TIF

Everybody's happy about the agreement that the schools reached with the city to extend the TIF for 12 more years. Some of the school board candidates are even using the agreement in their campaigns.

As we see it, there are two problems with extending the TIF. First off, the schools are making a deal with the devil, and they are carelessly looking at the short term. The excuse they are using to justify supporting the TIF is that they would lose state aid if the TIF ended, due to the sudden increase in their assessed valuation. The fallacy of that argument is obvious. The loss of state aid would be more than offset by the increase in property tax revenue. The school districts are taxing at the maximum rate already, so a substantial increase in assessed valuation might even allow the tax rate to be lowered. Furthermore, with the very real possibility that a district's overall assessed valuation could decrease over the next few years due to the recession, the schools are going to wish that they had that cushion. If they are already taxing at the maximum rate, no amount of TIF handouts from the city will be able to cover the shortfall from decreasing property values. Remember, the TIF money can only be used for capital projects, not salaries. In 2-3 years, the schools are going to be seeking to raise their education fund tax rates, so they can keep paying the teachers.

This leads to the second problem. The TIF is a de facto way for the city to tax the rural areas. Why? Because the city gets the tax increment from property in the city limits. The schools, library, and county then have to tax at a higher rate to recover the funds lost to the city. Therefore, the rural areas pay higher taxes to fund city projects. Now the argument will be made that the rural areas benefit from whatever the city spends money on, because the rural dwellers shop in town, make use of city facilities, etc. That may be true, but if it weren't for the TIF, the the city would be forced to tax at the realistic rate to cover its costs, and there would be more transparency as to the true cost of the city's services. For instance, the sales taxes the city collects are a fairer way for out-of-towners to pay for whatever city services they are receiving; as are the property taxes those businesses pass along to their customers.

One more thing. Doesn't this whole thing come across as just a little unseemly? That's because everyone involved is cheating. The city is bribing the school districts by letting them at the money two years earlier than they would have otherwise received it. And the selling point is that they get to keep the extra state aid while the city tosses more crumbs. While this is probably legal, that doesn't make it ethical. What kind of lesson are our leaders teaching our kids? The school boards, especially, should be ashamed.

Morris TIF

This is what we have to say about the Morris TIF:

The Morris TIF has been abused ever since it was created. When the TIF district was drawn, it included virtually every piece of non-residential property in the city limits. No way could all of that land qualify for TIF status, but the City Council approved it anyway. Why? So they could maximize the sales tax rebate from the state.

The Council then proceeded to use the TIF money for any number of projects of questionable relationship or benefit to the TIF district. For instance, TIF money was used to separate the storm and sanitary sewers in the residential neighborhoods. Yes, that indirectly benefited the TIF area, but was it within the spirit of the law?

As for funding the municipal building, that was not included in the original TIF plan. However, the city added it to the plan on the eve of the statute change in 1999. So, no matter your opinion of the city hall project, the city is legally free to proceed.

Morris is not unique in its abuse of TIF; citizens and taxing bodies across the state have been complaining for years about their local TIFs. The General Assembly has occasionally tinkered with the statutes; but there is an army of TIF lawyers advising the legislature, and then counseling municipalities, about how to maximize and leverage TIF income (and about creative ways to use the money once they get it.)

In conclusion, the City Council is going to use TIF funds to construct the new city hall. They have the money, they have designated it for this purpose, and they have the law and the power brokers on their side. Whether this is an appropriate use of TIF funds is irrelevant. Save your energy for the battle when they try to extend the life of the TIF beyond 2009.

We love to say we told you so

Check out today's Chicago Tribune for an expose on Jerry Weller's Nicaraguan land dealings.

The Tribune goes into some detail, finding several incidents where Weller failed to declare transactions in Nicaragua on his Congressional disclosure; differences in the amounts he reported for the purchase and sale prices of land; and an apparent conflict of interest with his support of the CAFTA agreement. The Tribune confirms earlier reports that Weller still has not fully disclosed his interests in Nicaragua.

So far, Weller continues to refuse to discuss the matter, which was first raised last summer by respected journalist Frank Smyth, as well as by campaign opponent John Pavich. Weller should have a hard time dismissing the report by the Tribune, which has consistently supported him. Can an Ethics Committee investigation be far behind?

Our past posts about this matter:
Weller's Nicaraguan Land Scandal
Weller Strikes Gold in Nicaragua
Other links:
Weller financial disclosure, 2006
Weller exemption letter, 3/2007
Weller financial disclosure, 2005
http://www.franksmyth.com/
Supporting documents collected by Frank Smyth
http://www.chicagoreader.com/features/stories/wellerbeach/
http://www.chicagoreader.com/features/stories/hottype/061103/

Weller strikes gold in Nicaragua

Who knew Jerry Weller was such a clever investor? Over a period of three years he reported purchasing 3 lots in Nicaragua, probably spending in the neighborhood of $300,000. In the last year he reports consolidating and subdividing his property, and selling some of the subdivided lots. His income from property sales last year can be estimated at $350,000; the value of the unsold lots is over $500,000, and can be guesstimated at $800,000. Good work, if you can get it.

Still unexplained is why Frank Smyth found six lots in Weller's name as early as 2005. (Smyth also reported that Weller had partners in at least one of the lots.)

Sources:
Weller financial disclosure, 2006
Weller exemption letter, 3/2007
Weller financial disclosure, 2005
Supporting documents collected by Frank Smyth
[our estimates of property values are inferred from the value ranges reported in the disclosures]

For entertaining reading, check out the last page of the 2006 disclosure, where Jerry claims to know nothing about his wife's finances in Guatemala, and notes that he will not inherit any of her assets.