High-Level Findings

Equity is not typically an explicit goal of development incentive programs, but in a city of constrained resources, like Chicago, it is central to many public narratives that question the fairness of pulling funds away from other needs in favor of developments, particularly when they are located in markets where conditions already seem favorable to investment. Given the importance of equitable development in creating thriving communities, this research provides a simple framework for understanding how development incentives are used in Chicago, and whether their use aligns with areas that would benefit from additional support based on MPC’s factor index.

The goal of this project was not to provide recommendations on how to do away with all incentive programs. Nor was our goal to examine whether incentives, like TIF and others, produce benefits in the geography where they are used comparable to other areas. MPC heard from Advisory Group members and external reviewers that project goals should be focused on ensuring equity in the process and outcomes around the use of financial incentive programs. By refining the programs and making the data more transparent and usable for advocacy organizations and government stakeholders, progress can be made on promoting development in historically disinvested communities.

Here are MPC’s key findings from this research. These challenges are being addressed as part of the recommendations:

Incentive programs do not center equity in their processes or outcomes. The allocation and distribution of incentives, broadly, does not consider factors of disadvantage or market types. Outcomes for promoting equity have not been defined for any of the incentive programs, and the use of incentives, except for the Neighborhood Opportunity Fund (NOF), does not track with MPC’s factor index. If the programs are redesigned to focus more on equity in awarding the incentives and in defining goals for incentive use, this map may shift to indicate greater alignment.

Incentives are difficult to access for applicants with resource constraints and limitations. Many small business and developers do not have the time and money to devote to the process of obtaining incentives. There is a high barrier to entry with the administrative processes that applicants must navigate. Also, there are challenges around receiving money within the timeframe that is needed for projects to remain viable.

The outcomes and impacts of incentives use in Chicago are unclear. There are no aligned outcomes and accountability measures that consider equity when awarding incentives. There is no consistent tracking and reporting on outcome metrics for all incentive programs as a whole.

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Recommendations for More Equitable Financial Incentives Use in Chicago

The 10 recommendations were developed through an iterative process and in response to the key findings. They are organized under five headings: Develop and Track Outcomes, Prioritize and Align Incentives to Achieve Equity, Ease Application Process, Streamline Funding and Communication, and Improve Accountability. After reading below, let us know what you think about the recommendations by taking our survey. We want to hear from you.

Develop and Track Outcomes

Develop outcomes around increasing equity and align with citywide goals and values.

Define outcomes for how incentive use will build healthy, mixed-income neighborhoods across the city, aligned with the goals and objectives of the We Will Chicago plan. Since all neighborhoods are different, this will require a baseline understanding of what is missing to help determine the outcomes that need to be targeted for each area as well as the data sources and metrics to be used to track progress. Citywide goals should be aligned with these outcomes along with standardized reporting on key data points to track progress on individual neighborhoods and across the city.

For example, some outcomes could include building neighborhood wealth, general neighborhood well-being, and economic development such as revitalization of commercial corridors. Metrics that can be used to track progress could include units of affordable housing, living-wage job creation, change in household income, etc. These outcomes and measures will vary by neighborhood, although there may be common ones across multiple areas.

Report on outcomes in a transparent and effective way.

Develop an incentive dashboard to report on outcomes from projects that used incentives. To align with outcomes, these reports should be provided at the level of the city as well as individual neighborhoods.

The dashboards should include basic data categories such as number of projects, dollar amounts, project size, and expected and realized outcomes. This requires staff to track this information and could be integrated into the technical assistance liaison role. The information should be posted publicly and presented at semi-annual public meetings, providing the opportunity for questions and answers from interested residents and stakeholders.

Prioritize and Align Incentives to Achieve Equity

Identify priority areas to achieve city goals and objectives for equity.

Assign incentives based on what is needed for development in each neighborhood, with certain areas prioritized for specific incentive use due to their market conditions and socio-economic factors indicating disadvantage or advantage.

Some neighborhoods are only able to support the use of incentives that are structured to act like subsidies or grants. A market typology aligned with socioeconomic development factors needs to be created to help structure which incentives are prioritized where. Having a mission statement and a clear set of goals for each incentive program will help clarify the reason behind its use and the outcome that it is designed to achieve.

Align incentive use with priority areas determined by criteria that includes equity.

Incentive programs should act as one large pot of pooled incentives, rather than different buckets, allowing for greater discretion in providing them to priority areas and areas of disadvantage. This may require relying more heavily on funds that are geographically flexible or consider changes to how some incentives are currently structured around geographic boundaries. The City is already in the process of implementing this strategy to pull funding from different pots to support aligned projects. This occurred with the last two rounds of funding announced for the Chicago Recovery Plan grants.

Incentives should also be aligned around the goal of achieving healthy, mixed-income communities in all neighborhoods. This should focus on outcomes that are place specific as well as people specific, centering the needs of both the community and its residents.

Ease Application Process

Fund and support a technical assistance liaison role.

Provide financial resources for City staff or an outside organization to provide technical assistance to less-resourced applicants. These applicants can be either nonprofit or for-profit entities. Resources should be provided via a funding source that is consistent and maintained over time.

Technical support should be provided to assist with preparing materials, writing and submitting applications, clarifying timelines, deadlines and reimbursement process, and reporting on outcomes. Technical support should be prioritized based on how closely the project aligns with the development goals of the City and community area, level of need, and the ability of the team to successfully complete the project.

Create a common, streamlined application for all incentives.

Refine the City’s recently launched Universal Financial Incentives Application to make the process easier for all applicants. Expand the application to include more incentive programs beyond the four it currently hosts. The initial application should be shorter and provide some questions up front to determine if applicants could use technical assistance and how quickly they need resources. The application should also be offered in languages other than English. The screener application should connect to a publicly available scoring rubric that allows for transparency in the project application and selection process.

In 2022, the City launched a Universal Financial Incentives Application that can be used for submitting an application for four different incentive programs, Neighborhood Opportunity Fund (Large Grants), Tax Increment Financing, Cook County Property Tax Incentives, and Chicago Recovery Plan Community Development (Large Grants). This was a great first step toward creating a streamlined application system.

Questions should be included that determine whether applicants need assistance, when money needs to be delivered for project success, and if they require an application in a different language. These questions would allow support to be provided from the beginning of the application process. The application should also ask basic project questions to see how it aligns with citywide priorities for development.

Streamline Funding and Communication

Provide quicker review and better communication around funding.

Increase capacity to review applications helping to shorten the timeline to receiving money for all applicants. The Department of Planning and Development should be fully funded to have the adequate staff capacity to complete reviews quickly and efficiently. If increased capacity is not possible, this may require the review assistance of external organizations as an alternative. Ensure clarity in providing information about timelines of when support will be received and the process for reimbursement. An internal tracking process with data on when applications are received, what happened for each applicant, when decisions were made, and when money was received will help determine how quickly the process moves and if improvements are necessary.

The technical assistance support provider should be responsible for assuming a liaison role with the recipients, keeping them informed of the overall schedule and providing open communication.

Provide bridge funding as part of the allocation for awardees when resource needs and disbursement do not align.

Resource and manage a fund via an external organization, like a community development financial institution or a philanthropic organization, to allocate money to smaller awardees when funding is needed sooner than can be provided administratively, particularly for predevelopment. To not burden the awardee, the external organization would provide the resources to the City to allocate to the awardee and would be reimbursed by the City when the money becomes available.

Improve Accountability

Require centralized reporting across all programs that use financial incentives.

Provide a comprehensive overview of all incentive programs to create a broad picture of total incentive use and what it is accomplishing. This may require consistency in reporting mechanisms, including what is being tracked and how data is being reported.

Reporting on incentive use is currently provided as data via spreadsheets on the City of Chicago’s data portal. This is valuable information, but it is not easy to understand for average residents. Collecting and compiling all of the information in one place will allow for greater public accessibility.

Develop a civic oversight committee to annually review incentive use across the different programs.

Convene a civic oversight committee to serve as an accountability body to ensure that resources are being allocated based on criteria determined for priority areas and that they are accomplishing equitable outcomes. Particularly for TIF districts, there should be periodic reviews and additional reporting requirements to confirm that the districts are meeting their goals.

This advisory committee would host public meetings and be composed of government officials, residents, and other stakeholders. The recommendations of the committee would require changes to be made to the allocation process based on their review.