Chicago’s Use of Tax Increment Financing to Fund New DePaul Arena

According to a Sept 23, 2013 article in the Chicago Tribune, the City of Chicago has pledged $33m to help construct a new event center as part of a revitalization project for the McCormick Place Entertainment District.  Dubbed the “DePaul Arena,” the proposed event center will cost $173m to construct.  According the Chicago Tribune, DePaul University has allocated $70m to the project, the Metropolitan Pier and Exposition Authority (“McPier”) has pledged an additional $70m of general revenue backed bonds, and the City has pledged the remainder $33m to the project to be paid from Tax Increment Financing (“TIF”).

The article goes on to state that the proposed DePaul Arena will be a 10,000-seat event center adjacent to the McCormick Place West building that will host conventions and trade shows as well as the DePaul University men and women’s basketball teams.  The event center is scheduled for completion in the fall of 2016 and is considered a key feature of the planned McCormick Place Entertainment District which also includes a 1,200 room hotel owned by McPier and operated by Marriot Marquis.  According to the Tribune, the City and McPier have mapped out a 12 block area adjacent to McCormick place as the McCormick Place Entertainment District in its plan to revitalize the area.  The plan hopes to encourage new business and jobs and attract a modern night life as well as increase the competitiveness of the McCormick Convention Center.  The DePaul Arena is described as an important step towards accomplishing the goals of the revitalization project.  The hope is that DePaul basketball will draw in a younger, vibrant crowd during basketball games as will entertainment headlines and convention events hosted at the arena.

One of the the most controversial issues with the project is the City’s use of Tax Increment Financing. TIF is a special type of Economic Development Incentive (“EDI”) utilized by many cities throughout the nation.  The funding for specific projects is generated by growth in the Equalized Assessed Valuation (“EAV”) of properties within a designated district over a 23 year period.  The amount of property tax the area generates is set as a base EAV amount. As property values increase, all property tax growth above that amount is used to fund redevelopment projects within the district. The increase, or increment, can be used to pay back bonds issued to pay upfront costs, or can be used on a pay-as-you-go basis for individual projects.

By using TIFs, the City argues it can stimulate growth in an impoverished or blighted neighborhood.  Successful revitalization projects can reduce vacancies, decrease crime, increase property value, incentivize property owners to improve and increase housing, reduce urban sprawl, and invigorate an otherwise declining property market. However, these benefits can also come at the cost of the current identity of the existing community.  Using TIFs to fund redevelopment assumes that property values will continue to increase sufficiently to fund the balance of the project.  This approach often relies on gentrification of neighborhoods which can have a detrimental effect on the existing population living within the community.  The most notable effect is the displacement of residents due to the increase in home prices and rent, the burdens placed on surrounding communities due to displacement, and potential resentment between existing residents and new ones.  Logically it would seem that community input is essential to community revitalization, but too often this is over looked.  The City and McPier should do their utmost to solicit community input into the overall revitalization project.  Hosting community input meetings, conducting community input surveys, and working with existing community organizations can help reduce the negative side effects while reaping the many rewards that follow a successful revitalization project.


Kathy Bergen, McPier Board OKs DePaul Arena Design, Chicago Tribune, Sep. 23, 2013,,0,19653.story.


The author is a current student in the DePaul Law School Housing and Community Development Legal Clinic. The opinions expressed in this blog are that of the author and not of the Clinic, the Law School or the University.