PILSEN TIF FREQUENTLY ASKED QUESTIONS
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What is TIF?
Tax Increment Financing (TIF) is a method used to fund infrastructure and development in "blighted" areas by diverting property taxes from certain parts of the city into a TIF fund. The city starts by designating TIF districts where the revenue will be generated.
Tax Increment Financing is used to build things. For example, TIF money can be used to build a new library but not to pay a librarian’s salary.
On June 11th, the Pilsen TIF Expansion was recommended to move forward by the Community Development Commission (CDC).
During the CDC’s June 11th staff report, they presented a budget for the expansion.
How do TIFs work?
Within a TIF district, yearly revenue given to the regular taxing bodies (like CPS, City Colleges and Cook County) is frozen at the determined base amount, while any revenue above this base amount goes into the TIF fund, known as the increment.
Revenue for taxing bodies inside the district then remains stagnant for the duration of the TIF. Any future gains in property values goes into the TIF district, instead of the local taxing bodies. TIF districts usually last for 23 years and can be renewed or sunset.
The base amount is determined by whatever the property tax bill was the first year. For example, if the property tax bill for a building was $1000 during the first year, and the second year bill is $1500; then $1000 goes to the taxing bodies while $500 goes into the TIF district.
This property tax diversion goes on for however long the TIF exists, usually 23 years.
Because the base amount given to regular taxing bodies is stagnant inside TIF districts, taxing bodies must then make up revenue needed for their yearly budgets in other parts of the City.
Curious City: Untangling TIFs with Sharpies. WBEZ Sep 5, 2013
Will the TIF raise property taxes in Pilsen?
TIFs are dependent on future gains in property values in order to raise their revenue. The Pilsen TIF expansion is projected to raise $950 million in the next 10 years if passed.
Studies have shown that subsidizing commercial development with TIF funding further drives up property values, and thus property taxes and rents.
If I don’t live in Pilsen, will this affect me?
Yes. TIFs impact all Chicago residents, even those not in a TIF district. Since revenue for taxing bodies is stagnant in TIF districts, non-TIF neighborhoods then see their property taxes increased to make up these yearly budgets. Congressman Mike Quigley, a vocal critic of TIFs, estimated that Chicago’s average property tax bill is 10% higher than it would be if not for TIFs.
Nearly two-thirds of Chicago is covered by a TIF district, leaving the other one-third of the city to carry more weight of funding public services. A TIF expansion in Pilsen will drive up tax rates for residents in other neighborhoods such as Little Village, Bridgeport, and McKinley Park.
The Alderman promised community engagement regarding the Pilsen TIF expansion?
The Alderman has hosted meetings with a select group of “stakeholders” in the first half of 2024, but these meetings were not open to the broader community.
On February 9th, (CDC June 11th Report page 32) he wrote to DPD saying “our office is now ready to proceed with the next step of formally introducing the amendment to the Community Development Commission for their consideration of the item” but his office hosted the first open community meeting on August 4th; months after the February letter and after the ordinance had already been written.
The Alderman’s office said TIF funds can help pay property tax debt?
TIF funds cannot be used to pay for property tax debt. The Alderman’s office claims to be working on a “circuit breaker” property tax relief program, but details of this program are unclear. Even so, there’s no guarantee that TIF funds can even be used for this. This will most likely need a state law change.
What is the Housing and Economic Development Bond?
A bond is a fixed-income investment where individuals lend money to a government or company in exchange for regular interest payments and the return of the principal amount at a later date. Bonds fund various projects and operations, with bondholders acting as creditors to the issuer.
The $1.25 Billion Housing and Economic Development Bond, introduced by the Mayor, will help improve neighborhoods and build affordable housing and will be repaid using funds from expiring TIF districts in the next five years.
Unlike TIF, the Bond Program is not dependent on increased property taxes. The Bond Program aims to end the City’s dependence on TIFs.
Will the TIF support repair grants for homeowners?
The closest mention of repair grants is in the proposed budget, which lists $200 million for the “Rehabilitation of Existing Buildings or Construction of Affordable Housing” (CDC June 11th Report page 41). This line item is unclear how much will go to Pilsen homeowners.
Additionally, the Mayor’s Bond Program explicitly promises to invest $210-240 million into programs for home repair grants, and other homeowner programs, within the next 5 years.
Will the TIF money go to build affordable housing? The proposed budget lists $200 million for “Rehabilitation of Existing Buildings or Construction of Affordable Housing.”
Building Resurrection Project style affordable housing lately has been costly. According to the Resurrection Project’s 2022 Annual Report, the total development cost for 52 affordable units at Casa Durango (1858 S. Racine Ave) was $28,235,734. This comes out to $532,750 per unit built.
For Casa Yucatan (2136 S. Ashland Ave), the projected cost for 100 affordable units is $59,149,183. This comes out to $591,492 per unit.
Additionally, the Mayor’s Bond Program already promises to invest $230-250 million to build and preserve affordable rental homes, as well as $20-30 million for SRO preservation.
Can TIF money be used to fund cooperative and social housing?
It’s unclear. Neither the TIF expansion ordinance (O2024-0010974) nor the proposed budget mentions cooperative or social housing.
Additionally, the Mayor’s Bond Program explicitly promises to invest $115-135 million into social housing within the next 5 years.
Social housing is an alternative model for affordable housing, different from the traditional Resurrection Project way of building affordable housing.
The Pilsen TIF can acquire properties, whereas the Mayor’s Bond Program cannot?
This is false. The Mayor’s Bond Program allows for property acquisition by supplementing the Chicago Neighborhood Rebuild Program and the Troubled Buildings Initiative.
Will the TIF expansion help Benito Juarez High School?
Benito Juarez High School is already in the current TIF district and can receive TIF support without an expansion. Whittier Elementary, Walsh Elementary, and Ruiz Academy are also in the current district.
TIF money can be used for school renovations and repairs, but cannot cover staff salaries; such as teachers, janitors, paraprofessionals and other support staff.
Will the TIF expansion help build affordable housing on 18th and Peoria?
The 18th and Peoria lots are already in the current TIF district and can receive TIF support without an expansion.
Will the TIF expansion help replace Pilsen’s lead water pipes?
The proposed budget lists $440 million for “Public Works & Improvements” which can be used for water pipe replacement. But the entire City needs updated water pipes, not just Pilsen. The City was given a $336 million loan from the EPA to help replace 30,000 lead pipes.
The City has a federal mandate to replace its outdated lead water pipes within 20 years. Most cities were given 10 years, but Chicago was given 20 due to the severity of its lead pipe issue.
Last edit: October 23rd, 2024
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We will update this page as more questions come in.
