SZALINSKI’S SUMMARY: Comptroller Susana Mendoza wants Illinois lawmakers to consider legislation that would limit when and how much local governments can pull from surplus tax increment financing districts for operational expenses. Mendoza is pushing the bill after Chicago used surplus TIF dollars to balance its budget.

House Bill 4712 would prohibit distributing more than 5% of surplus funds from a TIF district to the local governments that levy property taxes in that area. The surplus funds would only be allowed to be distributed once every 10 years, rather than each year as current law allows. If a TIF district is extended beyond its 23-year expiration date, no surplus funds would be allowed to be distributed until it expires.

The bill was heard in a subject matter hearing in the House revenue committee on Thursday, but it’s not likely to pass this spring.

BALANCING ACT: Chicago Mayor Brandon Johnson used $232.6 million from $1 billion in surplus TIF revenue to help close a $1.2 billion budget deficit in 2026. Some of that $1 billion surplus was distributed to Cook County and likely spent outside Chicago.

TIF districts are supposed to capture a portion of property taxes collected within a specific geographic area and set it aside for redevelopment. Some lawmakers, including Mendoza, oppose distributing surplus funds from those areas to government operations budgets, especially on an annual basis.

DIGGING DEEPER: The issue exposes another rift between Johnson and Mendoza, who is widely believed to be considering challenging Johnson next year after not seeking reelection this year for the comptroller’s job.

‘DUCT TAPE’: Mendoza said the city’s dependence on TIF funds to plug the budget hole is poor financial management.

“Municipalities should not be using duct tape to plug budget holes, especially when that money won’t be available in future years,” Mendoza said. “And let me be clear, when those TIF funds are surplused and swept, they are gone forever. It’s vital that money be safeguarded for its intended purpose.”

SPIRIT OF THE LAW: Mendoza said she believes TIFs can be an effective economic development tool “when they are used properly.” David Doig, president of the Chicago Neighborhood Initiatives, said imposing restrictions on accessing surplus TIF funds is necessary since Chicago has made sweeping the funds a habit over the last decade, even before Johnson.

“The idea is by limiting the use of TIF surpluses to fill operations budget gaps for local government entities, we can better keep the focus of TIF funds on investing in the economic, commercial, and public infrastructure of the neighborhoods and communities that they were created for and that need those dollars the most,” Mendoza said.

OPPOSED: Johnson’s administration opposes the bill, which is sponsored by Rep. Bob Rita, D-Blue Island. The city’s lobbyist, John Arena, told the committee that sweeping TIF funds is a key tool the city uses to avoid more harmful financial decisions.

“This would deprive local taxing bodies of revenues that they could otherwise use to address budget shortfalls, infrastructure needs, and programming taxpayers rely on for Chicago,” Arena said. “That is a terrible limitation on revenue management. The bill would result in tax increases, service cuts, or both for schools, parks, and other taxing bodies.”