Cross-posted at Examiner
The summary provided by the Department of Community Development would have Chicago believe that the City's first TIF district was a phenomenal success. In its 2008 annual report, the DCD goes so far as to proclaim this district as being "responsible for the economic turn around that the Downtown area has experienced in the last two decades." As most of the DCD's reports do, this report relies heavily on showing what appears to be explosive growth, intimating that it would not have been possible without the TIF. In the Central Loop report, the DCD indicates that the estimated assessed value at the creation of the district, in 1984, was $985 million. In 2005, the district's estimated assessed value was $2.6 billion. DCD indicates this as a 163% increase since 1984, hence proclaiming the district a wild success and responsible for the entire turn around of the City's downtown area. What the DCD fails to do in this report, however, is to properly analyze these numbers.
First and foremost, a critical eye must be turned to the idea that this was a 163% increase in assessed property value. The DCD never escalates the initial $985 milion for the effects of inflation. Escalating for inflation (simple calculator here) finds that $985 million in 1984, would translate to $1.85 billion in 2005, an 88% change in values due merely to inflation of the dollar. $2.6 billion to a new, adjusted baseline of $1.85 billion is the real comparison to be made. $2.6 billion is $750 million more than the baseline value of $1.85 billion. This is an increase in real property values over the life of the TIF of approximately 40.5%.
To generate a further comparison to real-world values, this 40.5% value of total growth must be compared to the growth of the economy as a whole over this same time. 40.5% taken over 21 years shows an average annual growth rate of 1.93%. Comparing this to Real Gross Domestic Product over the same 21 year period sheds new light on the situation. Real GDP from 1984 to 2005 occurred at a rate of 3.16%. Disregarding disproportionate bubble growth in housing, property values over that time roughly tracked this rate. It would appear in these terms, then, that the Central Loop District actually underperformed when compared to the economy as a whole.
There is argument to be made, and it is often made, that without the TIF money, many of the developments in the district would not have happened. This is where arguing over the idea of a TIF becomes mushy. One can argue the idea in either direction. One might view that the Central Loop TIF District, for instance, because it underperformed the economy, was not efffective. One might also point to other cities lacking in growth, such as Detroit, and argue that the TIF was the only thing that kept the district's growth rate from being even lower. In either case, there is no real objective measurement as to which argument might be correct.
In either case, the City of Chicago is at a point with its TIF district system, that a much more rigorous analysis of the available data should take place to determine whether or not a district was successful over the span of its life. This should start with an honest evaluation and reporting of the data the City itself publishes, rather than spinning numbers and utilizing false math that ignores the value of money over time.