It's been more than 11 years since I first posted about the absurdity of a steel plant located in Lincoln Park: Why Finkl & Sons Is In Lincoln Park. So I was pretty happy when word first got out that Sterling Bay was going to put something more logical on that prime real estate. Of course, not everyone was happy with the Lincoln Yards development plan, which ended up going through multiple rounds of revisions. And Sterling Bay didn't do the best of jobs seeking community support.
But let's move past that and focus on another even more controversial aspect of the whole plan - the Lincoln Yards TIF fund, which has provided an endless opportunity for people to voice their outrage over what they perceive as wealthy developers robbing Chicago of much needed tax dollars through corporate welfare. In fact, even though the city council approved the plan and the TIF on April 10 this debate is not over yet. The Grassroots Collaborative and Illinois Raise Your Hand for Public Education almost immediately filed a lawsuit to block Sterling Bay from using the TIF money.
Looking back at the history of this TIF you can see that much of the public perception of what is going on isn't really accurate. Once you understand how TIFs really work you can see that Sterling Bay isn't actually siphoning money off from the city. We are actually talking about tax dollars that wouldn't exist in the absence of this development. And you also need to understand how TIF money can be used. It's not like the city is giving Sterling Bay carte blanche to use the money to line their own pockets.
But it should be no surprise that there is a lot of misunderstanding about the Lincoln Yards TIF (actually it's called the Cortland and Chicago River TIF just to add to the confusion). The information is scattered about, has been revised multiple times and it's often contradictory or incomplete. For instance, the media has widely reported that the Lincoln Yards TIF funds add up to around $900 MM. However, the actual final official redevelopment agreement only lists about $534 MM in TIF funding. Another document, the Cortland and Chicago River TIF Redevelopment Plan which was revised on March 7, shows total costs of around $900 MM. Supposedly the $900 MM figure includes financing costs not included in the smaller number. But I can't confirm that.
However, one thing that is clear from all the documents is that the TIF funds are strictly for infrastructure investments - roads and bridges leading in, out, and around the development. They are not going towards subsidizing the development itself, as is often the characterization by the outraged. The bigger question, which is raised by the lawsuit, is whether or not this project meets the requirements for TIF funding - i.e. is the area blighted and is TIF funding the only way to make this deal happen? That latter question is known as the "but for test" that I discussed in my blog post on how TIFs work. In the absence of the TIF funds would a developer like Sterling Bay build out the needed city infrastructure on their own dime?
The Cortland and Chicago River TIF Redevelopment Plan actually makes a pretty good case that Lincoln Yards meets the requirement for TIF funding. See section VI on page 28. The plaintiffs in the lawsuit obviously disagree. So it's up to the courts to decide whether or not this was a fair deal.
Gary Lucido is the President of Lucid Realty, the Chicago area's full service real estate brokerage that offers home buyer rebates and discount commissions. If you want to keep up to date on the Chicago real estate market or get an insider's view of the seamy underbelly of the real estate industry you can Subscribe to Getting Real by Email using the form below. Please be sure to verify your email address when you receive the verification notice.