Winds of change blow in Chicago

The Windy City is using tax-increment financing as a tool to fund urban-renewal projects. Critics, however, charge it is politically connected developers who are cleaning up.

He calls himself the shammes of Maxwell Street. Armed with a broom, pliers and shovel, Merlyn McFarland tries to keep the decrepit but famous Chicago street looking clean and neat. "'Shammes' is an old Yiddish word, one that we should use more; it means someone who takes care of his community" he says.

It takes McFarland a moment when a visitor asks him why he spends his days cleaning streets and pulling weeds. Eventually an answer comes: "My attitude has always been that I should help out my community, and this is a community that needs helping. It's a community that deserves it" he says.

But this is Chicago, and McFarland and others like him are losing their battle to save the buildings on their historic street from the forces of nature--and politics. Here and there, weeds grow from cracks between the bricks of abandoned buildings and, at points, the sidewalk is such that even a careful walker risks tripping.

Maxwell Street has had several claims to fame. It was a Sunday street market for more than 100 years until planners and politicians ordered the market moved a half-mile away two years ago. This was one of the first places in the country where one could shop on a Sunday. Electric blues began here as African-American musicians who weren't allowed to perform in segregated clubs began to have impromptu jam sessions along the thoroughfare. The onion-laden Polish-sausage sandwich also originated on Maxwell Street as a quick, filling bite for shoppers on a budget.

During its heyday in the 1930s and 1940s, this market area was called Jewtown, with its mostly Jewish merchants operating from small stalls. It nonetheless was one of the few racially integrated shopping districts in the country. During the 1960s, a freeway bisected Maxwell Street, reducing the market to a few blocks. The center of the shopping area gradually moved onto Halsted, although the name Maxwell Street Market stuck.

In as little as a year, however, it is possible that wrecking crews will move in to raze the last of the market area's twenties-era buildings to erect a $450 million mixed-use development. The nearby University of Illinois at Chicago, or UIC, and several private-sector development firms will finance it all using an increasingly popular and powerful urban-redevelopment tool called tax-increment financing, or TIE

Tax-increment financing was developed in the 1970s largely as a tool to redevelop winded industrial areas in Northern cities. "I don't think the people who created it ever imagined it would be used as extensively as it is today" says Ron Kysiak, vice president of Northwestern University's Technology Park in Evanston, Ill., and a recognized expert on TIE "It was a limited tool when it started, but cities have found it very useful for all sorts of purposes." Although small differences exist in each of the 44 states that allow TIF, the fundamental concept is simple enough. First, a local government, almost always a city, declares a blighted area to be a TIF district. This must be based on a formal determination that said blight will cause the proposed TIF district to produce low or declining tax revenues for a long time to come.

At this point a developer B who, in some cases, might have approached the city in the first place B agrees to build a major project in the otherwise blighted area. Incremental increases in property-tax collection or the take from sales taxes projected to result from the new development go to pay part of the developer's costs or to retire bonds that the city floated to support the development. After an agreed period of time, 23 years in Illinois, the TIF district goes back on the standard tax rolls.

In theory, none of this is to cost taxpayers a dime. "Politicians can argue, not implausibly, that TIFs allow them to develop areas they never could otherwise. A lot of the areas they create them in are just in terrible, terrible shape" says Northwestern's Kysiak.

Christopher Hill, Chicago's commissioner of planning and development, says that aging cities have no choice but to use TIE "It's just about the only tool we have left" he says. "Twenty or 30 years ago, we would have had all kinds of federal and state money. Now, we have maybe one-tenth of what we had. If we're going to narrow the advantages that [other urban] competitors have, it's the best tool."

Indeed, a combination of economics and politics has made Chicago the nation's undisputed TIF capital. For the last two years, the city has created an average of nearly one TIF district a month. In all, nearly 7 percent of the city's land area, ranging from blighted industrial areas to slightly less prosperous areas of its generally booming downtown has been "TIF'd." During 1997, almost $250 million flowed from Chicago TIFs into urban-development coffers. Hill says that he doesn't see a pause anytime soon. Coupled with more than $1 billion in infrastructure bonds, TIF has begun to change the face of a city known more for mobsters, bungalows and grime than parks, loft apartments and elegant shopping districts. Even the harshest critics of Chicago's administration admit that the city looks better than it has in years. "We're opening up whole areas that were pretty close to wastelands" says Hill.