Selling City Futures: The Financialization of Urban Redevelopment Policy

TLDR

Global financial markets have deeply penetrated U.S. cities, with yield‑seeking capital flowing into municipal debt, especially favoring governments that could convert public asset income into new instruments and reduce nonpayment risk. The article investigates how Chicago, from 1996 to 2007, used Tax Increment Financing to subsidize development projects and attract global capital. Tax Increment Financing bundles and sells rights to future property‑tax revenues from designated city areas, enabling municipalities to monetize expected income streams.

Abstract

abstract This article examines the specific mechanisms that have allowed global financial markets to penetrate deeply into the activities of U.S. cities. A flood of yield‐seeking capital poured into municipal debt instruments in the late 1990s, but not all cities or instruments were equally successful in attracting it. Capital gravitated toward those local governments that could readily convert the income streams of public assets into new financial instruments and that could minimize the risk of nonpayment due to the actions of nonfinancial claimants. This article follows the case of Chicago from 1996 through 2007 as the city government subsidized development projects with borrowed money using a once‐obscure instrument called Tax Increment Financing (TIF). TIF allows municipalities to bundle and sell off the rights to future property tax revenues from designated parts of the city. The City of Chicago improved the appearance of these speculative instruments by segmenting and sequencing TIF debt instruments in ways that made them look less idiosyncratic and by exerting strong political control over the processes of development and property tax assessment. In doing so, Chicago not only attracted billions of dollars in global capital but also contributed to a dangerous oversupply of commercial real estate.