Back last fall when the Chicago Bears owners started talking about possibly moving to a new stadium in Arlington Heights at the site of the former Arlington Park racetrack, Arlington Heights Mayor Tom Hayes deflected talk of providing public money, saying only “They haven’t asked us for any money at this point. And we haven’t committed any money.” But that was before the NFL declared this stadium subsidy month, and Hayes is now changing his tune somewhat, according to the Chicago Tribune:
“We’re still in the process of evaluating what we might be able to do from a financial perspective. … We want to make this happen, so we’ll have to see what their needs and our abilities are, and try to balance the two.”
Such help might come in the form of a tax increment financing district or another local tax district that would use the site’s property taxes to pay for roads, sewers and other infrastructure.
The Chicago area has a long and mostly ignominious history with tax increment financing, which under Mayor Richard Daley in particular were handed out so aggressively to developers that it left the city’s property-tax map looking like Swiss cheese, with TIFs at one point costing the city more than half a billion dollars a year in tax kickbacks.
There’s no telling how much Arlington Heights would kick back. The Illinois property tax assessment system is fiendishly complicated, but it looks like Arlington Heights commercial properties would be expected to pay about 1.6% of their total value each year, and the Bears owners paid $197 million for it, so that would come to about $3 million a year. But there’s nothing stopping Arlington Heights from making the TIF district bigger than the stadium property, in which case the sky is the limit. (Not literally. Illinois doesn’t allow municipalities to tax the sky. I don’t think — I’ll have to read that tax code again.)
Coming two months after Chicago Mayor Lori Lightfoot hinted vaguely at “working on some plans” to present to Bears execs to entice them to stay put in Chicago, it looks like we’re seeing the first simmers of a bidding war at play here. This is, of course, exactly what team owners want and what city officials should be working to avoid, since it drives the public cost up regardless of what a team actually is or isn’t worth to taxpayers. Though even without a bidding war, elected officials often end up bidding against themselves, as New York Gov. Kathy Hochul appears to have done with her $1 billion Buffalo Bills plan despite zero offers on the table for the team from other cities. There are lots of ways for politicians to approach stadium negotiations badly, is the upshot here, and we’re seeing all of them on display at once — these are truly educational times.
Not to hate, but do we believe in substitution theory or not? Anti-subsidy folks can’t say “don’t count 100% of the hotel spend by fans who traveled to Dallas for WrestleMania last week, because some of those rooms would have been rented without WrestleMania”, while also counting 100% of TIF distributions — as the author of the “half billion dollars a year” article did — as lost property taxes.
Also — and I’m not hating on the reporting here; just pointing something out — the McCaskeys would commit hara kiri if the Arlington Heights development only doubles in value once the stadium and mixed use district replaces the racetrack. So, the value of the TIF should end up being a lot more than $3 million/year.
So Ben, let me get this straight: You’re arguing that when Chicago kicks $500 million in property taxes back to property developers, that’s “substituted” by … something?
I’m saying substitution theory is based on “but for”, so TIF disbursement calculations should also be based on “but for”.
Let’s be consistent: If we say that every dollar of TIF distribution is a lost dollar for city coffers, then substitution theory doesn’t apply to hotel rooms rented by visitors in town for WrestleMania.
If we’re going to subtract average weekend hotel room rental revenues from WrestleMania weekend’s total weekend hotel room rental revs when calculating Mania’s economic impact, then we should apply the same “but for” to TIF calculations. For example, the author of that Chicago Reader article (alongside an econ prof or economist) could try to estimate how much the properties in Chicago TIF areas would be worth if they’d never been developed (or if they’d been developed similarly to non-TIF’d projects). The taxes on that estimate would be the amount of money Chicago government is losing due to the TIF. I’m guessing that estimate would be a tiny fraction of the full TIF distribution.
The vast majority of TIF’d projects would have happened the exact same way with or without the TIFs. (That’s one of the other findings in Chicago — I believe there’s a Reader article on that as well.) So the “but for” is the full property tax amount in those cases.
(That’s not really substitution, though, which refers to economic activity that’s cannibalized from elsewhere. You’re talking about a different but-for calculation here.)
I still think Arlington Heights would get a better return on their investment by trying to get the horse track reopened. A 30 to 40 day summer meet at an existing top rate facility would seem a better deal that 10 to 20 events at an unbuilt billion dollar facility.
I think you are right.
Then again, Arlington Heights would probably get a better return on their investment by spending money in literally any other way than bribing an NFL owner to move his team there.
A convenience store, a business park, a bowling alley… all normal businesses that actually pay property taxes on their places of business and employ full time workers that live in the district and contribute to the local economy.
“… another local tax district that would use the site’s property taxes to pay for roads, sewers and other infrastructure….”
Beautiful. So then, who pays for all the things that “the site’s property taxes” would normally pay for?
Pols and stadium fan boys keep pushing this notion that property taxes are “profit” for cities or counties. In fact, they are supposed to be a particular property (or properties) pro rated portion of the actual cost of providing government services (IE: based on a cost recovery calculation of the operation of the government levying the tax).
If TIFs were, by definition, a surtax on properties included within a special zone and not a redirection of existing property taxes, I might be in favour of them in some cases. But more often than not they are not a surtax or special levy – they are a redirection of basic property taxes to pay for private developments.
Which means that the owners of other developments near (or sometimes far) from the TIF zone are paying extra to cover the unfunded obligation of the TIF district’s government services.
When did imposing a special tax on the McDonalds owner across the street from the Walmart to help the owner of the McDonalds housed inside the Walmart pay his or her rent become free market capitalism?