This story is part of the Re-Imagine Chicago project, a collaboration between the University of Chicago’s Center for Effective Government and WBEZ’s Reset, investigating how city government, community investment, public safety and schools could work better.
In March 2018, former Mayor Rahm Emanuel tweeted a 90-second video. It begins with the melancholy call of a single horn against an otherwise dark screen. As swirls of white form ribbons of light, the words “Amazon Makes Its Second City The Second City” come into focus.
A few seconds later, William Shatner, known for his role as Captain Kirk on Star Trek, tells the viewer that Chicago is a modest but resilient place, one with a story that parallels Amazon’s own humble origins. “Really the press release writes itself,” Shatner intones.
The video was released on the heels of Emanuel’s bid for the corporate behemoth’s second headquarters, a move that secured Chicago a spot on Jeff Bezos’s shortlist. During his tenure, Emanuel spent much of his time wooing large companies to the city. He was successful, too.
Under Emanuel, more than 50 corporate companies moved their headquarters inside the city limits. Among them: McDonald’s, Boeing and Google. But Amazon would have been his crown jewel.
Emanuel’s bid offered the Seattle-based company quite the deal, according to documents revealed by Crain’s Chicago Business after Amazon passed up Chicago in favor of New York City and Arlington, Va. Specifically, $1.4 billion in tax breaks, $400 million in infrastructure spending by the city and state and a $250 million “opportunity fund” to ensure city residents develop the skills required by Amazon jobs.
Put another way: Emanuel offered Amazon $2.25 billion reasons to come to Chicago.
While the numbers are astonishing, they confirmed what many already knew: One of Emanuel’s primary interests was expanding the city’s central business district to create a hub for corporate headquarters and technology companies. Combined with attractive downtown living, he felt this would build a critical mass of people and businesses and reverse out migration of residents and companies.
Economic development in Chicago has long been driven by one thing: location, location, location. While downtown and Near North Side neighborhoods have gotten both wealthier and more expensive over the past decade — thanks in part to large-scale developments such as the creation of the Lakeshore East neighborhood and a revamped Fulton Market — South and West side neighborhoods have suffered from chronic divestment.
“The city, as far as I can tell, is fairly reactive,” said Chris Berry, the director of the Center for Municipal Finance at the University of Chicago. “Much of city development has been in response to private demand. We’re looking at proposals for massive projects in places where private developers are urging it to happen.”
To understand this dynamic better, consider three tentpole projects from the past two decades: Millennium Park, Lincoln Yards and INVEST South/West. The past three mayors — Richard M. Daley, Emanuel and now Lori Lightfoot — have each thrown their weight behind one. These projects not only reveal how initiatives get funded but each administration’s priorities for the city.
So, where does the money for such behemoth civic projects come from?
The short answer? Taxes.
Transforming taxes into megadevelopment
When Daley first announced plans in 1998 to transform a 24.5-acre industrial plot in downtown Chicago into the city’s biggest attraction, he estimated it would cost $150 million, which would come from a mix of private and public financing. By the time Millennium Park opened in 2004, the project had cost almost $500 million, including a large chunk — $270 million — from public funds known as tax increment financing, or TIF.
Both powerful and controversial, TIFs are a mechanism for financing development, with the goal of increasing future tax revenue.
“In [a TIF] area, as the economic development occurs [and] as property values increase, the property tax that is generated is pumped back into the area and used exclusively for economic development,” David Merriman, a professor of urban planning at the University of Illinois at Chicago, told Reset.
By 2011, the park had brought almost $2.45 billion in new condo, office and hotel construction to the surrounding area, including River North and the South Loop, according to a study from Texas A&M and DePaul universities.
Every state except Arizona employs TIFs, and they have become a popular incentive for developers. To developers, businesses and groups focused on private sector development, TIFs offer opportunities to fund developments such as stadiums and civic projects like Millennium Park and affordable housing.
Critics argue TIFs divert revenue that would otherwise go to public schools and essential community services to the private sector. In 2019, for example, Chicago accrued $926 million from 136 TIF districts. That’s more than 35% of all property taxes collected across that city that year.
Courting private investment
TIFs only cover part of the costs of big projects. The rest usually comes from private investors. And when a mayor wants a big development to move into a certain area? They often offer incentives.
Emanuel was particularly good at attracting private investment. While his Amazon headquarters dream did not pan out, several other proposed mega developments from his tenure remain in the works. One is Lincoln Yards, a $6 billion project aimed at redeveloping 55 acres of riverfront between Lincoln Park and Bucktown.
The development partners are three heavy hitters: Sterling Bay, a local megadeveloper known for the Google offices in the West Loop; the architecture firm Skidmore, Owings & Merrill (SOM); and the landscape architect who designed New York City’s High Line park. Lincoln Yards promises to be a behemoth — a, tech-friendly, mixed-use neighborhood that will create 23,000 new permanent jobs in tech, the service industry and retail, among others.
And then there’s The 78, a similarly massive project slated for a 62-acre swath of land between the South Loop and Chinatown. That development, led by developer Related Midwest, comes with a $7 billion price tag. Between the two, the Chicago public will contribute $2.4 billion in TIF funds.
One of the main criticisms of the TIF-meets-developer model is that the dollars follow the interests of the developers — often to white and wealthy areas of the city. For example, a 2019 study by the Urban Institute found that private funding flows to majority-white neighborhoods — which received 4.6 times more private investment per household than majority-Black neighborhoods between 2011 and 2017.
Meanwhile, high-poverty areas must rely on development funding from the city or philanthropies to fill in the gaps after private developers have had their pick of the lucrative markets.
“We have a scenario where the public sector, the mission finance sector is not making up for the deficits [in] where the private market capital is slowing,” study author Brett Theodos told WBEZ in 2019.
But what if new developments were driven by community interests?
“You could imagine the city taking a more proactive approach,” said Berry, the UChicago professor. “They might say, ‘We would like to see new investment in Austin or Englewood,’ and [create] sites that have the kind of infrastructure you need to develop.”
A proactive approach to investment
Enter: INVEST South/West.
The project will steer more than $750 million of public funding over 3 years into 10 designated neighborhoods — including Englewood, Auburn Gresham, North Lawndale and Humboldt Park — which have struggled under decades of disinvestment.
“One of the main things that Mayor Lightfoot charged me to do was make sure that all parts of the city are a part of the kind of economic vitality that Chicago has,” Maurice Cox told Reset earlier this month. Cox, commissioner of the Department of Planning and Development, is leading the charge. “That means the South Side, the West Side are just as vital to the city’s future as is our downtown.”
Announced in 2019, INVEST South/West’s goal is to boost blighted commercial corridors and propel economic development by asking community groups and developers to collaborate on project plans.
So far, three projects have been announced. The first, a $19.4 million concept in Auburn Gresham, proposes 56 units of affordable housing and a set of retail shops for a 23,000 square-foot plot of land that now sits vacant. The second, in Englewood, suggests a $10.3 million plan that will turn a former fire station into a community commercial kitchen. And the third, in Humboldt Park, hopes to turn a vacant bank into mixed-use housing and retail space.
But, despite a promising start, “you don’t reverse decades of disinvestment with a few years of investment,” Danny Ecker, a commercial real estate reporter at Crain’s, told Reset.
Halfway through her term, whatever long-term economic plans Lightfoot hoped to realize have been hampered as she grappled with navigating an unprecedented pandemic. Yet to be seen is whether INVEST South/West can live up to its promise and pioneer an investment strategy that drives dollars into the neighborhoods that need them the most.
Race, Class & Communities reporter Natalie Moore contributed. Follow her @natalieymoore.
Elly Fishman is a freelance writer. Her book “Refugee High: Coming of Age in America” comes out Aug. 10. You can follow her at @elly33.
Mary Hall is the digital editor of the Re-Imagine Chicago project and produced this story for digital. Follow her @hall_marye.