Chicago Inspector General: City Is "Taxing a Tax" With TIFs

By Chris Bentley in News on Apr 6, 2012 3:20PM

An analysis by the Chicago Inspector General’s Office found redundancies in some special tax designations costs some Cook County property taxpayers $7 million each year.

The office looked at property taxes billed to property owners in two kinds of special tax districts: Special Service Areas and Tax Increment Financing districts. Their analysis found more than 80 percent of SSAs overlapped with TIF districts in 2010 and 2011.

SSAs and TIFs are common development tools. In an SSA, businesses and residents within the boundaries of a certain area agree to higher property taxes to fund neighborhood services and economic development. TIFs flag a portion of property taxes paid within certain “blighted areas” for redevelopment, without levying any tax directly.

But the two designations create different records of the area’s value. In TIF districts, improvements made to the property can increase its “Equalized Assessed Value,” creating a new “incremental” tax base. Where SSAs and TIF districts overlap, the SSA’s voluntary tax levy gets applied to both the property’s original valuation and the TIF’s incremental valuation.

Chicago is effectively “taxing a tax,” said Inspector General Joe Ferguson, squeezing TIF money out of SSA property owners. In Chatham, for example, SSA #51 property owners were billed $629,607 on top of the $996,317 approved for SSA improvements because of three overlapping TIF districts.

There were 42 SSAs in Chicago last year, with a total tax levy of nearly $20 million. TIF districts numbered 165 and received about $510 million in property tax revenue. The Inspector General’s Office report and data is available online.