Public Money Funds Corporations But Schools Closed And Pensions Cut

Months after Chicago Mayor Rahm Emanuel said budget constraints forced him to push for pension cuts and mass school closures, an analysis of government documents reveals the city has $1.71 billion in special accounts often used to finance corporate subsidies. While the Emanuel administration has rejected open records requests for details of the subsidies, evidence suggests at least some of them have flowed to companies connected to Emanuel’s campaign donors.
The analysis conducted by the TIF Illumination Project evaluated the city’s 151 tax increment financing, or TIF (Tax Increment Finance), districts, which divert a share of property taxes out of accounts obligated to schools and into special accounts under the mayor’s control.

The report shows $412 million was diverted last year alone into the TIF accounts and out of traditional property tax funding streams, many of which are dedicated to the city’s schools. In 21 of those districts, the report says 90 percent or more of all property taxes were diverted into the TIF accounts.
Citing Chicago subsidies offered to S&C Electric Co., LaSalle Street Capital, United Airlines and the Chicago Mercantile Exchange, an earlier study from the taxpayer watchdog group Good Jobs First found in the last 25 years, $5.5 billion of taxpayer money has gone into TIF accounts, and “much of the city’s TIF revenue was spent on subsidizing corporations, nonprofits and developers.”  The amount of money diverted into TIFs has exploded in the last decade, and transparency advocates say under Emanuel, TIF projects have been shrouded in more secrecy than ever.

In its annual budget, the Emanuel administration defends the TIF programs, saying their goal is “promoting business, industrial and residential development in areas of the city that struggled to attract or retain housing, jobs or commercial activity.” The administration further argues the money is needed “for community projects, public improvements and incentives to attract private investment to the area.”
The latter argument has been used by Emanuel to spend hundreds of millions of TIF dollars on corporate development deals in some of the city’s wealthiest neighborhoods. The rationale echoes the claims made in places like New Jersey, Detroit and Miami where lawmakers have been simultaneously slashing public services and municipal workers’ pensions and using the savings to expand taxpayer subsidies to corporations. Those subsidies have supported everything from arenas and NBA practice facilities, to corporate office towers and shopping malls — and the subsidy recipients have often been major political donors.

 In 2013, as Emanuel was pushing to spend $125 million of taxpayer money on a stadium development deal for a private university, the mayor said the need for budget savings compelled him to order the largest public school closing in American history. The budget mandating those school closures included a $68 million cut to classroom programs. For comparison, Cook County Clerk David Orr has said modest changes in the TIF program could recapture $44 million for schools. The Chicago City Council’s progressive caucus has estimated $200 million in uncommitted funds are sitting in TIF accounts.

 Emanuel made a similar argument when he cited budget constraints as the rationale behind his pension reform bill that is estimated to cost municipal workers $55 million. Reuters reports Chicago faces a $1 billion pension payment in 2014 and an overall 30-year, $19.2 billion pension shortfall. Yet, Emanuel has preserved the TIF accounts despite the Good Jobs First report concluding “property tax diversions into TIF have exceeded pension costs in every year since 2007.”


- While saying there was no more money for schools or pension benefits, Emanuel pushed a $29 million TIF that critics say is designed to benefit an office tower that will be the new Chicago headquarters of a law firm whose employees gave Emanuel more than $125,000 in campaign contributions. That firm was involved in a $4.5 million TIF that Emanuel’s allies pushed for Vienna Beef.

- The Emanuel administration approved a $7 million TIF aiding a grocery store chain, Mariano’s. A board member of that chain’s parent company donated $25,000 to Emanuel’s campaign.

- As part of an estimated $300 million in taxpayer-financed subsidies to help the tourism industry, Emanuel backed a $55 million TIF near the city’s convention center. The TIF benefits a hotel chain partly owned by one of his largest campaign contributors’ hedge funds.

- Emanuel appointees additionally awarded some of that latter TIF project money to Jones Lang LaSalle, which counts Ariel Investments as one of its largest shareholders. The president of Ariel Investments is Mellody Hobson, a major Emanuel donor.

 Emanuel has insisted “close to 75 percent of [TIF] dollars go to schools, parks, libraries, streetscape [and] mass transit.” But community groups have suggested many of those projects are deliberately targeted to help the city’s corporate class — for example, activists protesting the $29 million TIF for a park in upscale downtown Chicago said the subsidy was really an effort to create a taxpayer-sponsored corporate plaza for real estate developers’ new office tower. Additionally, Waguespack said when he and the City Council’s progressive caucus analyzed TIF data, they found far less than 50 percent was going back into public projects and much of it was going to private development.


In an interview with IBTimes, TIF Illumination Project head Tom Tresser said the $1.7 billion fund is the central political mystery in the city in advance of the 2015 mayoral election.
“The No. 1 question in Chicago politics is why is this money is just sitting there when the mayor is cutting so many public services,” Tresser said. “There are three possible answers: We are saving the money to pay back money we owe on old projects, there are projects moving ahead that aren’t being revealed or the mayor just wants to keep a slush fund for himself. But we can’t know everything that’s going on because so much of it remains secret.”

The Emanuel administration did not respond to IBTimes request for comment about the TIF Illumination Project’s findings and about campaign contributions to the mayor’s re-election campaign.

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