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Wednesday, February 24, 2010

What is a TIF?

My nominee for the non council submission this week (out later today) is from Ben Javorski about Alderman Ike Carothers. Carothers recently pled guilty to corruption related charges and is serving a forty eight month sentence.

The details of Isaac Carothers's recent guilty plea—how the former alderman accepted about $40,000 in home improvements from a developer in return for pushing a zoning change through the City Council—have already been splashed across the front pages.

But what hasn't been reported is the role played by our old friend, Mr. TIF.

To help Calvin Boender build Galewood Yards, a residential and commercial complex on the west side, Carothers not only put his muscle behind the zoning change but used his influence to get $5.3 million in property tax money funneled to Boender and his partners.

The concept of the TIF is central to understand the way the City of Chicago government works. They've often been mischaracterized. For instance, Michelle Malkin calls them a tool of wealth redistribution.

These “public-private partnership” scams inevitably involve tax-increment financing gimmickry to siphon off tax dollars to subsidize developers/builders/contractors who then reward politicians with big campaign donations. (See here for how it works.)

The Chicago Olympics bid involves TIFs at a massive level.

And voters oppose it at their own risk — including threat of violence against them by their own representatives!

Remember the video from March 2009 of an unhinged Chicago alderman attacking a citizen who dared to challenge the wealth redistribution TIF scheme?

Calling it a wealth redistribution scheme is a mischaracterization of what they are used for, though frankly TIF's are far too sophisticated for Malkin to understand.

To understand TIF's let's look at an example. Let's suppose you live in a property that has a yearly property taxof $2500. Now, your property is designated a TIF zone. What does that mean? To you it won't necessarily mean anything, YET.

Now, out of your $2500 property tax bill, say your first $2000 will still go to normal expenses: schools, roads, hospitals, etc. That will be limited to the first $2000. The rest goes into a fund for "community development". What is that? It's whatever the mayor wants it to be. So, a big condominium project can be designated a TIF project, theoretically.

Now, it's not quite that simple. Of course, any specific project must go through all the proper committees: zoning and such. Still, each of those committees are chosen by the mayor. Furthermore, whereas a TIF zone is designated, the money isn't spent on a specific project for months or years.

In the case of Carothers, he helped to funnel $6.5 million in TIF money to a developer, Calvin Boender, he was tied to. So a TIF is a great way to funnel city money, property tax money, to people of influence. Tracking what project gets what TIF money is nearly impossible. Often, the corruption is discovered after the fact.

TIF's have often been referred to as a slush fund for Mayor Daley. The case of Ike Carothers shows others use that fund.

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