Tuesday, June 5, 2012

Research Brief #3: Tax Increment Financing and Chicago Public Schools Construction Projects Introduction

CReATE |Research Brief #3
June 2012

Tax Increment Financing (TIF) is one of Chicago’s leading financing tools for development. TIF districts create a development fund based on the property taxes generated in the TIF district. When the TIF district is formed, all the properties in the district have the property value amount on which taxing bodies draw their revenues (the baseline) frozen for 23 years. Any new tax revenue created above the property value baseline amount (the increment) is diverted into the TIF development fund, used to finance community development projects in both the public and private sector. State law requires TIFs to be used for the development of blighted or deteriorating communities. In recent years, the city of Chicago has expanded its use of TIFs to increasingly include sections of the city that are economically developed and stable. Currently, TIF districts cover over 30% of the city.

The effects of TIFs are controversial. On the one hand, critics of TIFs note that each district diverts revenues from the public school taxing body, thus depriving them of revenues that would have otherwise gone to them. TIFs capture about $500 million in tax revenues each year, about half of which is diverted from the public school system. Critics have also pointed to the revenues given to large corporations, such as Boeing and United Airlines to finance the expenses of moving their headquarters to the downtown Loop, as an abuse of the intent of TIF. On the other hand, city officials and TIF proponents claim that the TIF is the only game in town for financing local development projects. They emphasize the public works projects and new school construction to demonstrate the benefits of the TIF program. Since 1983, 46% of TIF revenues have been allocated for public works projects, with 47% of those revenues going towards Chicago Public Schools construction projects.

This white paper examines the nature of TIF funded public school construction projects. Key findings include:

  • 1 out of 3 schools receiving TIF funds are in the highest socio-economic communities (Tier 4) as measured by Chicago Public Schools (CPS), even though the TIF was designed to help develop blighted communities. 
  • Selective enrollment schools constitute 1% of CPS schools but receive 25% of TIF funds used for school construction projects. 
  • Schools with some form of an exclusive enrollment process (includes selective enrollment schools and charters, magnets, etc) received nearly 50% of all TIF funds used for school construction projects. 
  • Neighborhood area attendance schools constitute 69% of CPS schools but receive 47% of all TIF funds used for school construction projects. 
  • 78% of the schools receiving TIF funds are located in the northern 50% of the city, even though the TIF is suppose to help underdeveloped communities.

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  73. With the passage of time, expenses of a person have been increased with same percentage but salary at low level so tax rate should be less. I think companies like dissertation writing service providers are paying highest taxes.

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  74. Being writer of an essay writing services provider, I deeply went into tax rate and people's reaction. More than 78% are not happy with increment of tax rates.

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