This op-ed was first published in Crain’s Chicago Business and was co-authored with Good Jobs First’s Amanda Kass and Kristan Wong Karinen.
The current version of Illinois’ megaproject subsidy proposal is a bear — and not just because it’s being touted as the NFL franchise owners’ desired path to a new $2 billion stadium.
State Senate leaders are debating whether to use taxpayer dollars to subsidize a new Chicago Bears stadium in Arlington Heights, but this bill has much broader impacts. It creates a new statewide property tax cut program for large development projects — so-called “megaprojects” — where the developer agrees to spend $100 million or more to purchase land, build or improve buildings, pay off debt, and make other “investments.” It is a major giveaway to wealthy private developers and corporations.
Under this proposal, developers would not have to pay property tax on their developed property for up to 45 years, just on the value of the property before construction, regardless of how much they build or how profitable their development becomes. Most of the time, when a homeowner renovates their house, their property taxes go up; this legislation will make it so that when Amazon builds a new distribution center or the Bears build a multibillion-dollar stadium, theirs don’t.
In exchange, developers negotiate an annual “special payment” with the municipality where the project is located. For most megaprojects, the special payment can be as low as 10% of what the property was paying in taxes before construction began; for projects that are at least $2 billion (like the Bears stadium), there is no minimum on that payment.
While there are some exceptions (notably, data centers) the legislation allows a wide range of developments to qualify – sports stadiums, warehouses, manufacturers, shopping malls, and any other commercial developer wealthy enough to invest $100 million or more in a property.
This is a direct property tax cut for corporations that other residents will pay for. The developer gets to pay the community a fraction of the property taxes they would owe otherwise, and the discount lasts for decades. That means higher rates for everyone else: homeowners, small businesses, and neighboring properties.
On top of that, developers can stack the property tax cut with an existing sales tax exemption for building materials that already nets large companies millions of dollars per year.
The special payment fails to make up for lost revenue. The special payment is pitched as making up for significantly reduced property taxes, which schools, special districts, towns, and residents need to provide the necessary public services and goods that keep our communities healthy. But it’s laughably low.
For a project like the proposed Bears stadium, where the site is a partially demolished and undeveloped former racetrack, the special payment could amount to just $360,000, based on their current $3.6 million tax bill. And since the stadium project is estimated to cost $2 billion, the Bears’ owner, the McCaskey family, won’t even be subject to the 10% floor.
Families and schools face the greatest harm from this bill. House sponsors have touted the bill’s requirement that half of the special payment go toward reducing homeowners’ property taxes. But Gov. JB Pritzker’s office has estimated that this amount would be negligible, less than $2 per homeowner. The Illinois Federation of Teachers estimates the McCaskeys will receive more than $10 billion in property tax breaks over 25 years, of which $5 billion would be owed to the local schools. That amount could pay the salaries of 63,000 teachers, 65,000 school librarians, or build 60 brand new school buildings. Instead, in the best-case scenario under this bill, schools will get just $2.2 million.
Communities don’t have enough tools to make sure they negotiate a good deal. If Senate leaders pass this legislation as written, the subsidy agreement is negotiated exclusively between the developer and the municipality where the project is located — school districts and other taxing bodies have no seat in negotiations and can only participate through a local review board.
The review board’s role is limited to a simple yay or nay vote; it has no independent analytical capacity, there is no required independent fiscal analysis, and the legislation does not define what adequate compensation looks like. And while the review board can say no to a deal, as we see in Arlington Heights, local officials are eager to attract new development, sometimes without a clear understanding of the tradeoffs. Billionaire developers come to the table with sophisticated financial models and experienced attorneys. Communities don’t.
When we give big developers a free pass not to pay the taxes everyone else pays, our communities suffer the consequences. Illinois already has a property tax system rife with regressivity and tax bills already out of reach of many homeowners, so it does not make sense to give further tax cuts to the people who can most afford to pay for services. This bill would rewrite the state’s property tax code to benefit some of the wealthiest property taxpayers in the state without offering real affordability solutions for homeowners and renters struggling to make ends meet.
