Chicago Public Schools to get TIF surplus, but impact for schools unclear

City Hall’s Progressive Caucus to push for vote that would automatically trigger a TIF surplus.

November 12, 2013

By: Becky Vevea and Alex Keefe

Chicago schools are in line to get a small infusion of cash from City Hall that parents and activists say could help offset significant school budget cuts made over the summer.

But it remains unclear how much individual schools will see.

Earlier this month, Mayor Rahm Emanuel said he planned to again declare a more than $49 million surplus on money sitting in the city’s 151 tax-increment financing (TIF) accounts. A TIF surplus would be distributed to the city’s taxing bodies according to state law, with about half of the total amount going to Chicago Public Schools.

Chicago’s massive network of TIF districts is expected to reap nearly $376 million next year. In a TIF district, any increase in property tax revenue caused by an increase in property values is funneled into a special fund designated for economic development projects. That means revenue growth is diverted away from local taxing bodies, though unused surplus money is supposed to be returned to them at the end of each year.

Currently, the mayor’s administration decides how much money to surplus, and the City Council must sign off on the declaration. However, some independent aldermen want to change that.

At Wednesday’s City Council meeting, members of the Progressive Caucus say they plan to invoke a procedural move to bring an alternative proposal on TIF surpluses to the council floor for debate and a vote.

Their ordinance, which has been bottled up in a committee for months and prevented from going before the full council, would would automatically trigger a surplus declaration from TIFs that took in more than $1 million last year. Members of the caucus say the ordinance would generate a larger surplus than Emanuel is proposing.

How much money is tied up in TIFs?

There are currently 151 TIF districts in the city of Chicago that collectively have about $1.7 billion to use toward economic development. Of that, about $1.53 billion is “encumbered” - that is, tied up with current projects - according to Alex Holt, the city’s budget director.

That leaves about $170 million to $180 million that could potentially be released as surplus back to city agencies, Holt said. But, as she explained to WBEZ last week, the city sees a need to do some additional subtraction, leaving a projected $49 million surplus for 2014. Here’s the city’s math:

  • $40 million next year goes toward paying down bonds for the Modern School Across Chicago program, a massive school building effort, and can’t be surplused

  • $35.1 million is subtracted for TIFs that have had no revenue or may have declining revenue

  • $11 million remains in TIFs that have balances of less than $1 million

  • $37 million is reserved for single-project TIFs and future obligations

After that, the city is left with about $49 million in unused TIF money to surplus, Holt said. The public schools would get about $24 million in additional revenue. On Friday, Emanuel signed an executive order that will annually declare at least 25 percent of unused TIF money as a surplus.

CPS spokeswoman Becky Carroll said in an e-mail that the district has not yet determined where it would spend the additional revenue.    

Schools do benefit from TIF money through new construction and capital upgrades. The mayor’s budget office says 35 percent of TIF spending in 2014 will go to school capital projects.  

WBEZ  has repeatedly requested a breakdown of all current TIF-funded projects, but CPS has not yet provided it.

However, in a string of recent press conferences, Mayor Emanuel has announced a handful of new school buildings and additions—some at the city’s most affluent and selective schools—which will be funded with either TIF money and state construction grants. 

Long-term solution or quick fix?

The administration has been saying TIF money is not a panacea for the district’s budget problems. CPS faces a structural deficit driven largely by jumps in required pension payments after years of neglecting to adequately fund its pension system.

“Even with...the surplus that some people have called for, those things don’t begin to plug the budget gap that either the CPS or city have been seeing,” Holt said. “When you look at CPS with a billion dollars’ worth of budget gap that they’ve had to address, the dollar amounts are really just too small to accomplish that.”

But for parents and activists, every dollar counts. Kate Bolduc sits on the local school council at Blaine Elementary and is the co-founder of a coalition of local school councils advocating for adequate funding from CPS.

“We understand that it’s only a short term solution but we’ll take it,” Bolduc said. “We need it. We have students who are sitting in classes that are way too large. We have students missing out on technology, foreign language, music. Every dollar counts.”

Bolduc said if a TIF surplus is declared and distributed directly to schools, it could have an significant and immediate impact.

“If you do the math and you take $25 million divided by 400,000 students, we’re looking at about $62 per student,” Bolduc said. “At Blaine, we have about 950 students, so Blaine would see maybe $60,000. That’s a teaching position for us. So that’s no small amount.”

Experts say the fact parents and activists look to the TIF surplus and other TIF reforms speaks to how massive and unwieldy Chicago’s TIF program is.

“We’ve created a monster in some ways,” said Rachel Weber, a professor at the University of Illinois at Chicago who studied TIFs extensively and sat on Emanuel’s TIF Task Force a couple of years ago.

“This program that started off as kind of an obscure way to fund specific kinds of economic development has become a general redevelopment tool, and anybody and everybody who’s doing anything and wants some money is now looking to TIFs instead of just looking to the city to help them.”

Becky Vevea is a producer for WBEZ and covers education. Follow her @WBEZeducation. Alex Keefe is WBEZ’s political reporter. Follow him at @WBEZpolitics.