To stave off a “significant shrinkage” in the city’s available pool of money, Mayor Brandon Johnson’s administration Wednesday rolled out a new $1.25 billion borrowing plan to help fund a slate of progressive housing and economic development initiatives, funded in part by winding down reliance on special taxing districts, or TIFs.
Johnson’s plan would require City Council approval, but, if passed, would provide $250 million per year for projects helmed by the city’s housing and planning departments every year through 2028, Johnson said.
The city would pay off $2.4 billion in accumulated debt through 2061 by using property tax revenues that would become available thanks to expiring tax increment financing districts. The proposal was first pitched in a memo last summer from two outgoing city department commissioners appointed by Mayor Lori Lightfoot.
By law, TIF districts have a 23-year life span. They capture any increase in property taxes resulting from fresh development and lock that new money away in a special fund that can be spent by the city on economic development projects within that district’s geographic boundaries. Chicago’s TIFs generated nearly $1.3 billion in 2022, according to The Civic Federation, a business-backed watchdog group.
Johnson’s plans for soon-to-be expired districts would shift city spending priorities away from TIFs’ historic use — infrastructure work to support private development like roads, bridges, sidewalks and site remediation — toward investment in housing and direct support for businesses. Johnson framed the proposal as a delivery on his promise to invest equitably across the city.
“One of the reasons I ran for mayor is because too many of our neighborhoods — including my own — bear the scars of disinvestment and neglect. Too many communities on the South and West sides in particular have not benefited from the prosperity of our tremendous city,” he told reporters Wednesday.
Aside from authorization to borrow the money, many of the programs Johnson proposes to fund are brand-new and likely also would require City Council approval.
The success of the program would also require some haggling with aldermen about which expiring TIFs to let go and which to potentially extend. It may be a difficult choice for some: TIF funds can be a valuable resource to bankroll voter-friendly infrastructure work or improvements to Chicago Public Schools and Park District buildings and facilities.
When Johnson introduced the proposal at the City Council on Wednesday, the measure was immediately sent to the Rules Committee, a parliamentary maneuver that adds an extra hurdle to it being voted on by the full council. Johnson dismissed the move, telling reporters, “Well, democracy allowed for that to happen. It just means we’ll have to take one more vote for it.”
Of the city’s 121 designated TIFs, 43 are expected to expire over the next three years. Among them are wealthier districts such as the Central West TIF just west of the Loop, the River West TIF that covers parts of West Town and along the Chicago River and the Chicago/Kingsbury TIF. Each of those three districts generated $34 million in property tax increment in 2022.
When TIFs expire, that increment of cash is freed up so that taxing bodies such as the city, CPS, the Park District and Cook County can begin collecting property taxes on it.
Johnson’s plan calls for leveraging Chicago’s share of that newly freed-up value to borrow $1.25 billion and pay for existing, new and modified programs at the city’s housing and planning departments:
- $360-$390 million to build and preserve affordable rental homes, decarbonize multiunit apartment buildings and pay for a revolving loan for green social housing.
- $210-$240 million to help people buy or repair homes, rebuild and preserve existing homes, and retrofit and decarbonize single-family homes.
- $20-$30 million to preserve single-room occupancy units, or SROs, as shelter for those experiencing homelessness, and to create new permanent supportive housing for those experiencing homelessness.
- $400-$500 million on community development grants.
- $82.5-$115 million for small and emerging business loans and grants.
- $57.7-$90 million on workforce training grants and “infill” development on government-owned vacant lots.
The shift would require the city to raise its property tax levy to capture that new value, which city officials said will not raise tax bills for individuals.
“Instead, as TIF districts expire and there is a related increase to the overall tax base, there will be a correlated increase to the amount of property taxes received by the City,” the city said in its public report on the proposal.
Local taxing bodies regularly raise their levies to capture new development from expiring TIFs. If they didn’t raise their levies to capture that new value, their property tax rates would drop.
In all, the city expects it will capture $150 million in new annual revenue over the next 10 years and $290 million over the next 15 years, which it can use to pay down other debts or fund other programs.
The borrowing would be issued as general obligation bonds, or sales tax securitization bonds issued through Chicago’s not-for-profit Sales Tax Securitization Corporation. City officials have yet to determine how much would be borrowed via either vehicle. STSC bonds typically fetch more favorable interest rates. The city’s report assumes annual debt service — the cost to pay back the borrowing — would rise gradually starting in 2027 and level out at $81 million a year, tapering down by 2061.
The city hopes $1.25 billion in programming will further bolster the city’s property tax base by stabilizing housing options and securing commercial development.
There’s a bonus for other districts too, city officials said: Rather than that money being trapped in a TIF for Chicago’s use alone, letting those districts expire also allows CPS, the Park District and Cook County to capture new revenues. At the time of expiration, any funds left over in that TIF’s account will be distributed back to taxing bodies, too, providing a one-time infusion of funds.
The new borrowing plans are necessary, Johnson’s administration said, as COVID-19 pandemic relief dwindles and existing funding pools fall short of city needs. Payments into the city’s Neighborhood Opportunity Fund and as part of the Affordable Requirements Ordinance are inconsistent and depend on new development. Borrowing Lightfoot undertook leveraging federal pandemic relief was slated to run out in 2023.
Johnson’s bond initiative won praise from some developers, who said that after the double whammy of COVID-19 and high interest rates, the city could use another major development program that bolsters existing efforts such as LaSalle Street Reimagined, an initiative started under Lightfoot to remake aging downtown office space into apartments, and Invest South/West, a Lightfoot endeavor to spark economic activity in outlying neighborhoods.
“They’re all tools in the toolkit that a smart administration will employ,” said Quintin Primo, executive chairman of Capri Investment Group and part of a venture that bought the James R. Thompson Center and plans to remake it into a new downtown home for Google. Raising funds through a bond program is “not necessarily unique or novel, but it’s very, very effective. And even more importantly, it’s timely. It’s extremely timely.”