Tax Increment Financing (TIF) districts are a tool used by the City of Chicago (and many other municipalities) to stimulate economic development in designated areas.
Here's a detailed overview:
What are TIFs?
A TIF is a public financing method where the city earmarks future property tax revenue increases from a defined area, the TIF district, to fund public or private investments within that same area. A TIF district is established with a baseline property value (equalized assessed value, or EAV). For the next 23 years, any increase in property tax revenue (the “increment”) resulting from rising property values is diverted from general city services (like schools, parks, police) and instead used for infrastructure improvements, redevelopment subsidies and redevelopment of contaminated sites. The key feature of the increment can be given as subsidies or incentives to developers or used for public works like street improvements and schools within the TIF district.
There are 126 active TIFs in Chicago that raised $1.07 billion in 2023. That was a record high, largely due to the higher reassessments from increased property values. The Cumulative Fund Balance, which is the surplus or unspent money raised was over $1.5 billion. There are two ways to look at it. A surplus of any kind is shocking, and welcome, for the City of Chicago. On the other hand, there is no reason for the city to act like a university. Over 50 percent of the revenue went to paying down debt from past developments. The remainder went to new infrastructure like roads, sidewalks, and sewers. One can only hope that the graft while handing out those contracts was minimal. At least that work needs to be done, graft or no graft. It’s the last portion of funds that we should be diametrically opposed to. The Chicago Public Schools get a portion of the revenues. That number should be zeroed out. There is no logical reason a school with 89 administrators and 74 students to receive a nickel. Starve the beast.
TIFs were created to help blighted areas. When the economic development improves the neighborhood and brings in additional revenue to the city, they should not be a target of criticism. During the redevelopment period there will be plenty of new jobs as well. You never want to start a project to create jobs. That is foolish. If the project is deemed to be a sensible one, then new jobs will be a welcome fringe benefit.
The Cortland/Chicago River TIF
The Cortland/Chicago River TIF (Lincoln Yards Development) is surrounded by gentrified areas. It is, however, a commercial area that has seen better days. Lincoln Yards spans roughly 53 acres of former industrial land along Chicago’s North Branch of the river, situated amongst Bucktown, Wicker Park, and Lincoln Park. The ambitious plan includes a mixed-use community featuring up to 14 million square feet of development, including residential, office, life sciences, retail, and open space and around 6,000 housing units with 20% designated as affordable. A total of 21 acres are planned as public open space, including riverwalks, parks, and recreational areas. Chicago has committed over $490 million in TIF funds for infrastructure such as new bridges, roadways, work on the river wall, and a trail extension. Sterling Bay pitched in nearly $300 million more for parks, trail extensions, riverwalks, cleanup, and other improvements.
Designed by SOM (Skidmore, Owings & Merrill) with local firms, the project aimed for a sustainable, connected district. Construction kicked off around 2021, starting with the ALLY Life Sciences Building (1229 West Concord) and developments in Lincoln Yards South like The Steelyard lifestyle district. Progress has stalled since economic difficulties have slowed down the project. Economic difficulties have slowed the overall project. Sterling Bay surrendered the northern section of the site to lender Bank OZK and is being reimagined as a lower-density community featuring 2,000-3,000 residential units — mostly located in buildings under 20 stories, with some mid-rise (up to 30 stories), and even some single-family homes included.
As of early 2025, broader city support for the megadevelopment appears to be waning. While parts of Lincoln Yards South, like the life sciences and retail spaces, continue to move forward, much of the original masterplan remains unrealized. A more modest plan to develop the area into parkland might have been a less costly and therefore better idea. The eyesore would have been removed. Any future private development would happen organically. We give Lincoln Yards a grade of C.
LaSalle (Central Loop) TIF District
The LaSalle Central TIF — often referred to as the “Central Loop TIF” or “LaSalle Street TIF” is one of Chicago’s more financially substantial traditional (non-transit) TIF districts. In 2021, it collected approximately $175.5 million in tax revenue, adding to its already significant fund balance. Recent Projects as part of the "LaSalle Street Reimagined" initiative, this April, the City Council approved $164 million in TIF funding for converting office buildings into mixed-income apartments totaling 899 units as well as converting 92,000 square feet of commercial space. This includes the Harris Trust & Savings Bank at 111 W. Monroe, the Continental and Commercial building at 208 S. LaSalle, and the Field Building at 135 S. LaSalle. By today’s standards, $164 million is pocket change but these developments are not exactly located in blighted areas, nor are they an eyesore. There is no reason to partner up with private developers in this egregious example of corporate welfare. This TIF gets an F grade.
The Fulton Market Innovation District (FMID)
The Fulton Market area has been a designated TIF district since 1998, aimed at helping fund revitalization in this formerly industrial neighborhood. The FMID spans roughly 217 acres on Chicago’s Near West Side, bounded by Hubbard Street to the north, Randolph Street to the south, Halsted Street to the east, and Ogden Avenue to the west. Originally established in 2014, 16 years after the project’s designation, to guide land use, design, and infrastructure, the district was updated in 2021 to support mixed-use and mixed-income development, especially by allowing new residential uses north of Lake Street, something previously restricted.
Success stories include McDonald’s and Google moving their headquarters to the district. Guiness Brewery selected the Fulton District as its second U.S. brewery. This has started a chain reaction as old warehouses were repurposed to serve new office, retail, and hospitality functions. The FMID checked one box by spurring new developments in an area that was not exactly blighted, but, left to its own devices, soon would be. Could this have happened without the TIFs? Perhaps it might have but probably not as quickly. FIMD receives a solid B grade.
There are grades of B, C, and F. Funds should be restricted to areas that are not being used and are unlikely to be used in the near to mid-term future.
