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Study: Evanston should tighten TIF process
Nick Federowicz leads the presentation by Kellogg grad students on the TIF districts in Evanston at City Hall on December 11, 2012 in Evanston. | Joel Lerner~Sun-Times Media
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Updated: January 21, 2013 2:15PM
EVANSTON — The city should establish a more rigorous process for approval of tax increment finance districts, establish greater monitoring and oversight controls and push risk to the private sector, said a study taking the first real critical look at the city’s TIF process.
Students from a lab course at Northwestern University’s Kellogg School of Management, taught by Professor Therese J. McGuire, conducted the study, “An Assessment of Tax Increment Financing as a Tool for Economic Development.”
Under tax increment finance, tax revenues are frozen at a “base” level over the life of a district (23 years).
Any increase in assessed value above the base level, then is dubbed the “value increment; or simply increment” and can go into costs for the development.
They include public infrastructure improvements, streetscape upgrades, site preparation and other development costs.
City Council members have generally called the city’s use of TIF’s a major success, and the city’s consultant, Kane McKenna and Associates, has qualified districts as “blighted” and deserving of TIF status without qualification over a near 25-year period.
The Kellogg report found some city TIF districts, such as downtown (embracing the movie theaters) as successes, but recently established districts such as Dempster-Dodge and Chicago-Main Street raise questions as constructed, the study found.
For instance in Dempster-Dodge – which includes the vacancy-riddled shopping center acquired out of bankruptcy by a private developer – the city has allotted $2 million in funding for capital improvements over the next eight years in order to boost occupancy and attract quality tenants, the study noted.
“If the city does not expeditiously create a plan to spend these funds,” said the authors of the report, “it may lead to a risk that the increment will become viewed as a “slush fund” for projects that do not necessarily support the short-term goal of attracting quality tenants to the shopping center.”
At the Chicago-Main district, approved by the council Dec. 10, the report noted, “the driving force for tax increment in the district is the single project on the vacant lot (where the city hopes to help a private developer in construction of an office building.)
“Depending on a single project to drive growth in the EAV is somewhat risky and should be thoroughly vetted,” the study found.
On the other hand, upgrading infrastructure and improving green spaces are both effective and non-controversial uses of TIF funds. The Chicago corridor and the Main Street business district would clearly benefit from such improvements.”
The study also concluded:
• Evanston should approve TIF districts only after specifying how they help the city achieve its economic development goals.
• Evanston should implement a more rigorous process for TIF approval, oversight and accountability. “Without a clear and unbiased TIF approval and management policy, stakeholders are left to speculate whether or not private funds could have been used in place of TIF monies.” In monitoring and oversight, the city ‘’should develop metrics, specific to each TIF project, to regularly measure project performance against stated goals.”
The study’s goal wasn’t to determine whether the city’s TIF policy was a success, said Nick Federowicz, one of the authors.
Rather, “What I think we tried to drill down to was the definition of success,” he said. “I think the first thing that people hone in on is how much value has the TIF created and what we wanted to do was bring this whole perspective to the process of evaluating TIFs (and) has Evanston been using them effectively,” he said.
Officials will “go back and study carefully” the recommendations, said Mayor Elizabeth Tisdahl, and see how the findings mesh in relation to the city’s economic goals, and will also look at whether the city should be more transparent on the issue.
