In an effort to reduce California’s budget deficit, California Governor Jerry Brown proposed the elimination of over 400 Redevelopment Agencies in the state by July 1, 2011.  The Governor’s 2011-2012 Budget, released on January 10, 2011, proposes to eliminate the Redevelopment Agencies and amend the State Constitution to require 55% voter approval for redevelopment projects.  The Governor also proposed that annual TIF dollars in the amount of approximately $5.2 billion normally collected by Redevelopment Agencies be distributed as follows:

• In fiscal year 2011-2012, $2.2 billion would be used to pay debt service and other contractual obligations.  The balance of the TIF dollars would be distributed to the State General Fund and to local agencies, cities, counties and special districts. 
•  Beginning in fiscal year 2012-2013, any available TIF dollars after payment of all outstanding debt obligations would be distributed to schools, cities, counties and special districts.  In addition, after the retirement of all outstanding debt, the monies that had been used for the retirement of that debt would be distributed to the local taxing bodies.

According to the California Redevelopment Association, on February 18, 2011 the State Senate Budget Committee voted to support the Governor’s proposal to eliminate Redevelopment Agencies.  The State Assembly Budget Committee voted to take $1.7 billion from Redevelopment Agencies and deposit those funds in the State General Fund, however the State Assembly Budget Committee includes language indicating a possible reform to the Redevelopment Agency structure rather than a complete elimination of Redevelopment Agencies.  The legislature will form a conference committee to settle differences between the bills approved by the Senate and the Assembly Committees before sending a compromise bill to the full Assembly and to the full Senate for a vote.

More information about the proposed 2011-2012 California budget can be found at http://www.ebudget.ca.gov/BudgetSummary/BSS/BSS.html .

Last week, the Chicago City Council voted 28 to 19 in favor of tabling the proposed Sweet Home Chicago Ordinance, which would require 20 percent of all TIF Funds to be set aside for affordable housing projects.  A competing Ordinance, introduced by Alderman Patrick O’Connor (40^th Ward), which would have made the 20 percent affordable housing set aside a goal rather than a requirement and which was supported by Finance Committee Chair Ed Burke (14^th Ward) and Mayor Daley, was also tabled.

Any vote on the Sweet Home Chicago Ordinance will now be delayed until after the February 22^nd elections when a new Mayor and a new City Council take office.  With a new Mayor and potentially many new Aldermen, it is unclear whether Sweet Home Chicago sponsor Alderman Walter Burnett Jr. (27^th Ward) will be able to garner enough votes to pass the Ordinance.

Last week, Chicago mayoral candidate Rahm Emanuel released his Government Reinvention and Fiscal Sustainability Agenda, which proposes more than $500 million in efficiency measures focusing on the reinvention of City government by improving transparency and accountability.  As part of this Agenda, Mr. Emanuel has singled out Chicago’s TIF Program to improve accountability, create jobs and hire more police officers.

The TIF reform proposal would require the City to make all financial and spending information available on-line and require TIF spending to be fully integrated into the City’s formal budget process.  Also, a panel comprised of economic development and financial experts would be created to establish certain return-on-investment goals for each TIF district in order to increase job creation and to limit the terms of TIF districts that have achieved their growth targets.

Based on information from the Emanuel campaign’s website, the TIF reform plan is estimated to make $50 million in property tax resources available for municipal services, including $25 million which would be earmarked to hire an additional 250 police officers who would target crime in economically distressed TIF areas.  TIF funds usually cannot be used for operational expenditures, so this would stretch the common statutory interpretation, or it might require a legislative change to the existing TIF statute.

Chicago’s mayoral election takes place on February 22^nd.  If no single candidate receives more than 50% of the vote, a run-off election between the top 2 candidates would take place on April 5^th.

The City of Chicago is sometimes criticized for the lack of transparency associated with its Tax Increment Financing (TIF) program.  We examined how TIF disclosures in Chicago compare to other big cities.  We reviewed public information available on the websites of the 10 most populous cities that use TIF in the United States: New York, Los Angeles, Chicago, Houston, Philadelphia, San Antonio, San Diego, Dallas, San Jose and Detroit.  (Phoenix was not included because Arizona does not have a TIF statute.)

On April 22, 2009, the Chicago City Council adopted Ordinance number SO2009-1529, a TIF Sunshine Ordinance, which requires the City of Chicago to publish certain TIF-related documents online for TIF districts established on or after July 30, 2004.  Documents required to be published include TIF designation ordinances, ordinances authorizing TIF redevelopment agreements, staff reports on TIF projects, economic disclosure statements, TIF overviews and annual reports, and any City-issued Certificates of Completion.

The City of Chicago’s website includes a specific section that shows all TIF related information.  Available TIF documents include maps, overviews, redevelopment plans, designation ordinances, Annual Reports (2004 – 2009) and three-year TIF Projection Reports for each TIF district, development agreements for each TIF project and, for TIF projects in more recently established TIF districts, economic disclosure statements which disclose the identities of the people or entities that comprise the project developer.  These documents provide information including TIF district boundaries, incremental taxes generated in each TIF district, expenditure and balance of the TIF funds for each TIF district, and pledged and paid assistance amounts for each TIF project.

In examining the websites of the other nine cities, we found that three (New York, Philadelphia and Detroit) do not have comprehensive TIF information available online. New York and Philadelphia do not have any TIF district or TIF project information available on their websites at all.  Detroit’s website includes information limited to maps of a few districts, district overviews and brief summaries of some of the TIF projects in the City. 

Although the websites of six cities (Los Angeles, Houston, San Antonio, San Diego, Dallas and San Jose) include comprehensive TIF information at both the district level and the project level, the quality of the TIF information at the project level generally does not match the information available on the City of Chicago’s website. For example, those six cities only disclose summaries of TIF projects while Chicago has made the development agreements of each TIF project available, thereby giving the public a more complete picture of the specific project terms.  

While our research shows that online TIF transparency in Chicago is better in many aspects, Chicago is less transparent than some cities as to the TIF budgeting process.  For example, Houston has a public annual budgeting process and the annual budgets for each TIF district are approved by ordinances adopted by the City Council.  In contrast, Chicago’s annual budgeting process for TIF districts is an internal process determined by the City’s planning department.  Chicago could further improve transparency by making its TIF budgeting process public and adding each TIF district’s annual budget to the City website. 

Chicago TIF information can be found at http://www.cityofchicago.org/city/en/depts/dcd/provdrs/tif.html .