devon Ave., are for sale, with no plans in place for the development of these blighted parcels.

In arguing for the Devon-Loyola TIF, aldermen Moore (49th Ward) and O'Connor (40th Ward), argued that the university is a good neighbor that Rogers Park should be grateful for and that we should extend ourselves to keep the university here by tossing this well-endowed institution $46 million to improve tax-exempt property, which is not an appropriate use of funds under a program specifically designed to expand the tax base. However, their argument is pretty specious in view of the fact that Loyola has been here since 1878, through all the years of Rogers Park's early development and its later deterioration. What was the university doing, exactly, to combat the blight that spread rapidly through Edgewater and Rogers Park in the 70s and 80s? In any case, it's doubtful that Loyola would trash investments it has made on its campus here over the past 100 years simply for lack of a windfall it is not morally or legally entitled to, nor would it be at a loss to fund these projects without the TIF money.

This would be a good time not only to challenge the Devon-Loyola TIF, but the city's other TIF districts that have notably failed in their stated purpose and moreover have fostered ugly, inappropriate development that often fails economically, at massive cost to the public in both money and degradation of the civic envirnonment. The Berwyn-Broadway TIF gave us the strip mall slum at that corner with its incredibly ugly buildings and vast expanses of black asphalt, thus further degrading the blight-pocked Broadway streetscape. The Ashland-Diversey TIF destroyed dozens of charming old apartment buildings that could have been renovated into desirable housing and replaced them with another strip mall of overscaled suburban-styled Big Box retailers. The Broadway-Lawrence TIF is paying for the renovation of two exquisite old Uptown commercial buildings, but the major retailer, Border's Books, which was the beneficiary of local subsidies, will be vacating its space on Broadway as soon as it sublets its space, and will leave a huge vacant space that is unsuitable for a small local business and will probably sit vacant for many years.

But to to challenge these TIFs and to prevent other TIF districts from being formed, we need to not only make use of every law that would enable us overturn existing TIFs, but we need most to attack at the root, which is the 1952 legislation passed by Illinois that enables the formation of thse districts. We need also to demand legislation that protects property owners from eminent domain proceedings.

Village Theater Restoration: Our TIF Dollars at Work

A community meeting on the proposed restoration of the Village Theater at 6740 N. Sheridan Road will take place at:

MERTZ HALL-LOYOLA UNIVERSITY
BREMNER LOUNGE
1125 W. LOYOLA AVE.
TUESDAY, JUNE 3, 2008 AT 7:00 PM

The building's new owner, Anthony Fox, of ADF Capital, will be on hand to share his plans to restore the terra cotta exterior of the building, which houses a number of businesses. The current operator of the Village Theatre will be evicted, and Fox states that he hopes to operate the theater after restoration.

The proposal asks for $200,000 in TIF district funding. The property is part of the Loyola TIF district.

Personally, I love the Village Theater building, and I'm ecstatic that the new ownership intends to restore this beloved building. The Village is the last film house left in Rogers Park, and one of the last on the north lakefront. and the building with its broad brick plaza pretty much makes the corner of Columbia and Sheridan.

And $200,000 is not so much money, is it?

It's certainly not the worst use possible of funds made available to private entities by the devices of a program that should not even exist to begin with. What's $200K compared to the $2,000,000 grants to rental property owners and developers of overpriced condos along Sheridan Road,or, most of all, the tens of millions that are being used to fund the restoration and construction of the Mundelein College and other Loyola University buildings? At least the money earmarked for the Village Theater Bldg.will be used to restore a lovely old building that is a landmark of sorts, and for the benefit of businesses that make the neighborhood more attractive and livable.

It is just that the TIF should not exist to begin with. Chicago's 160 or so TIF districts constitute a massive diversion of present and future tax monies from urgent, unmet needs, notably our decrepit water and sewer infrastructure, and underfunded police and fire departments, as well as our public schools and transit.

Our politicians may not have noticed, but Chicago is nearly bankrupt, a circumstance most of its citizens couldn't have imagined 20 years ago, at the beginning of King Richard's reign. Chicago was an extremely well-run city with reasonable taxes, excellent police and fire protection, superior public transit, decent infrastructure,solid finances,and old neighborhoods that were steadily improving by means of private investment unaided by massive public grants to private developers, and far less at the mercy of the whims of politicians armed with TIF legislation and eminent domain rights.

Worse, there is no longer any rhyme or reason to the allocation of public money. All claims on our funds seem to have equal weight; the demand for, say, $20,000 to provide jugglers for a children's event is given weight equal to a public school's need for new textbooks, and a few million clams to renovate a fugly apartment building for the profit of its ownership, is given equal consideration with the need to replace a water main under a major artery before the street collapses and swallows a few automobiles, or provide our police with the manpower and tools they need to compete with the gangs for control of our streets.

Most of all, taxpayers are forced to subsidize strictly private projects whose benefits do not accrue to them, at the expense of necessary public services and public amenities available to everyone. The funds allocated to Loyola U. for campus buildings will benefit only those rich enough to pay nearly $35,000 a year in tuition and housing, to the detriment of public schools available to all citizens. The citizens are paying to subsidize big barn stores in which they might or might not shop, to the detriment of the business who are forced to subsidize their better-heeled competition through their taxes.

We can no longer pretend that we can afford this type of waste. We have too many unmet and really critical needs to fund, and very little time to meet them, before energy prices reach levels that will make it impossible to make basic repairs necessary to keep Chicago's massive street, water, and sewer networks minimally functional, let alone put into place the more efficient systems and vastly expanded public transportation we'll need for the city to be minimally safe and livable in another twenty years.

Instead of frantic, late campaigns to block this TIF or that, or efforts to funnel the money to useful purposes, we need to repeal the 1952 legislation that authorizes TIF districts, and start the process of rolling back most diversions of public money to strictly private purposes, beginning with the massive subsidies to large businesses that destroy true competition and foster the destruction of local business and retail networks; to the countless claims of public funds that drive property and sales taxes and impoverish the population as a whole while making life impossible for most of our small, locally-owned businesses, while starving our public services.