Activist Fights Slush Funds, Tax Breaks That Raise Costs

TRANSCRIPT AND SHOW NOTES

TOM: As long as he does it with his own money, he can build ten Kingstonians. I don’t care. You know, he can have fur-lined garages. That’s capitalism, and if he finds people who are willing to pay for fur-lined parking garages, how smart is he. Just don’t use public money.

ILONA: Hello and welcome to All Things Hudson Valley. I’m Ilona Ross. Today’s interview is with a political activist who’s been fighting corporate welfare, subsidies and tax breaks for millionaires in the great city of Chicago. Tom Tresser is an organizer and an expert on giveaways to developers. Today is September 29, 2020, and the news is full of developer-in-chief Donald Trump’s tax information, specifically that he paid no taxes in ten of the past 20 years, and only $750 in 2016, the year he was elected, and in 2017, the first year of his presidency. But he’s also received tax breaks and subsidies of the kind we’ll be talking about in this podcast. These tax giveaways exempt developers from property taxes. That’s the tax that pays for public schools and community services such as de-icing your roads in winter and fixing broken streetlights. Here in the Hudson Valley, developers Brad Jordan and Joseph Bonura are seeking a $30 million tax break on their proposed luxury development in the historic Stockade area of Kingston. Joseph Bonura himself has two tax breaks known as PILOTs that will cost the nearby city of Poughkeepsie a billion dollars. That’s billion, with a B. The word PILOT is an acronym for payment-in-lieu-of-taxes. The Kingston Board of Education and the Ulster County Legislature have yet to vote on what many observers consider a welfare-for-millionaires boondoggle. Thirty million dollars may not seem like a lot, but in a small city like Kingston, it can mean a lot to the school district and to the functioning of local government. Today we’ll hear from Tom Tresser, who founded Civic Lab in Chicago, as well as other groups that fight against a kind of tax break known as TIFs, which is an acronym for Tax Increment Financing. That’s just another kind of tax giveaway that results in reduced services, or higher property tax bills for everyone, or both. Tell me a little bit about yourself and how you got into or how you started End TIFs Now and tell us what Civic Lab is and how the two are related.

TOM: Well, my name is Tom Tresser. I’m in Chicago these 40 years. I call myself a civic educator and public defender. And I take the word ‘public’ very seriously, because I think that concept is under threat in America. The Commonwealth, the commons, the greater good, the fact that we’re all in this together, the fact that we have a government of and by and for the people. All those lofty concepts are at the heart of the American experience and they’re under attack and under threat these many, many years. My work has been about trying to lift up, celebrate and activate citizens so they will take responsibility for public. Part of that concept is knowledge. So, the founding fathers, for all their flaws, wanted to put government, you know, sort of in the hands of the people but they assumed and presumed that we would be smart. We would avail ourselves of facts to understand which way to go and we would be guided by our values.

ILONA: I saw a wonderful quote on one of your pages from Thomas Jefferson about illuminating. Here’s Jefferson’s quote on government. “Those entrusted with power have, in time, and by slow operations perverted it into tyranny. And it is believed that the most effectual means of preventing this would be to illuminate as far as practicable, the minds of the people at large.” So, what exactly is Civic Lab? Did you found it?

TOM: I did. I was an actor and then I was a theatre producer. I was an activist on behalf of the arts for many years, making the case for the arts as a powerful force for the economy, for the community and for democracy, and was really called into action by the Far Right in the early 1990s over what’s called culture wars. So that was when Senator Jesse Helms, Republican of North Carolina, an extreme racist, decided to attack the National Endowment for the Arts, a piddling little federal agency. Those people raised tens of millions of dollars and they beat the crap out of America’s arts community. And we lost the culture wars, and that was my baptism o ffire. I set to work to understand who are these people, that’s what led me to become the activist and to stand up for public. But the direct cause of the Civic Lab was the campaign that I led in 2009 here in Chicago to oppose the Olympic bid. So Mayor Daley, Mayor Richard M. Daley — that’s the son of Richard J. Daley — sought to bring the 2016 Olympics to Chicago and raised about $90 million in 2008 and 2009 and Chicago’s major foundations put in 6 million — at a time when they should have been really paying attention to people’s homes being lost to the Great Recession and the implosion of America’s finances. So today, in 2020, Chicago has the most homes underwater and they’re in black and brown communities. So that’s a direct result of, you know, our foundations and city fathers here, ten years ago, not paying attention to their knitting instead chasing the chimera of the Olympics. So, a group of eight neighbors came together and we did the research that showed that seeking the Olympics, let alone hosting the Olympics, is a city killer. With no office and no allies we defeated the Olympic bid. Doing dozens and dozens of community meetings, you have not a lot of time to explain a complicated financial giant project backed by, you know, Oprah Winfrey, Michael Jordan, the mayor, the president. I mean, it’s hard to speak against something like that, and it made me think about, you know, an instrumentality of progressive social justice that would do that work. The normal organizations that are sort of guarding public life here in Chicago failed. So groups that had the word ‘policy’ in them, you know what I mean, ‘planning’ in them, Urban Affairs — where were they, and whose job is it to interrogate such a major, major plan like bringing the Olympics to Chicago. No university did it. The labor unions weren’t doing it. So, that experience, said, well, I’m going to create a sort of incubator dedicated to social justice.

ILONA: So let me guess that the Olympics would have cost Chicago taxpayers a lot more than the economic activity it supposedly would have sparked.

TOM: Always. I mean, it’s a complete fabrication. The studies that are usually cited to promote these kinds of projects are lies, and they’re just, they’re just an excuse to gift developers with public assets, either land and/or money. And it’s in the name of something that you bring these bogus projects to your city and they’re pushed by developers, they’re pushed by lawyers, bankers, large construction companies and large architectural firms. There’s a sort of a cabal in every city of those players that drive planning and drive the thinking about what makes a city great. So what does Chicago need? So here you are in 2008, you’re looking around the city, you’re seeing youth violence, you’re seeing high levels of unemployment, you’re seeing disparities in longevity between black and whites, you’re seeing economic opportunities gone missing, you’re seeing high levels of dropouts. So what’s your solution? To have the Olympics, nine, seven years from now, at a cost of between like $20 billion? It makes no sense. But the people that are driving that process don’t live in poor communities. They’re already wealthy. So these things are just boondoggles. They’re complete ripoffs for the public, and pushing the Olympics is just the largest example of this. But in many cities, the same people push the subsidy of a stadium. So that’s like, we need to have a football stadium, or, or a basketball stadium, and it’s the same idea. There’ll be jobs, it’ll revitalize. You know what I mean?

ILONA: I’m laughing, I’m laughing because that is the exact language that is used here. A little something on the Kingstonian. It’s a layer cake of bogus development on three levels: the federal level, the state level, and the local level. On the federal level, it’s an Opportunity Zone project, which might as well be called an Opportunistic Zone project. On the state level, you used the word revitalization. In fact there was a $10 million grant from the governor for the so-called Downtown Revitalization Initiative. So there comes the word revitalization. And on the local level it’s a tax PILOT.

TOM: Right.

ILONA: This problem is being recognized across the political spectrum. Libertarians object to it because it’s government interference, it’s anti-competitive. Social justice advocates object to it because it’s inegalitarian. So it seems that there’s a broad coalition forming that could put an end to some of these boondoggles, these tax giveaways that are essentially welfare for millionaires. Can you explain the difference between Tax Increment Financing and PILOTs?

TOM: I can tell you what a TIF is, for sure. So that’s a body that’s created by a local unit of government, usually the municipal government. A line is drawn around a number of properties and inside the TIF district, which does stand for Tax Increment Financing. You get a snapshot of how much property taxes all the properties inside that TIF were paying. That’s called the base and the base flows to the units of government that are supposed to get those property taxes. And I should say, in a state like Illinois, which is one of the most regressive in America because we don’t have a progressive income tax, it places an unfair burden and property taxes to run our local units of government including schools. So at the heart of all this is tax equity, and if a state is is regressive, that means a wealthy community will have great schools, a poor community will have sucky schools and that’s racist. And when you put a TIF on that for 25 years, every cent of increments of property tax value that, that is above that base, whether from new construction, or just rising property values do not flow to the units of government, but instead go into a slush fund called a TIF which is controlled by the local mayor. And from that fund money is dispersed for projects within the borders of TIFs, and they can be whatever. They can be a Kingstonian, it could be a public thing like a park or school annex or a new firehouse, but it’s completely controlled by the local mayor. And the other thing that is true about this is they’re off the books. So for people who are good government sticklers, and they want to know what their government is up to, and feel like they should have a say in it, this is not for you. Now PILOTs I don’t know what the legal distinction is but it sounds just another way to give private developers public money.

ILONA: That’s true. The difference is that with PILOTs there were no direct cash payments, which is why the Kingstonian developers repeat ad nauseam that no money will come out of taxpayer pockets. And that’s a lie.

TOM: Right. Well, foregone revenues is a traditional way to gift public stuff to private businesses. It’s a little harder to track from money you’re not collecting rather than money that you’re just giving.

ILONA: First off, it’s anti competitive in that if building A doesn’t have to pay taxes but building B does have to pay taxes, that’s anti competitive, which is where the libertarians get all upset. And then the other reason it’s just another boondoggle is that the Cost of Community Services is never figured in to the calculation. And so the taxpayers have to pay more for schools, water, sewer, all these things that nobody really thinks about and their taxes keep going up,

TOM: What you’re describing – a PILOT – is an example of foregone revenue. So that’s some revenue that we’re not collecting that we should rightfully collect. And it’s harder to track, as opposed to just giving a developer a check. So yeah, the local units of government, they need the money they need to operate. And so if, say, say this Kingstonian has 100 apartments and say 30, say a third of them have children in it, well those children are going to have to be absorbed by the school system, and say that means it’s two new classes with teachers and equipment. Well, where’s that money going to come from? Well, it’s not coming from the tax base, so someone has to pay for it. So there is no free lunch, so you’re going to give somebody a gift of cash, whether it’s straight, a check or whether it’s money that they should have paid in the first place.

ILONA: The developers are saying that their tenants are not going to have children.

TOM: Okay, well alright, I mean it’s it’s an absurd statement, but they’re going to use police services, they’re going to use, they’re going to drive on the roads, you know, someone may may get sick and have to go to a public hospital. I mean, it’s impossible not to cause a burden on the local government when you’re bringing in a couple hundred new people. And so what we say to Civic Lab is, I just look, I don’t really care what a developer wants to do. As long as he does it on the open market with his own money, he could build ten Kingstonians, I don’t care. You could have, you know, you’d have them fur-lined garages, that let him charge a million dollars a unit. Good for him. That’s capitalism, and if he finds buyers who are willing to pay for fur-lined parking garages, how smart is he. Just don’t use public money. It’s very simple. Either we’re a capitalist society, we are or we aren’t. And the other issue is, which is, I think, a little more important is what is the proper role of government to spur justice and economic development for everybody. Now, I know upper New York State that it’s been in hard times over the years. My father used to work at the Fallsview Hotel in Ellenville for 50 years. I’m very familiar with a lot of upstate New York and they’ve been on hard times. So, you have municipalities all over the country trying to figure this out. Well, should we have gambling? Is that the panacea? Then you have other communities saying, well, let’s subsidize something like a football stadium. And they’re all in that mode. And I don’t think that’s the right way to be thinking about your community. And we’re more interested in making sure that people are robust, healthy and smart. And if you go down that path, then you have a different kind of thinking about what the government should be doing, and that only a government can do. So we’re saying, okay, city governments, wherever you are, you want to focus on making your place great and competitive and a great place to live? Don’t build a Starbucks, don’t build a Target, don’t build, you know, air-conditioned garages. That’s got nothing to do with what we’re speaking about. Make sure your children are the smartest and healthiest that they can be. That’s where you should start. That’s the conversation I think people should be having about the proper role of government in these affairs about, about what we call so-called development.

ILONA: One of the problems is that the land may not be suited for a garage. And one of the reasons is because the soil underneath is very irregular, the water table is at different heights, the soil itself is shale, and there is no bedrock at least 40-50 feet down.

TOM: Well that’s why… So a project that has little merit gets all of a sudden crazy times. And, and people are just saying the most outrageous things with a straight face. And so you have to say, you know, whose job is it to say no to this greedy developer. Well, you have to look at your mayor, you have to look at your city councilmen. And the first thing you have to see is, I don’t know if you’re able to pull their financial records, but you’ve got to make sure that the developer isn’t giving them money. Straight out campaign contributions, or consultancies or having their wives or, spouses, you know, on related projects because it’s a conflict of interest and it should be immediately disallowed, but a lot of places, it’s legal.

ILONA: It’s a .. it’s in an Opportunity Zone, therefore it’s a Qualified Opportunity Fund and the IRS does not require the identification of members in an Opportunity Fund. So what the developers have done … is the developers have kept the identity of their investors a secret on grounds that it is, are you ready, a trade secret.

TOM: Absolutely. We see this all the time. And so, they should be embarrassed. The League of Women Voters in your community should be on this. Any taxpayer leagues should be on this.

ILONA: Why the League of Women Voters?

TOM: The League of Women Voters is for good government. They don’t like secrets. The League of Women Voters of Illinois are against TIFs, but the League of voters of the New York may, they may not have looked at PILOTs. I would reach out to them. Common Cause and Public Citizen, you know they’re there for government reform. They usually play at the federal level, but they may have local or state chapters, and they too really don’t like, you know, secret deals and unwanted subsidies of private businesses. So if you can get a table full of those people to pepper the mayor and to do a letter to the editor, have a joint press conference and just embarrass the hell out of these people. Reveal, we want the name of all the parties, we want to know who’s investing, we want to know, we want all relationships revealed. You’re asking for a lot of money, and you’re not going to get it until we have all these parts displayed. There’s no secrecy here. But a lot of times there are conflicts, people are being paid off. And they get really greedy and then the process goes out the window, and many times, across the country, we’ve seen the Open Meetings Act being violated, we’ve seen FOIL requests being routinely ignored because they’re greedy. This developer who’s in the middle of all this, you know, is a powerful, wealthy person, he has lawyers, he has connections. He will use them all, because they’re all cheaper than paying his own way. So, as long as he thinks that he can … you know, that there’s 50 million or 30 million or whatever it is the number from this PILOT at the end of the table, he’ll happily spend one or two, or even three million, you know, in fees and lawyers and taking out full page ads in the paper. I saw some of the stuff you sent me, you know, these, these brochures he creates. It looks like he’s curing cancer with this garage, you know, you know, so all that he has at his disposal. The process is always the same. These players have power and clout and agency. They have staff, they have lawyers. They’re the guys who can pick up the phone and the mayor will answer on the first ring. They have all that. They can flood the market with those stupid flyers and false claims, which they always do. So, build what you want to build. Just don’t use our money, because if you, if you’re trying to create economic opportunity and we’re, and we have $30 million on the table, there’s a zillion different things you could do with $30 million. This is the fundamental argument, and we say, hire 100 teachers, create a public health center, make sure every child in your public schools has a tablet or a laptop or make sure the entire county has free Wi Fi. That’s going to be a better use of public money that’s going to go further, faster, and have a more long-lasting impact than giving this guy money to build his one project. Because, you know… And then at the end of the day, who’s gonna audit him? He said he’s gonna hire 30 people. Did he hire 30 people? Maybe he hired undocumented labor and paid them $5 an hour. You’ll never know, not unless you’re on the job site, you know, it just places a burden on the community to audit him post jobs.

ILONA: If you were to see these IDA applications, they don’t… they hardly have to explain a thing…

TOM: The whole thought process is bogus. There’s no evaluation, there’s no way. There’s only one instance that I know of here in the city Chicago in which a TIF money was taken back and that was because of a worldwide protest. A company that makes .. they make windows and doors called Republic Windows received $9 million in TIF funds back in around 2003 or so, and their business went south. They overextended, they got caught up in the big recession in like around 2007-8, and they were going to move in the middle of the night to Iowa, leaving all their workers completely stranded without benefits, you know, without their pensions and by just the strangest set of circumstances, some of the workers saw was happening and they barricaded themselves in the plant. And it … made worldwide headlines, there was a documentary written about it and a book written about it, and only then, after all that, because they received that $9 million, they had to give the 9 million back. You know, they were, they were allowed to go. But in the end, the workers received funding from their union and they bought the business. That’s the only time, you know, in all the history of TIFs in Chicago for over 30 years. Hundreds of deals, many of whom were questionable. So, what I’m saying is, he can promise the sun, the moon the earth. No one’s gonna check his numbers. And to your point earlier, because he has the lawyers and the clout, he could get this subsidy but a half a block away, another guy who’s not in the zone, he’s absolutely disadvantaged. And so why should, why should we be picking winners and losers. That’s not the role of government, especially since we don’t know of the conflicts of interest because it’s secret.

ILONA: We have another issue in Kingston. Several PILOTs have been transferred when the property is sold. And that leads to huge windfalls for the previous owners. A local nursing home right now, it used to be owned by Ulster County and it was privatized in 2013. And at that time it was sold for about 11 million, and that owner got a 25 year PILOT. So, now a nursing home group wants to buy that property for 42 million, which means that the previous owner would walk away after owning it for only seven years, he would walk away with a $30 million profit, and the new buyer is asking for the PILOT to be transferred to the new owner.

TOM: Sure. We did not pay our fair share of taxes but they’d be negligent not to ask for that. Well, so you see now the other side of this whole morass of TIFs and PILOTs: the people then act as bankers for these developers. So instead of the developer paying the true cost of the project, the people act as his banker and either are direct investors or, in a way, offset his investment so he’s able to make something happen for, you know, the true cost minus, 20 or 30%. So sure, when he when he cashes out at the full value, he takes that money with him. He doesn’t give that profit back to the county or the City of Kingston; they’re not co- owners, although that would be a kind of a novel reform, I suppose, to say, well, okay, what percentage of this investment does it realize of your total project? So for Mr. Kingstonian, if he’s getting $30 million from the people, then just ask for a deed, so make the city one third owner. And so when he does cash out the county will get a third of the profits. They’ll never do that. They’ll call that communistic or something. No, they’ll react with horror. But so, sure, what you’ve described is very typical. Here in Chicago, giant office towers in the Loop are subsidized with tax money, and they were flipped more than once, to Tishman Speyer and to Japanese investors and in each time, yeah, the investor walks away with their profit and our money. It’s very typical.

ILONA: Oh my gosh, but this is really a national problem,

TOM: A national problem. Yes. These TIFs are in 49 states.

ILONA: Are there any states that have managed to get rid of it?

TOM: Well there are none in Arizona, and California in 2011 under Governor Brown stopped the TIFs altogether but then they came back in a slightly revised form. But no, not really. I mean, there is no one place to go, interestingly enough, in America, not at the Treasury Department, not at some nonprofit or think tank to say well how many TIFs actually are there in America right now. You know, state by state, how much money have they stolen. Now, the TIF Illumination Project, which I created here, out of the Civic Lab, does that for the city of Chicago. And we have the data that says, well, here’s where your money went. So it’s very, very hyperlocal. So we have what are called wards. So you have your city council district, we have 50 of them. And we explain how many TIFs are in your ward, who got paid, have the recipients of TIF money, these developers, given any money to your elected officials. People get really angry when they hear all this, because they’re seeing at the same time, schools closed, black communities are suffering, public services being diminished and the harsh life in the communities especially amongst black youth, there’s like 80 to 90% unemployment rate. Things are getting worse. And when someone like me comes to town to explain it doesn’t have to be that way, they’re righteously angry, and they should be. So that’s what we’ve done with, with the TIF Illumination Project, and we’ve talked to activists all over the country. My fantasy, before COVID, was to have a national convening of people like you for many cities that I talked to and we would all come and meet each other, because this is a national fight about equity, and we’re part of the larger conversation about the 99% 1% that goes back to the Occupy movement. We’re in that same camp. This work is exactly in that same space.

ILONA: Tom, you’ve been an amazing person to interview. Thank you so much. When I started looking into this I had no idea that this was a national issue. I just thought it was a little local issue, maybe a few other towns and cities in New York State. And boy, were my eyes opened.

TOM: Well, I’ll recommend two sources. First is Good Jobs First. They’re tracking this globally. In America, TIFs are just part of what they track. There’s that, but then there’s also offshoring of profits which they don’t track but another group does. That’s trillions. So if you put a couple of these big buckets together, like subsidies to business, like offshoring, yeah, you start getting some pretty big numbers, you know, that money that we’re spending stupidly and money that we should be collecting that we’re not collecting. And so when we are talking here in Chicago about these matters, we say, well, there’s three buckets that we need to look at. Bucket number one is money that we’re spending that we shouldn’t be spending. So that’s through corruption and bad bank deals. The second bucket is money that we’re collecting but we just don’t know where that money is. That’s TIFs, we can’t put our hands on it, because it’s a slush fund, it’s off the books. The third bucket is money we should be collecting, but we’re not. Put them all together, it’s $5 billion of sustainable revenue, each and every year, for the people of the city of Chicago. The same thing applies if you look at a state. I think it’s the same for the federal government, the same things still apply, those three large lenses to look critically and creatively at your finances.

ILONA: Tom, thank you so much. You’ve been wonderful. This interview was recorded on Friday September 25 of 2020. Since that date information has come out from Poughkeepsie indicating that Joseph Bonura, who is one of the developers, has not one but two PILOTs in Poughkeepsie, that will last for 99 years, their value will exceed $1 billion. That’s billion with a B. It’s becoming clear that tax breaks are a major problem contributing to inequality, on the one hand, and on the other, handicapping progress and the American dream that once was within reach for most of us. I hope you’ve enjoyed this podcast. Be well and stay safe.

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