Is Tax Increment Financing Racist? Chicago's Racially Disparate TIF Spending

Author:Jared F. Knight
Pages:1681-1717
SUMMARY

Tax Increment Financing (“TIF”) is a financing tool used by cities large and small across the country. Chicago, whose history includes several instances of de jure and de facto racial discrimination, is an especially prolific TIF user. This Note examines TIF distribution in each of Chicago's 50 wards. Both a regression analysis and full population data show that white wards receive substantially... (see full summary)

 
FREE EXCERPT
  
1681
Is Tax Increment Financing Racist?
Chicago’s Racially Disparate TIF Spending
Jared F. Knight*
ABSTRACT: Tax Increment Financing (“TIF”) is a financing tool used by
cities large and small across the country. Chicago, whose history includes
several instances of de jure and de facto racial discrimination, is an especially
prolific TIF user. This Note examines TIF distribution in each of Chicago’s
50 wards. Both a regression analysis and full population data show that
white wards receive substantially greater TIF allocations than black and
Hispanic wards. To solve this disparity, this Note proposes amending the
Illinois TIF statute to narrow the circumstances in which TIF is available.
This Note further proposes changing Chicago’s TIF allocation process to
restrict TIF dollars to wards experiencing extreme poverty and wards with
little racial disparity, concluding that the latter is the best and fastest short
term option to correct the imbalance.
* J.D. Candidate, The University of Iowa College of Law, 2016; B.A., Iowa State University,
2013. The author thanks Dr. Rhonda DeCook for her assistance with this project.
1682 IOWA LAW REVIEW [Vol. 101:1681
I. INTRODUCTION ........................................................................... 1683
II. WHY STUDY TIF IN CHICAGO? .................................................... 1684
A. TAX INCREMENT FINANCING .................................................. 1684
1. How It Works ............................................................... 1685
2. Why It’s Popular .......................................................... 1686
3. Why It’s Controversial ................................................. 1687
B. WHY CHICAGO? .................................................................... 1689
III. IS TIF RACIST? DATA FROM CHICAGOS 50 WARDS .................... 1692
A. HYPOTHESES ......................................................................... 1692
B. METHODOLOGY .................................................................... 1693
C. RESULTS ............................................................................... 1695
1. Income’s Effect on TIF Spending .............................. 1695
2. Race’s Effect on TIF Spending ................................... 1697
i. Regression Results .................................................... 1697
ii. Population Results ................................................... 1699
IV. FIXING THE BROKEN SYSTEM ...................................................... 1701
A. AMEND THE ILLINOIS TIF STATUTE ....................................... 1701
1. Blighted Conditions .................................................... 1701
i. Obsolescence ............................................................. 1705
ii. Deterioration ............................................................ 1705
iii. Below-Minimum Code Standards ............................. 1706
iv. Excessive Vacancies .................................................. 1706
v. Declining Value ....................................................... 1707
vi. Lack of Community Planning .................................. 1707
2. The Causation Standard ............................................. 1708
B. TARGET SPENDING ELSEWHERE .............................................. 1709
1. Use TIF in Economically Depressed Wards .............. 1710
2. Use TIF in Racially Integrated Wards ........................ 1711
3. Don’t Allow TIF Projects that Racially Stratify a
Ward ............................................................................. 1711
V. CONCLUSION .............................................................................. 1713
APPENDIX A. RACIAL COMPOSITION BY CHICAGO WARD ............ 1714
APPENDIX B. PLOTS OF TIF SPENDING BY RACE .......................... 1715
2016] IS TAX INCREMENT FINANCING RACIST? 1683
I. INTRODUCTION
The 20th century introduced radical changes to the landscape of
American cities. An evolving economy and the population’s migration away
from farms and toward cities resulted in massive decreases in labor and farm
jobs, and even greater increases in professional and service employment.1 As
manufacturing and labor moved overseas, incomes surged in the jobs that
took their place.2 These shifts, combined with rapid suburbanization in the
mid- to late-20th century,3 left behind abandoned buildings in the nation’s
central cities.4
At the same time as these shifts altered employment in American cities,
black and Hispanic in-migration caused a dramatic change in the racial and
socioeconomic makeup of central cities.5 The race of in-migrants was the
primary motivation for white flight to suburbs, even controlling for
endogenous locational preferences.6 This combination of deindustrialization
1. Ian D. Wyatt & Daniel E. Hecker, Occupational Changes During the 20th Century, MONTHLY
LAB. REV., Mar. 2006, at 35, 36 chart 1; see also PATRICK J. CARR & MARIA J. KEFALAS, HOLLOWING
OUT THE MIDDLE: THE RURAL BRAIN DRAIN AND WHAT IT MEANS FOR AMERICA 4–5 (2009)
(discussing migration from rural to urban areas).
2. See THEODORE CAPLOW ET AL., THE FIRST MEASURED CENTURY: AN ILLUSTRATED GUIDE
TO TRENDS IN AMERICA, 1900–2000, at 164 (2001) (“Middle-income families —those in the
middle fifth of the aggregate income distribution—saw their average annual in comes, measured
in constant dollars, increase from more than $15,000 in 1929 to more than $47,000 in 1998.”).
3. KENNETH T. JACKSON, CRABGRASS FRONTIER: THE SUBURBANIZATION OF THE UNITED
STATES 4 (1985) (“The 1980 census revealed that more than 40 percent of the national
population . . . lived in the suburbs . . . .”).
4. See generally John Accordino & Gary T. Johnson, Addressing the Vacant and Abandoned
Property Problem, 22 J. URB. AFF. 301 (2000) (describing the barriers to growth created by
abandoned and vacant properties).
5. See DOUGLAS S. MASSEY & NANCY A. DENTON, AMERICAN APARTHEID: SEGREGATION AND
THE MAKING OF THE UNDERCLASS 74–81 (1993) (discussing how racial migration patterns resulted
in “hypersegregation” in cities); John F. Kain, Housing Segregation, Negro Employment, an d
Metropolitan Decentralization, 82 Q.J. ECON. 175, 176–77 (1968) (“The means by which racial
segregation in housing has been maintained are amply documented. They are both legal and
extra-legal; for example: racial covenants; racial zoning; violence or threats of violence;
preemptive purchase; various petty harassments; implicit or explicit collusion by realtors, banks,
mortgage lenders, and other lending agencies; and . . . the Federal Housing Administration
(FHA) and other Federal agencies.” (footnote omitted)); Jay Readey, The Coming Integration, 7
DEPAUL J. SOC. JUST. 15, 27 (2013) (“[A]s black and brown people would move into a
neighborhood, white people would move out—quickly in the 60s and 70s and perhaps more
slowly in recent memory but always with inevitability.”); Leah Platt Boustan, Was Postwar
Suburbanization “White Flight”? Evidence from the Black Migration 21 ( Nat ’l Bu rea u of E con. Res earc h,
Working Paper No. 13543, 2009) (finding a causal connection between white out-migration to
suburbs and black in-migration, controlling for other proposed causes).
6. Boustan, supra note 5, at 19; see also William H. Frey, Central City White Flight: Racial and
Nonracial Causes, 44 AM. SOC. REV. 425, 426 (1979).

To continue reading

FREE SIGN UP