The Shadow Budget
The Daley administration commands an off-the-books kitty of taxpayer money equivalent to a sixth of the official city budget. Now we've got documents that show what they want to do with it.
By Ben Joravsky and Mick Dumkehttp://www.chicagoreader.com/chicago/the-chicago-shadow-tif-budget/Content?oid=1218391
Here are some of the documents referred to in this story--the portions of the proposed TIF budget (PDF) city officials provided to aldermen Robert Fioretti of the 2nd Ward, Rick Munoz of the 22nd, and Scott Waguespack of the 32nd. Budget items are categorized as "appropriated," meaning (according to a city spokesperson) that the transaction has already been approved or finalized; "committed," meaning it's "locked in" or expected to be shortly; or "pending," meaning it's been proposed. Under the project descriptions, "porting" means the designated funds would be moved into the account of a neighboring TIF district.
On October 15, Mayor Richard M. Daley held a press conference to break some bad news: To erase a $500 million budget deficit for next year, he would probably have to eliminate jobs, cut services, and dip into reserve funds generated by leasing the Skyway and the parking meters.
But behind the scenes, the mayor and his chief aides were proposing to spend millions of taxpayer dollars on a rehab of Willis Tower, subsidies for privately run hospitals and Fortune 500 corporations, and pet neighborhood projects that won't be included in the official city budget.
We recently came into possession of hard evidence of what we've long argued: that the city produces two annual budgets, one released to the public, covered by the media, and debated by the City Council, and the other forged behind closed doors by the Daley administration, shared only in pieces with certain aldermen, and never fully disclosed to citizens. Both budgets are funded by taxpayers.
For the last few years, we've been trying to force the city to open up that shadow budget, which is funded by property taxes diverted into Chicago's tax increment financing program. As regular readers know, the TIF program is a complicated system in which property tax dollars in designated districts are collected in special accounts that are supposed to be used to eradicate blight and bolster development where it might not otherwise come. (See our archive of TIF coverage.)
Daley administration officials insist that the program has been a huge success and that everything the public needs to know about it is available on the city's Web site. But many aldermen have started to disagree publicly with the administration—a rarity these last 20 years—and in April the City Council unanimously passed an ordinance requiring that additional documents and data showing the use of TIF money be posted online.
It turns out much of that information still isn't. For the last several weeks, city planning officials have been sitting down with aldermen in closed-door meetings, offering peeks at portions of a citywide TIF budget marked "internal use only." The budget shows how the administration has spent millions of dollars in its 160 or so TIF districts in 2009 and how it wants to spend hundreds of millions of dollars more through 2011.
Administration officials don't and won't make this document publicly available. Of the 11 aldermen who spoke with us about their TIF meetings, none was allowed to see the entire TIF budget—they were shown the revenues and expenditures planned for their wards alone and asked to sign off.
And most did, as they have in years past—though in return the bolder and savvier requested funding for additional projects of their own. "Anytime they ask me for anything, I think it's a good day," says Walter Burnett, alderman of the 27th Ward, three-quarters of which is in TIF districts. "Anytime they ask me for anything with any TIF, I say, 'OK, but you need to do something for my community.'"
Several aldermen were willing to share their portions of the TIF budget with us (several others declined, or shared them on the condition that we wouldn't publish specifics). But the city claims it's privileged information. On September 21, we filed a Freedom of Information Act request asking the Department of Community Development, which maintains the TIF budget, to provide us with a copy. Under the law department officials were required to respond within seven business days. After ten they asked us for an extension, and after eight more they sent us a letter notifying us that they were denying our request on the grounds that "the information contained in it is comprised of staff-determined estimates. . . . They are not final or official projections."
Yet aldermen say the portions of the document they've seen are a simple, precise accounting of how the city has already budgeted TIF money this year and how it wants to spend it over the next two years. A lot of money is involved. Earlier this year Gene Saffold, Daley's chief financial officer, and Christine Raguso, head of the community development department, told the City Council's finance committee that the city had a little more than $1 billion in TIF funds on hand at the beginning of 2009. To put that in context, this year's official city budget was about $6 billion.
"When I had my meeting with Community Development, I made a point of saying, 'Now these are wish lists and proposals, right? You haven't actually gone ahead with these yet, right?'" said one alderman who asked that his name not be used because he wanted to avoid a confrontation with "the fifth floor" (where Mayor Daley's office is). "They said they were just proposals, but you pretty much have to demand the right to provide oversight or it just goes forward without you."
Many of the items in the TIF budget seem to be pretty far along. Most are categorized as "appropriated," meaning the expenditure has already been approved or finalized, or "committed," meaning it's "locked in" or expected to be shortly, according to community development department spokeswoman Molly Sullivan, who provided written answers to our questions about the documents after her department declined our FOIA request. Fewer projects are listed as "pending," meaning they've been proposed.
"The designations are informal and used only for budgeting and planning purposes," Sullivan wrote. "There is nothing binding about the terms in this context; they are in fact determined by DCD TIF staff as a way to prioritize potential expenditures."
But that's not substantially different from the way it works with the city's official budget, which the mayor publicly introduces as a set of "recommendations" and which changes throughout the year depending on how closely projections meet reality.
When the City Council creates a TIF district—and in all our years of observing, it's always at Mayor Daley's urging—it typically freezes the amount of property tax dollars that the schools, parks, county, and other taxing bodies get from that area for 24 years. Any extra tax revenue generated during that time flows into the TIF account.
To compensate for the money that they're not getting from the TIF district, the schools, county, parks, libraries, etc have to raise tax rates. In this way, everyone across the city pays for every TIF district.
Moreover, the money's supposed to be used to subsidize economic development in depressed communities that would otherwise receive no investment. But according to aldermen, and as the TIF documents we obtained show, the program is used to help clout-heavy developers and corporations, pay for basic infrastructure and services without the public oversight given the official budget, and strengthen the political position of the mayor.
Aldermen say it happens like this: Proposals for spending the money typically come from officials with the Department of Community Development. "It's hard to say in lots of cases whether they're driven by policy folks in the department or by developers who have an interest in it and make their case to the department," said the alderman who wanted to avoid a confrontation with the mayor. In either case, city officials usually at least brief the local aldermen before proceeding. "The administration can move forward with TIF expenditures without the support of the local alderman, but they don't do it often, mostly so they can cover their asses in case something goes wrong and there's a backlash."
Sometimes, this alderman says, developers approach him first with their requests for TIF money. He says he applies a "but for" test—is it something beneficial to the public that wouldn't go forward but for TIF funding? If so, he'll arrange a meeting with Community Development.
On rarer occasions, he says, he and his staff will propose a project they think meets the bar. But it doesn't go anywhere without the consent of high-ranking mayoral aides. Aldermen say officials from several city departments, including Community Development, the Office of Emergency Management and Communications, the Department of Transportation, and the Office of Budget and Management, sit on an advisory "TIF task force" that vets the spending plans. No aldermen are members of this group.
By law, TIF agreements with private companies—such as those that provided millions of dollars in subsidies to MillerCoors and United Airlines this year—require approval from the Community Development Commission, a board made up of mayoral appointees that almost never kills a proposal the administration supports. Then they must be voted on by the City Council, which has its own unblemished record of approving TIF deals. TIF-funded projects for other governmental agencies, such as construction of el stations or schools, must also be voted on by the council.
But some TIF expenditures aren't subject to even this level of debate or scrutiny, such as the $415,000 committed to Wabash Avenue streetscaping this year, or $650,000 for a "median cul-de-sac" on Ogden Avenue. "Direct expenditures by a municipality for public improvements are allowed by the state TIF statute and do not require individual authorization," Sullivan wrote in her statement. And there's no vote or formal oversight process for the TIF budget as a whole. How it ends up being spent is a multimillion-dollar secret.
The documents we've obtained show that the city is proposing to spend TIF dollars over the next two years on private development deals that haven't been discussed publicly, much less approved by the council.
The most notable is at the Willis Tower. In May the City Council voted in favor of giving $3.8 million in TIF funding to Willis Holdings Group, the tower's chief tenant, and earlier this month it signed off on $35 million in subsidies to help United Airlines cover the cost of moving into the 110-story skyscraper.
But according to the internal budget, the city has "pending" plans to spend still more—$13 million in 2010 and another $15 million in 2011—for a line item called "Willis Tower Rehab & Modernization Project." The budget also proposes four other payments of unspecified amounts for the Willis rehab after 2011, all slated to come out of the LaSalle Central TIF coffers.
There's been no discussion in public or in the City Council of earmarking millions of property tax dollars to rebuild the Willis Tower, which is owned by American Landmark Properties, a private company based in Skokie.
Yet according to Second Ward alderman Robert Fioretti, Jack George, a lawyer for American Landmark, has been pushing for the city to spend up to $200 million in TIF dollars on the building. "George first came to me two summers ago, in 2008," says Fioretti. "I'm still fighting [him] over that—it's a lot of money for one building." The project would need approval by the Community Development Commission and the City Council.
George is a principal in the law firm Daley & George. His partner, Michael Daley, is the mayor's brother. George didn't return a call for comment.
Not all the TIF expenditures are corporate subsidies. Among the TIF-funded projects listed in the documents for the next couple years: new schools, sidewalk and alley repaving, streetlights, park improvements, even job training programs. Burnett, the 27th Ward alderman, says he wants to train unemployed people to make ward improvements that were once made by city workers paid for out of the official budget. "I want to get people to do some clean-up work in my area because Streets and San is being shortened every day," he said.
Aldermen with money-generating TIFs tend to be big supporters of this way of paying for city services. But it almost guarantees that some communities don't get their fair share.
By law the money can only be spent in the district that produced it or in an adjacent TIF district. This means that some wards and neighborhoods end up with far more TIF money to spend than others. For example, in 2007, the most recent year for which numbers are available, the Roseland/Michigan TIF, which runs along a depressed stretch of South Michigan from about 101st to 120th, brought in about $707,000, according to Cook County clerk David Orr. In contrast, the LaSalle Central TIF, which includes much of the city's financial district, brought in about $19 million.
This is not lost on the aldermen. In fact, one alderman who has several flourishing TIF districts in his ward asked us not to detail the specific expenditures in them: "I don't want my colleagues to be jealous," he said.
"Over the years [administration officials] have been a little secretive about them, and they've played aldermen against one another when they rape these TIFs," said Ninth Ward alderman Anthony Beale. His ward includes three TIFs, and Beale thinks they're integral to his redevelopment plans. But he argues that he's one of the aldermen who's been played in the past and is now due some infrastructure money: "Some wards have gotten new police stations, firehouses, and schools—and I haven't gotten any." But he declined to make his portion of the TIF budget public.
By moving more necessary expenditures into the secret budget that he ultimately controls, the mayor also wields even more power over every public entity, from the City Council to the public schools to the Park District. At various times at least half a dozen aldermen have told us that mayoral aides pressure them on key votes—such as the ordinances for funding the Olympics or moving the Children's Museum to Grant Park—by either promising to give their wards more TIF dollars or threatening to take TIF dollars away.
Some aldermen say many of their colleagues don't grasp how the program works and simply agree to everything proposed by the administration. Others say they've had to figure out how to get what they need out of the program. Burnett says he learned his lesson about eight years ago, when the city used TIF money to put up ornamental lights along Chicago and Madison without consulting him first. "I'd just told other parts of my community we didn't have money for lights, then I saw the new lights and said, 'Where did that money come from?'"
Burnett says he raised a stink, and now things are different: "I think I'm fully part of the process—if I pay attention."
Aldermen also say they've become dependent on the program—and thus the mayor's administration—to make up for shortfalls from other sources. "For me and my community, it's a great thing," says Burnett. "But since I have TIFs we're not getting anything from the other agencies. We just got a new el stop at Morgan and Lake. It was all TIF money—there was nothing from the CTA. When we go to the parks and ask for something, they say, 'Use your TIF money.' Same with the Board of Ed. So it's a plus and a minus."
Despite the passage of the TIF sunshine legislation earlier this year, the TIF budget document shows that the city still isn't sharing most of the details of TIF spending with the public.
Take the Calumet-Cermak TIF district, in the South Loop. The city's Web site says that "the 11-acre district is intended to foster private redevelopment of the buildings for new uses, provide opportunities for residential development on adjacent sites, and establish a unifying pedestrian environment in the area. Additional district priorities include transportation improvement for vehicles, commercial improvements to support residential growth, and infrastructure improvements that provide connections with the nearby Prairie Avenue Historic District and McCormick Place Convention Center."
The site says that $149,153 was spent in 2008 on "Costs of studies, surveys, development of plans and specifications, implementation and administration of the redevelopment plan including but not limited to staff and professional service costs for architectural, engineering, legal, marketing." There's no further breakdown.
The budget document we obtained shows that the city has no intention of spending money for any of the purposes laid out on the site. Instead, it's committed $13 million for an unspecified Green Line station in an adjacent TIF district (and proposed $25 million more), $40 million to help rebuild Jones High School, which is also in another district, and $453,700 in unspecified administrative costs.
By the end of 2011, the Calumet-Cermak TIF district would be $392,370 in the red, according to the city's projections.
Ironically, Daley's aides tell the aldermen that calling them in for their private conferences about TIF spending in their own wards only is a way to be transparent about the program. "They started our meeting by telling us that this is to prove that there's no billion-dollar slush fund here," says 32nd Ward alderman Scott Waguespack, one of the chief sponsors of the sunshine ordinance. "But they should release this budget to the public—put it on the Web site with the other TIF information."
As Waguespack points out, in a more efficiently run system the schools, parks, and county would raise their own money for projects like new high schools or field houses—without having to convince the mayor's people to give them a piece of the property tax yield that was diverted from their pots in the first place.
But then that would undercut the mayor's power. "If you control the money, you control the system," says 22nd Ward alderman Rick Munoz. "What do they always say? Follow the money."
As he and many of his colleagues have found out, that's nearly impossible to do.
Ben Joravsky discusses local politics weekly with journalist Dave Glowacz at mrradio.org/theworks.
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