Methodology and Process


Advisory Group and External Reviewers

Although initial scoping and data gathering occurred from 2019–2020, research for this project began in earnest in 2021. The Metropolitan Planning Council (MPC) assembled an Advisory Group to help guide the research and inform recommendations. The Advisory Group met eight times from 2021 through 2022, with time spent reviewing the research findings as well as discussing ways to improve incentive programs. This group played a critical role by regularly engaging in discussion with each other and MPC, asking challenging questions to shape the research, findings, and recommendations. The Advisory Group included individuals representing a wide range of sectors, expertise, and perspectives to provide a complete picture of incentives and new thinking about how their use can become more equitable.

This research was previewed with a group of organizations that received funding from The Chicago Community Trust’s Catalyzing Neighborhood Investment program area. This group provided input on the initial findings and recommendations. MPC also presented its research to the City of Chicago’s Offices of Equity and Racial Justice, and Economic and Neighborhood Development, and the Department of Planning and Development (DPD). DPD is the department that manages financial incentive programs in Chicago.

Data Compilation

Incentive programs were selected for this project based on the initial scope of work that was created in 2019. This scope included the identification of multiple types of programs beyond the final six selected. MPC initially compiled a broader list that included the Enterprise Zone Program, Federal Opportunity Zones, and multiple bond programs, such as Industrial Development Revenue Bonds, General Obligation Bonds, and Revenue Bonds, as well as others. The organization finalized the list of six incentives based on the availability of public data. MPC believes there is potential to expand this review in the future to include additional incentive programs, including funding provided as part of the Chicago Recovery Plan.

A data dictionary to accompany the downloadable interactive map data is available. The spreadsheet includes tabs for each incentive and provides descriptions of the data categories, data type, expected range, and source.

Data for this project was compiled from the following sources:

Tax Increment Financing (TIF)

Small Business Improvement Fund (SBIF)

Neighborhood Opportunity Fund (NOF)

Property Tax Abatements (PTAs)

New Markets Tax Credit (NMTC)

  • U.S. Department of Treasury Community Development Financial Institutions - Research and Data
  • Data period: 2010-2019

Community Development Block Grants (CDBG)

  • U.S. Department of Housing and Urban Development Data Portal
  • Data period: 2010-2019

Data Categorization

Categorization information is displayed on the interactive maps. Categorization varies between specific incentives and was determined using the following methodology:

Tax Increment Financing (TIF)

  • Public vs Private – Categorized using the ‘project name’, ‘project description’, and ‘developer name’ columns. Public is defined as developed by a government department or agency for public use or primarily accessible to the public. Private is defined as all other development.
  • For Profit vs Non-Profit (Developer Type) – Categorized using the ‘developer’ column. For profit or non-profit are organizations designated 501c3 as defined by the Office of the Illinois Secretary of State. Not determined is used if available information to determine a developer’s status was not publicly available.
  • Type - CMAP Community Snapshots to define categories: Residential, commercial, industrial, institutional, transportation, mixed-use, plus additional categories for Park and Infrastructure projects.

Small Business Improvement Fund (SBIF)

  • Type – Categorized as defined in the ‘PROPERT_T’ column in the downloaded data. Categories are Commercial, Industrial, Manufacturing, Mixed-Use, Office, Retail, and Warehousing.

Neighborhood Opportunity Fund (NOF)

  • Type – Categorized as defined by City of Chicago thresholds; Small Projects (up to $250,000) and Large Projects ($250,001 - $2.5M). Categories are Commercial, Industrial, Manufacturing, Mixed Use, Office, Retail, and Warehousing. Use categories are: New Construction, Rehabilitation, and Retention.

Property Tax Abatements (PTAs)

  • Type – Categorized as defined in the ‘Property Type’ and ‘Abatement Type’ columns within the downloaded data. Categories are Commercial, Industrial, Manufacturing, Mixed Use, Office, Retail, and Warehousing. Use categories are: New Construction, Rehabilitation, and Retention.

New Markets Tax Credit (NMTC)

  • For Profit vs Non-Profit (Developer Type) – Categorized based on company/entity names. For profit or non-profit are organizations designated 501c3 as defined by the Office of the Illinois Secretary of State. Not determined is used if available information to determine a developer’s status was not publicly available.
  • Type – Categorized as defined in the ‘Purpose of Investment’ column within the downloaded data.

Community Development Block Grants (CDBG)

  • Type – Categorized as defined in the ‘Grouping’ column within the downloaded data. Categories are: Housing, Public Services, Acquisition, Economic Development, Public Improvements, and Other.

Data Transformation Methodology

Each of the data sources listed above were collected at the project level during the study time-period. Each project, and the corresponding dollar amount utilized by each incentive, is associated with a specific address, which allowed project investment totals to be mapped and aggregated to a finer geography than is typical for most studies on financial incentives. The exception was the TIF infrastructure dataset. Since the projects were not a single point but could span several blocks, a central point of the address range was selected for purposes of mapping. As a result, some census tracts may slightly overestimate the value of TIF infrastructure and some may slightly underestimate it.

All projects were mapped using ArcGIS software, and summarized and aggregated to Chicago census tracts, which allow for a more nuanced comparison with other socioeconomic variables across areas. Although residents do not typically identify their neighborhood according to a census tract, a census tract’s area is smaller than Chicago’s 77 designated community areas, and can be thought of as a rough approximation of a ”neighborhood.” Each financial incentive had its own unique classification for projects (e.g. type of project—commercial, industrial, etc.—size of project—small vs. large, etc.), and data were aggregated by each of these subcategories to allow website users to understand the distribution of incentives in greater detail across small areas. The data transformation process resulted in a final dataset comprised of N=1,998 census tracts with data on each financial incentive, as well as additional variables listed below.

Socio-economic Factors Index

MPC developed a simple index with factors representing the challenges that Chicago faces and that development should help address. The project identified 10 socio-economic factors that form an index to identify specific areas for equitable development. This index includes both longstanding indicators of disinvestment in Chicago, with additional consideration of where development is also most efficient (i.e. areas with greater density should be prioritized due to more residents benefiting from development). These factors are also consistent with literature and other cities’ definitions of variables related to disadvantage. The following variables define areas of disadvantage during the baseline period of this study:

  1. Lower income (2010 Census)
  2. High poverty (2010 Census)
  3. Predominantly renter (2010 Census)
  4. Lower value of homes (2010 Census)
  5. Greater share of nonwhite population (2010 Census)
  6. Higher vacant home rates (2010 Census)
  7. More subsidized housing (HUD)
  8. Higher density (2010 Census)
  9. Fewer businesses (City of Chicago Business Counts, 2010)
  10. Less development activity (City of Chicago Building Permits)

Each factor was split at the median of all census tracts. Tracts that were above the median on factors 2, 3, 5, 6, 7, and 8 were assigned a value of +1. Tracts that were below the median on factors 1, 3, 9, and 10 were also assigned a value of +1. Thus, tracts were ranked on a scale of 0 (least in need of investment) and 10 (most in need of investment). MPC used 2010 census data, as that was the start of our time basis for tracking and aggregating incentives. Incentive use was collected for years 2010–2021.

Definitions

Financial Incentive: Financial incentives are monetary benefits typically used to fund development that otherwise would not occur. An economic development incentive is cash or near-cash assistance given on a selective basis to attract, expand, or retain business operations. They can also be used to provide other types of services. An incentive should be used to encourage an action that would not have happened on its own, without support. Each incentive program has its own authorizing agency and reporting requirements.

Equitable Development: Equitable development is both outcomes-based and process-based. It is an approach to urban planning that seeks to meet the needs of historically underserved communities, such as low-income residents and communities of color, by reducing disparities and fostering places that are healthy and vibrant. This is accomplished by prioritizing the positive outcomes that people want to see in their neighborhoods and limiting negative impacts like displacement. Equitable development requires an approach to policies, structures, and incentives that center community voices and provide opportunities for local residents’ full participation in planning for new development.