TIF Bashing Facts

I received the following email from Steve Stanek, a former Chicago Tribune and Northwest Herald reporter who is the first person I know who fought a Tax Increment Financing district’s formation in McHenry County. Stanek is now Managing Editor of Budget & Tax News, a national monthly publication of The Heartland Institute.

That first fight was in McHenry and Stanek won.

Here’s some good food for thought on the TIF issue:

A ere is the truth about local communities using tax increment financing (TIF) as a redevelopment tool:“

Tax increment financing is usually sold to the public with assurances that ‘TIF does not increase your taxes.’ However, NCBG’s study indicates clear warning signs that the liberal use of TIF captures the natural growth in property tax base, putting more strain on every taxpayer and all taxing bodies, a strain more acutely felt in public budget belt-tightening times.” -- Neighborhood Capital Budget Group, which includes economists at University of Illinois and Loyola, DePaul, and Chicago State Universities.

“Our analysis of 235 municipalities in the metropolitan Chicago region finds cities, towns, and villages that had TIF districts actually grew more slowly than municipalities that did not use TIF.” -- Professors Richard F. Dye and David F. Merriman for a study published by the University of Illinois.

“TIF does not tend to produce a net increase in economic activity; favors large businesses over small businesses; often excludes local businesses and residents from the planning process; and operates in a manner that contradicts conventional notions of justice and fairness.” -- Developing Neighborhood Alternatives Project, a consortium of Chicago neighborhood groups and university economists.

Economists who have studied TIF almost universally agree with these findings.

Nearly the only people who defend TIF are developers and consultants who make money from TIF, and municipal officials who create TIF districts.

Study after study shows that TIF districts often fail to achieve their stated goals; divert growth away from other areas of the community, resulting in no net gain in development and sometimes net losses; and enrich a favored few developers, landowners, and businesses at the expense of everyone else.

There is remarkable uniformity of opinion on this. Conservative, liberal and libertarian economists all agree on these findings. There is almost universal criticism of TIFs and other targeted tax incentives by independent economists.

Yet municipal officials and economic development officials, who have a stake in thumping their chests and proclaiming they are the engines of economic progress, ignore all this information and blithely give away the store (sometimes literally) to wealthy developers and well-connected insiders.

Most municipal officials don't have a clue what they are getting into; listen only to the TIF consultants (who have a stake in ensuring that TIFs get created so they get more income) and to a few property owners who stand to gain; pay little or no attention to ordinary people who may be affected; and care nothing about objective independent analyses showing how often these things fail to meet their goals.

They will point to a handful of "successful" TIFs -- never thinking that the success may have come at the expense of development that would have occurred elsewhere -- and ignore independent economists who can point to hundreds of TIFs that have failed to achieve good results. And as we've seen a number of times recently, they don't even care what local school officials think.

Municipal officials are willing to create TIFs because municipalities typically get less than 10 percent of their revenue from property taxes, unlike schools, fire districts, library districts and other local taxing bodies that don't get motor fuel tax money, sales tax money, sewer and water fees, utility taxes, building permit fees, vehicle sticker fees, parking tickets, traffic tickets, etc.

Saturday, at McHenry County Blog, a “modest proposal”