Chicago wants to borrow $1B to replace TIFs to fund development
Debt would be used for affordable housing and other projects as city withdraws from property tax subsidies
Mayor Brandon Johnson’s administration is taking a new approach to fund affordable housing and other real estate developments.
As Chicago withdraws from tax-increment financing districts, the city aims to borrow more than $1 billion, marking a shift in how the city pays for and subsidizes new developments, Crain’s reported.
Chicago has heavily utilized TIF districts — which are used to give developers breaks on their property taxes — for the past three decades. However, these districts, created to catalyze development, have come under increasing scrutiny for their fiscal implications.
A confidential memo obtained by the publication sheds light on a proposed $1.25 billion borrowing blueprint. This bond, issued over a five-year period, could potentially generate an annual influx of $250 million into city development projects. The funds would be repaid in 30 years.
Beyond merely filling fiscal gaps, the city aims to invigorate sectors like affordable housing, community development and broader wealth-building endeavors, while pivoting away from a TIF-centric financial strategy.
Despite Chicago’s mounting financial challenges, including sizable existing debt and looming pension obligations, the timing seems opportune. Favorable interest rates on municipal bonds provide a financial window that the administration deems crucial for capitalizing on this borrowing tactic, especially since more than 50 TIF districts are set to expire within the next five years.
“There was always going to come a time where we were going to have to think past TIF, and in a way I’m grateful that this mass expiration of TIFs is kind of forcing our hand,” First Ward Alderman Daniel La Spata told the outlet.
In 2022, Chicago’s 127 TIF districts took in a total of $1.3 billion, according to Cook County Clerk’s office records cited by the outlet. With many TIFs on the brink of expiration, a substantial influx of tax revenue is expected to revert to entities like Chicago Public Schools, the Chicago Park District and other taxing bodies.
While the borrowing proposition offers a potential solution, it’s not without contention. Alderman Gilbert Villegas, of the 36th Ward, has pressed for transparency, emphasizing the need for a detailed spending outline.
TIF districts, which freeze property tax values to capture incremental tax growth, have played a pivotal role in city development. As the end of numerous TIFs looms large, Chicago stands on the precipice of a significant fiscal recalibration.