Lincoln Yards and The 78 are developments that are years off, but nearly $140 million in TIF funds are flowing
The two largest ongoing development projects in Chicago — one on the North Side, the other just south of the Loop — are primed to benefit from a series of fiscal maneuvers the city has quietly made, shifting nearly $140 million from under-the-radar public bank accounts to pay for infrastructure improvements in and around those developments.
Records show that since 2020, the dollars have steadily moved into position for the revamp of the Chicago River’s North Branch called Lincoln Yards and the creation of a new neighborhood dubbed The 78.
The public dollars are set to pay for constructing and improving roads and bridges within and around both developments. While use of the often-overlooked but controversial tax increment financing dollars was always expected to be part of both projects, the city’s maneuvers mean certain infrastructure work stands to be funded by tax dollars from neighboring TIF districts and not the TIF districts the city established in recent years to support the Lincoln Yards and The 78 projects.
The moves are potentially beneficial for Lincoln Yards as its developer, Sterling Bay, has struggled with securing financing for the $6 billion project. In addition, a portion of the TIF transfers mean the city and not Sterling Bay could bear upfront costs for some of the new infrastructure as opposed to previous plans that Sterling Bay would pay for the infrastructure work first and be paid back with TIF funds later.
None of the three aldermen whose wards touched or covered the Lincoln Yards development were aware of the transfers, and it caught a TIF expert closely watching the project by surprise.
The transfers didn’t happen in a vacuum, either: The $139.8 million moved out of the neighboring TIF districts and into the TIF districts created for the megadevelopments could have instead been shared with every major taxing body in the city, including for schools, libraries and parks.
Michele Smith, recently retired alderman of the 43rd Ward that neighbors Lincoln Yards and a critic of using public dollars to support the development, said she knew there was money left in neighboring TIF districts but didn’t realize the transfer was such an “outrageous” sum. She also said the city potentially using that money for infrastructure costs went against her expectation Sterling Bay would launch that work.
City officials say the transfers, for the most part, are paying for leftover projects from TIFs that they let expire. Developers helming those megaprojects say they haven’t yet seen a penny of the TIF dollars come back to them.
Though also initially unaware of the transfers, Lincoln Yards’ other neighboring alderman, Brian Hopkins, 2nd, supported the use of TIF dollars to deliver on “necessary and desirable” infrastructure that residents wanted, and that it was a “mistake” for the city not to extend the life of adjacent TIFs that could also have helped pay for other major projects.
The fiscal moves are the most recent chapter in the decadeslong debate about TIFs and the expenditure of public dollars that also benefit private interests.
While supporters say TIFs help spur investment, critics say they are little more than tools for corporate welfare that put developers at the front of the line for infrastructure projects, subvert the normal city budgeting process and give the mayor and city planning officials more power to spend with little oversight or transparency.
“By allowing these transfers instead of letting the money remit back to the general fund — the normal procedure — you’re continuing to hot-wire both the previous TIF recipients and the new ones adjoining,” said Greg LeRoy, executive director of Good Jobs First, a policy organization that pushes for transparency around the use of public money for economic development. “It’s profoundly undemocratic. This is a covert budget system out of the public view.”
‘This strikes me as a workaround’
TIFs have always been at the center of the Lincoln Yards development.
Sterling Bay won approval for the project in 2019 and broke ground in 2021. When it pitched the public and aldermen on establishing an up to $1.3 billion mega-TIF to help cover the costs of revamping the traffic-choked area, Sterling Bay said it would help pay for road, bridge, and river wall improvements and be reimbursed over time by funds from the newly formed Cortland/Chicago River TIF district.
Among the projects Sterling Bay planned to pay for were new or improved bridges at Armitage Avenue, Dominick Street and for extending The 606 into the Lincoln Yards footprint. It also planned to realign the convoluted Elston-Armitage-Ashland-Cortland intersection. Under Sterling Bay’s redevelopment agreement with the city, the development firm would be eligible to be reimbursed for up to $498 million of that work, according to the city’s Department of Planning and Development.
Only $12 million in increment has naturally built up in the Cortland/Chicago River account, according to city data. And to date, just one building has been completed of the planned 53-acre campus — a life sciences office. Company CEO Andy Gloor has blamed former Mayor Lori Lightfoot’s administration for delays, and the company has sought fresh financing to help with the initial infrastructure outlay, according to Crain’s, who also reported the Chicago Teachers’ Pension Fund has passed on investing in it.
But $86 million from other TIFs have still flowed: Annual reports prepared by DPD, which manages the city’s TIF program, show tens of millions of dollars being transferred into the Cortland/Chicago River account from two abutting TIF districts — North Branch North and North Branch South — beginning in 2020.
About $53 million was transferred to rehabilitate bridges that span the Chicago River on Webster Avenue and Cortland Street; more than $12 million was for the Elston-Armitage-Ashland-Cortland work; $1 million was set aside to study creating a new park and nature preserve; and $20 million was designated for broadly funding “the Lincoln Yards infrastructure redevelopment agreement,” which DPD officials said will go for the Elston intersection project.
Sterling Bay’s redevelopment agreement, or RDA, with the city doesn’t allow the company to seek reimbursement until an infrastructure project is completed and conveyed back to the city. Sterling Bay spokeswoman Julie Goudie said the company has “not been reimbursed for any work performed to date outlined in the RDA,” and the company was not “aware of any transfers into the Cortland/Chicago River TIF from other neighboring TIFs.”
DPD spokesman Peter Strazzabosco said the $53 million transfer was for bridge work already underway in the North Branch North TIF area that faced cost overruns in 2020 and 2021 due to supply chain issues. Because of those extra costs and that the new Cortland/Chicago River TIF overlapped that area, the city “shifted its location” of the funds.
The Elston intersection work is on Sterling Bay’s list of responsibilities. But because the RDA allows the city to take over the project, DPD said, Sterling Bay might not have to pay the upfront costs for that work, rendering a reimbursement moot.
The Chicago Department of Transportation hasn’t even started design work on the intersection project, “but because that option is there, the city is taking reasonable steps to assemble funding should it elect to exercise that option,” said Tim Jeffries, a DPD managing deputy commissioner.
Hopkins, the 2nd Ward alderman, said he was unaware of the transfers but supported what the money would be spent on, describing the bridge improvements and “untangling that bowl of spilled spaghetti” at the Elston intersection as expensive but necessary work neighbors want.
But Smith, the retired 43rd Ward alderman, said the TIF transfers run counter to her understanding of how the funding was supposed to work.
“The intent of this redevelopment agreement was that (Sterling Bay) go first,” she said. “This strikes me as a workaround that benefits Sterling Bay without them having to lay out money under their TIF, whereas under the anticipated and loudly announced statements made, the city isn’t out money until Sterling Bay pays.”
Andrea Craft, a professor at the University of Illinois at Chicago’s urban planning and policy department and a member of the Lincoln Yards Community Advisory Council, also described the transfers as a surprise. A former TIF consultant, Craft attended nearly all the Lincoln Yards public meetings and said transfers from abutting TIF districts “never came up. Which is what totally blew my mind when I realized this recently, because I should have been a person to know this.”
In addition to transparency issues, critics say the transfers raise questions about whether taxing bodies affected by TIF are getting shorted and what kinds of budget priorities are placed first in line.
TIFs are established to have an end date — typically 23 years after they begin. When a TIF boundary is established, property taxes distributed for schools, parks and other government services are frozen during those 23 years and any additional tax dollars are redistributed for use within that TIF district.
When a TIF expires, any money left over in its piggy bank is supposed to be divided up and paid out to governments that collect property taxes within the district, from the city itself to schools and parks to Cook County government and forest preserves.
The North Branch North and South TIFs were both set up in Mayor Richard M. Daley’s tenure in the late 1990s to protect, attract and support industrial investment along the North Branch corridor — which was still populated by factories at the time — by eliminating unnecessary streets, alleys and railroad right-of-ways and creating buffers between industrial and residential areas.
The North Branch North TIF expired at the end of 2021. After it transferred $52.7 million to Cortland/Chicago River in 2021, that left only $1.8 million to be distributed back to taxing bodies.
North Branch South expired at the end of 2022. It transferred $33.6 million to Cortland/Chicago River in 2021 and 2022. The TIF only distributed $3.2 million to other taxing bodies when it expired.
If the dollars transferred, a process also called “porting,” to Cortland/Chicago River remained in their original TIFs instead, CPS could have received up to $45 million in additional surplus and the city of Chicago could have received up to $20 million, according to a Tribune analysis.
While porting helps the city navigate budgetary constraints and pay for infrastructure, Craft said it can also result in money being withheld from other taxing bodies that need it. CPS has faced budget struggles for years, and leaders have warned of a looming fiscal cliff when pandemic relief runs out.
Critics say while legal, the transfers essentially create a “forever TIF,” where dollars remain locked and reinvested in the same area well beyond the initial 23-year term.
“When a TIF expires, its balance is supposed to be redistributed among the taxing bodies. Porting it is a way of skirting that regulation,” Craft said.
It’s a maneuver Chicago officials frequently use: a Tribune analysis of city data found more than $740 million has been transferred from one TIF to another over the last six years.
In defense of the transfers, Strazzabosco said now that those two TIFs have expired, “a significant amount” of value has been returned to the overall tax base, meaning the value that was being reinvested into the old TIF districts is now being shared citywide. In 2021, for example, those TIFs generated $18 million in increment.
Hopkins said he hoped and expected the city would have extended the life of the North Branch North and South TIFs and the fact they weren’t was “a grievous, unforced error,” that makes it more difficult to fully fund the intersection untangling at Elston and Armitage that the community wanted in the lead-up to Lincoln Yards’ authorization. While $32 million in TIF money has been set aside for that work, the total estimated cost is nearly $265 million, according to DPD.
“Generally we should have a bias toward letting TIFs expire, unless there’s extenuating circumstances or incomplete projects. In this case, it meets those criteria … the argument to extend in this case was strong,” Hopkins said. “It’s too late now.”
From ‘Rezkoville’ to The 78
Much like with Lincoln Yards, the city established a TIF to help spur development for The 78 — the $7 billion project planned by Related Midwest to transform 62 acres of largely vacant former railroad lines just south of downtown that used to be owned by Antoin “Tony” Rezko. The developer in 2008 was convicted by a federal jury of corruption charges for trading his clout as a top adviser and fundraiser to former Gov. Rod Blagojevich.
The plan is to convert the land once colloquially called “Rezkoville” into Chicago’s newest neighborhood with new office and residential space alongside an anchor tenant: the University of Illinois’ Discovery Partners Institute.
The Roosevelt/Clark TIF, as the new TIF district was named, was established to help build infrastructure around The 78. But on its own, Roosevelt/Clark has raised just $5 million from property tax increment since 2019. Transfers from abutting TIFs, however, have helped bring the total balance up to $56 million at the end of 2022, city records show.
A complicated series of maneuvers involving soon-to-be-expired TIFs led to that transfer: The nearby Canal/Congress TIF, which was set to expire in 2022, transferred $51 million in 2018 and 2019 to another neighboring district, the River South TIF, which was scheduled to expire at the end of 2021.
According to annual reports, those transfers were designated to help fund construction of a new South Loop Elementary School and a new road between the Loop and Chinatown known as the Wells-Wentworth Connector.
Then in 2020 and 2021, River South transferred $53.5 million to the new Roosevelt/Clark TIF to fund repairs to the Roosevelt and Taylor street bridges and the Wells-Wentworth Connector, according to annual reports.
In the end, $32.5 million was left over in the River South TIF to be distributed back to CPS, the city and other taxing bodies. Canal/Congress, meanwhile, was quietly extended until 2034. Had River South not transferred the money out of its bank account, CPS and the city could have received up to $28 million and $12.4 million in surplus, respectively.
The Wells-Wentworth Connector, Roosevelt and Taylor Street bridge projects were all CDOT projects in the old TIF that were incomplete or long-term priorities, Strazzabosco said.
TIF-eligible projects for Related Midwest are different: They include construction of a new Red Line station, the realignment of Metra tracks, improvements to Clark Street and 15th Street, and river wall improvements. A Related Midwest spokesperson confirmed none of the TIF-transferred money are for projects on its to-do list or eligible for reimbursement.
But for both projects, LeRoy of Good Jobs First said even if it’s not directly reimbursable, any targeted infrastructure build will still benefit the developer.
“You’re talking about getting goods and services in and out more efficiently, improving street amenities, improving traffic, improving utility hook ups,” LeRoy said. “All that immediately redounds to the value, rentability, and rent prices of the development owned by the developer.”
