Chicago Mayor Rahm Emanuel announced several TIF reforms today which are designed to improve transparency and accountability in the City’s TIF Program.  The reforms are based on recommendations from the City’s TIF Reform Task Force, a Task Force that the Mayor created shortly after being elected.

The reforms, which are effective immediately, include the following:

• Creation of a comprehensive online TIF database.  The online database will provide the public with access to project and performance data and will allow the public to track all of the City’s TIF projects.

• Assessment Reports.  Prior to City Council consideration, the City will prepare these reports for every proposed private development TIF Project.  Information in these reports will include projected Project job creation and projected return on TIF dollar investment to the City.

• Monitoring of TIF Performance.  TIF Performance will now be monitored by the Department of Revenue and will include random audits of TIF Districts by independent auditors.

• City’s Internal TIF Task Force.  Representatives on the City’s TIF Task Force will now include the City Comptroller, the City’s Chief Operating Officer and the City’s Chief Financial Officer.  Previously, the Task Force only included members of the City’s Department of Housing and Economic Development.  This Task Force considers all proposed TIF deals that are brought to the City.

While the reforms are effective immediately, it is anticipated that they will be implemented throughout 2012.  According to the Mayor, “these critical reforms will strengthen the transparency and accountability involved in TIF projects, and will help the city focus the program on job creation and economic development.”

The City of Chicago’s Small Business Improvement Fund (SBIF) database shows that from 2001 to 2011, 565 companies received grants from the TIF SBIF fund to repair or remodel their commercial and industrial properties throughout the City. To be eligible, commercial applicants must have annual sales less than $3 Million during the previous three years and industrial applicants must employ no more than 100 full-time employees. The maximum grant per project is $150,000 but applicants are allowed to file multiple applications for grants from the SBIF program. Between 2001 and 2011, the total amount of all grants awarded was approximately $33 Million and the average grant was approximately $37,000. Approximately 34% of the 565 companies that received SBIF grants received multiple awards.

In 2011 alone, 162 companies received approximately $10 Million in SBIF grants for 222 projects. 87 TIF districts participated in the SBIF program in 2011, or approximately 50% of all of the City’s TIF districts.

Since 2001, the highest number of grant awardees has been in the Kinzie Industrial Corridor TIF District. From 2001 to 2011, 133 projects received SBIF grants in this TIF District for a total amount of approximately $5.3 Million. The Fullerton/Milwaukee TIF District and the Lawrence/Kedzie TIF District have also widely used this community redevelopment tool. In each of these TIF Districts, more than 50 projects have received SBIF grants between 2001 and 2011 in the total amount of $2.2 Million and $1.3 Million respectively.

The SBIF database is available on the City of Chicago’s website at:

https://data.cityofchicago.org/Community-Economic-Development/Small-Business-Improvement-Fund-SBIF-Grant-Agreeme/jp7n-tgmf

On December 29, 2011, the California Supreme Court upheld legislation that abolishes redevelopment agencies in California and struck down a companion law that would have allowed Redevelopment Agencies to continue to exist if they were to pay a certain portion of the tax increment that they collected to the State.

The Court’s decision means that approximately 400 Redevelopment Agencies throughout California will be disbanded and their obligations will be transferred to successor entities, typically local cities and counties where the Redevelopment Agencies are located.  As a result of the law, any pending projects or transactions that were not formally approved by June 29, 2011 will terminate and the validity of certain recent obligations issued or entered into after January 1, 2011 will be reviewed.

Newly constituted Oversight Boards comprised of local city and county officials have until March 1, 2012 to approve the list of enforceable obligations and the obligation payment schedules.  The lists must then be submitted to the State by April 15, 2012.  The Oversight Boards will also be charged with disbanding the Redevelopment Agencies and selling Agency assets.  Once the Redevelopment Agencies are disbanded, these Boards will oversee the distribution of taxes that would otherwise have been under the purview of the Redevelopment Agencies.

The California Department of Finance estimates that approximately $2.2 Billion out of $5 Billion in annual tax increment revenue must be set aside to pay debt service obligations for existing bonds.  The remainder of the tax increment would be distributed to local governments to ease budgetary pressures.

Under California’s Community Development Law, twenty percent (20%) of tax increment funds were allocated to low-income and moderate-income housing.  The Supreme Court’s ruling may have a significant impact on the construction and availability of affordable housing in California.

The California Redevelopment Association and the California League of Cities have already called on the California Legislature to commence work on legislation that would re-create Redevelopment Agencies, citing comments made by key California legislators that the purpose of the legislation was not to eliminate redevelopment agencies completely, but rather to limit their sizes and budgetary impacts.  However, because of the significant financial challenges facing California, it is unclear whether the State Legislature will be supportive of such an effort.