DOWNTOWN — Mayor Brandon Johnson’s initiative to overhaul the city’s tax-increment financing (TIF) program was approved by City Council on Friday, paving the way for $1.25 billion toward affordable housing and economic developments throughout the city.
The proposal relies on borrowing $250 million in economic development bonds annually for the next five years. A signature policy proposal of Johnson’s administration this spring, the plan hinges on repaying that debt using funds from expiring TIF districts.
The ordinance passed 32-17, but not without controversy and several last-ditch attempts to adjust the deal.
The proposal was initially delayed after a bid from Ald. Bill Conway (34th) to lower the total amount of borrowing from $1.25 billion to $350 million during a Finance Committee meeting Tuesday. Ald. Brendan Reilly (42nd) then unsuccessfully tried Wednesday to require Council approval for projects over $1 million, lowering the threshold from $5 million.
Committee members voted 20-9 to send it to the full Council on Wednesday before Finance Committee Chair Ald. Pat Dowell (3rd) delayed a final vote until Friday.
Before the final vote, Conway proposed reducing the bond total, this time to $750 million to align with the three years left of the Council’s current term, but Ald. Daniel La Spata (1st) blocked that. Reilly then tried a second time to require Council approval for projects over $1 million. La Spata blocked that, too.
Ald. Raymond Lopez (15th) attempted a compromise by proposing a $2.5 million threshold for project approval, which LaSpata again blocked.
Alderpeople who opposed the ordinance said they weren’t against the idea but wanted more oversight over how the money is spent. The bond initiative allows the city to spend up to $5 million on projects without approval from City Council.
Ald. Samantha Nugent (39th), among those who voted against it, said she didn’t feel comfortable “blindly signing a check.”
“Five million is a lot of money. That’s the entire infrastructure budget for three … entire wards,” Nugent said. “Allowing … projects to be approved [by] Council at the $1 million threshold is another opportunity for transparency for colleagues to share and showcase their projects.”
But Ald. Maria Hadden (49th) argued that $5 million is a “drop in the bucket” for major housing and infrastructure developments.
“We know that the cost of capital projects these days, $5 million is … nothing,” Hadden said. “I think this is very appropriate.”
Ald. Walter Burnett (27th), who also serves as vice mayor, encouraged his colleagues to support the bond deal. He pointed out that when TIF districts expire, the money will go to the wards in form of housing and other development projects rather than into the city’s general fund.
“This is an opportunity to leverage some dollars that’s gonna go to the general fund anyway. … Let’s leverage those dollars. Make some things happen,” Burnett said.
Chicago has 121 designated TIF districts across the city, 45 of which are set to expire by the end of 2027. The money returned to the city from those districts would not only completely cover the debt accrued, but would allow the city to use the money to more freely to invest in communities across the city, according to the mayor’s plan.
The principal and interest of the proposal is estimated to cost taxpayers $2.4 billion over 37 years, but would again be completely covered by money returned to the city by various expiring TIFs. If successful, it would mark a large overhaul of the TIF program, which has been around since 1984.
TIF districts have for decades been a source of development dollars in Chicago, but the system has also faced significant criticism from opponents who argue it is inequitable and favors wealthier areas where property values are rising.
When a TIF district is created, it freezes the amount of property taxes collected there for schools, parks and other taxing bodies as long as the TIF exists.
As property values increase over time, the additional tax dollars created in the district are deposited into a designated fund. Those dollars are meant to fund infrastructure and economic development within a TIF’s geographical boundaries.
Under the plan approved Friday, the bonds will be split evenly between the city’s Department of Housing and the Department of Planning and Development.
The Department of Housing would use $360-390 million for the construction and preservation of affordable rental homes, $210-240 million for the construction and preservation of homeownership and $20-30 million for the preservation of single-room occupancy structures, according to the proposal.
The Department of Planning and Development would use $400-500 million for neighborhood development grants, $82.5-115 million for small business support and $57.5-90 million for jobs and workforce training.
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