On Pensions, TIF districts, and Business Development

The Chicago Tribune asked Davis Schneiderman these questions about pensions, TIF districts, and business development, and then excerpted the answers for this story.

The full answers appear below:

Q: Would you support raising the portion of the City of Highland Park's property tax levy that goes to the police and fire pension funds?  Please briefly explain your position.

Davis Schneiderman: The Council must grapple each year with the City's mandated obligation to fund the Fire and Police pensions. Because we operate under an external state mandate to fund, I would support raising this portion of the levy but only if the City continues to make significant contributions to the fund. Residents should not be asked to shoulder this burden without City participation. The City must recognize the difficulties any increased levy has on our most economically vulnerable.

More recently, the City decided to put $7.5 million toward these pensions. That is $2.1 million more than the requirement and was used to cover a growing shortfall and includes $1.7 million from the City’s portion of state income tax. The most recent report from our independent actuary indicated that the City’s combined debt is $86 million and that we have slipped to 43% (from 45%) funding for the Police Pension Fund, and 47% (from 50%) funding for the Fire Pension Fund from the previous year. We are required to reach 90% funding by 2040, and by continuing to meet a yearly target, we can maintain our AAA bond rating that allows for more favorable borrowing. Should we fall short in our pension obligations, we risk a reduced bond rating that would raise our borrowing costs.

At the same time, we must balance our obligation to support the pension fund with our support for current residents. Spending too much on pensions in effect takes money away from current residents, and there are real questions as to the viability of the 2040 deadline. It is likely that state political forces will amend or extend the obligation as we move closer to a funding deadline. Nonetheless, we must act to meet the requirement, but we should only raise the levy when the City continues to contribute additional funds to keep tax increases as small as possible. At the same time, we should engage in a public advocacy campaign to ask our state legislators to intervene for sensible pension reform. We must thread a needle between supporting our police and firefighters, past and present, without unnecessarily draining our current resources.

 

Q: Might you support creating one or more additional Tax Increment Financing (TIF) districts to spark redevelopment of an underperforming area, provided of course the area meets the criteria? Please briefly explain your position.

Davis Schneiderman: I support TIF districts, so long as they are entered into with full involvement of partner governments, and so long as they include a long-range development plan that involves businesses and residents. The City has hired a firm to determine the viability of a TIF in the Briergate Business District. This district would include the Solo Cup property, the business strip along 41 that includes the Tesla dealership and Williams Ski and Patio, and the businesses in the area around Deerfield and Old Deerfield Road.

A TIF district freezes the taxable value of these properties at current levels for our partners, including school districts 112 and 113, and the Park District, and then diverts the extra incremental revenue that may occur from new development for use in the TIF district. These funds can be used for infrastructure improvement bonds and other development improvements to the area. Put another way: a TIF takes from government partners to the benefit of the defined area of the TIF within the City. Therefore, such an arrangement must not be lightly entered. I am supportive of TIF districts under circumstances where the government partners (who must shoulder the burden of reduced revenue) are full participants in the planning of the TIF, with the idea that improvements will raise tax revenue for everyone in the long term.

Residents must be actively involved in the entire process. After all, it’s their tax dollar that is effectively being reapportioned. Only a small portion of the current tax bill goes to the City, of course, but even so, it’s a series of interlocking community priorities that are at stake in a TIF.

 

Q: What other approaches should the city consider to promote economic development and downtown vibrancy?

Davis Schneiderman: We need to streamline our permitting and approval processes further. Our current system can actually serve as a disincentive for new business investment. For instance, several investors have been working for more than a year to open two new businesses in Highland Park. They have felt frustrated by the City’s position to serve as “facilitator” rather than “partnering participant” in their work. The process has slowed, and they’ve started to look at a second and larger investment in Chicago. They still plan to have a presence in Highland Park, but it will be significantly smaller than originally planned. This situation has a negative impact on the City regarding tax revenue and job creation, and this situation could have been avoided with, at a minimum, better communication with applicants. 

We certainly need approval processes that maintain the integrity of our business, but those should not cause unnecessary delay and disincentive.

We have nine business districts in Highland Park, but the average resident would likely only identify two or three. We should consider strategic business development plans specific to each district, with strong representation from current business owners as to the long-term direction of the districts.

We must think carefully about the impact school closures will have on business behaviors. This impact is difficult to quantify, of course, and we must certainly screen against arguments that overstate the financial impact of closures. Equally problematic are arguments that undervalue the presence of schools for local businesses. Nonetheless, as NSSD112 proceeds with its reconfiguration, we need joint City, School District, and Park District cooperation, with residents and businesses, to best plan for the impact and opportunities. 

The City needs to improve its comprehensive communications strategy further. Even the presentation of factual information on the City website, such as the “Available Property” listing, could be easily improved by a) indicating the length listed properties have been available, and b) by a presentation that is web-friendly to read. Currently, the document looks like a spreadsheet, in 7-point font, and it is certainly not easily readable on mobile devices. The City must be as much a booster as an information provider, and we can further improve how we share opportunities in Highland Park.

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