CHAMPAIGN, Ill. - The debate over the impact of tax-increment financing on funding for Chicago Public Schools has devolved into gridlock, and the key to moving forward is for both sides to recognize how contested the ground is that they are fighting over, says a University of Illinois labor expert.
Robert Bruno, a professor of labor and employment relations, says a tax-increment finance program that can equally serve to bolster both the city of Chicago's economic development and the needs of children in public schools is not likely to arise from the current approach to the issue.
"The debate is polarized between two contrasting narrative frames, with the competing parties largely talking past each other," Bruno said. "Although each side cites substantive data that appear to validate its perspective, the effect is not an enlightened debate over an important public policy tool but instead a war of positioning where the conflicting parties battle to establish their framework as the correct one."
Bruno and Alison Dickson Quesada, a program coordinator of the Labor Education Program, are co-authors of a white paper that outlines ways to reset the debate between the two warring sides.
"Ultimately, there's a flaw in the way this is being talked about it in the public square," Bruno said. "In our paper, we say that if you laid both arguments out, the needle moves back and forth a little bit between one side and the other, but we don't know how much. That's why we need a baseline for how the program should be debated by both sides."
For the past three decades, tax-increment financing has been the primary public financing tool used by the city of Chicago to spur economic development. According to the research, the modern-day debate is shaped by two competing arguments - whether TIF districts, which cover nearly one-third of the city, siphon money from Chicago Public Schools. Opponents claim that TIF districts diverted about $250 million away from Chicago schools in 2009.
"This reproach of TIF resonates with much of the public given the current budget crises confronting the school district and the city," Bruno said. "Schools in Illinois are highly dependent on the collection of property taxes for revenue generation, and Chicago schools face a $700 million budget shortfall for the 2011-2012 school year."
Proponents argue that TIF districts have limited or no financial impact on public school finances.
"The city typically comes up with a number and says, 'This is the economic value of TIF,'" he said. "And they argue that there's relatively little impact on schools. The critics sharpen their knives and say, 'No, it's $250 million drained out of schools.' But really, it's all back-of-the-envelope arithmetic from both sides. It's pure guesswork. Frankly, it's hard to find good numbers to back either side up."
Instead, Bruno says the conversation would be best served by recognizing how the relevant variables likely shift the impact on school funding.
"Depending on the factor and the weight of its influence, the loss of local property tax dollars to city schools because of TIF will shift between more or less," he said. "For a school system with a $700 million budget deficit, the shifting is not without consequence."
In the paper, the researchers make recommendations for improving TIF accountability and transparency in order to help both parties find common ground.
"After three decades, tax-increment financing is no longer an exotic measure but a mature economic policy tool with multiple data points," Bruno said. "Let's at least agree on the variables, and maybe then that will at least get us into an open debate and we'll come up with some kind of assessment on how these things actually work. There are also TIF 'best practices' that should be seriously investigated and adopted."
Although Chicago Mayor Rahm Emanuel has moved forward with plans for auditing TIF finances, Bruno said it's only a small step in the right direction.
"It's certainly consistent with the idea of providing more data, of being more transparent in real-time, and measuring how well a TIF is doing, but it's mostly already been done," he said. "The city already has an online database. What it doesn't do is get to this question of the amount of new property value that's been generated in these TIF districts."
According to Bruno, one of the data points that would "move the needle" is how much new property value is actually generated through a TIF zone.
"We know it's there, otherwise these TIFs wouldn't be operating," he said. "But the city claims that they can't determine what it is. They just know the property values go up, they don't know if it's due to inflation, a rehab on a unit or the product of the TIF itself. To my knowledge, what the mayor is recommending isn't going to provide that key piece of data."
There are also no indications that Emanuel recognizes the alternative critical arguments that Bruno and Quesada raise in their paper.
"The commission Emanuel established didn't deal with them at all, nor are there any hints that he's going to attempt any of the best practices that have already occurred in other places, like carving out a percentage of the increment for the schools," Bruno said. "The city seems absolutely resistant to the idea of looking at other creative ways TIFs have been used around the country, including in Illinois. We think our recommendations are sensible and feasible because there are some fundamental flaws in how people have promoted tax-increment financing."