application of tif in illinois

The Application of Tax Increment Financing in Illinois

An Overview

200 N. Broadway Suite 1000 St. Louis, MO 63102 (314) 231-7318

PGAVURBANCONSULTING

By Mike Weber, Director

PGAVURBANCONSULTING2

TIF is a financing tool designed to induce private sector investment in areas where such investment is lacking and would not otherwise occur because of blight or conditions that may lead to blight.

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Sale Street Looking North - Existing

Sale Street Looking North - Restored


TIF Basic Facts

Available to all Illinois municipalities

No Federal or State approval required – plan your own destiny

An economic development tool designed to achieve 2 principle goals:

Removal of blight or conditions that may lead to blight

Enhance the tax base of all affected taxing bodies

All taxing districts participate & benefit

3 Fundamental Findings:

Area must qualify as: Blighted area Conservation area Combination thereof Indus. park cons. Area

Lack of growth and development by private enterprise

“But for” TIF, private investment will not occur


How TIF Works (Example)

1. Establish TIF area (meeting statutory requirements)

2. Initial (base) EAV generates:

$50,000 real prop. tax

3. Plan implementation – after redevelopment is completed:

$300,000 real prop. tax

4. Tax increment calculation:

5. $250,000 tax increment annually

Pays for eligible costs Pay as you go or bonds Increment stays in TIF area to carry

out Plan per City/Village direction

$300,000 Tax after redevelopment

- $50,000 Tax on base EAV

$250,000 Increment Available


How TIF Works (Graphic Illustration)

Revenue Flow During TIF

$-

$20

$40

$60

$80

$100

$120

1 5 9 13 17 21 25

TIF Year

Do

llars

($00

0)

Revenue To TIF Special Allocation Fund

Revenue To Taxing Districts

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Sample of TIF Eligible Costs

Property assemblyBuilding demolitionBuilding rehabilitation or retrofittingPublic infrastructure (e.g., streets & utilities)Interest write down (30%)Job trainingEnvironmental remediation


Approval Process

1. Feasibility Analysis/Findings Minimum area: 1-1/2 acres Feasibility study/inducement

resolution Request for proposals Housing unit count &

displacements (75/10 rule) Eligibility analysis –

document findings Blighted area Conservation area Indus. park cons. area

Vacant land is difficult to qualify

Developer negotiations/level of assistance

2. Redevelopment Plan & Project Evidence on lack of growth

& investment by private enterprise

Identify public and private projects

Estimate of project costs Determine current EAV &

estimate of EAV after redevelopment

Term of TIF – up to 23 years

May transfer increment to adjoining TIF


“Blighted Area”

Must find 5 factors withrespect to improved properties:

Dilapidation Obsolescence Deterioration Structures below code Illegal uses Excessive vacancies Lack of ventilation, light

or sanitation Inadequate utilities Excessive land coverage Deleterious land use or layout

Environmental clean-up Lack of community planning Declining or stagnant EAV

growth

Vacant properties:

Can’t include agricultural land…unless subdivided or in anindustrial park cons. area

Very limited eligibility criteria Flooding criteria now much more

restrictive… must find “chronic”flooding.

Factors must be present to a meaningful extent and distributed throughout the area


“Conservation Area”

Over ½ of Buildings 35 yearsold or older

Must find 3 factors withrespect to improved properties:

Dilapidation Obsolescence Deterioration Structures below code Illegal uses Excessive vacancies Lack of ventilation, light

or sanitation Inadequate utilities Excessive land coverage Deleterious land use or layout

Environmental clean-up Lack of community planning Declining or stagnant EAV

growth

Vacant properties:

NOT APPLICABLE

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“Indus. Park Conservation Area”

Must be a “Labor SurplusMunicipality”

Labor Surplus Municipality:

Any time within 6 months of establishing the IPC TIF, unemployment rate must exceed 6%

Also, rate must be same or higher than U.S. unemployment rate.

Vacant land must be suitable for industrial park

Must be zoned industrial Contiguous to blighted area or

conservation area

If unemployment rate unavailable for municipality, then may use rate for the county

Vacant properties: Can be agricultural…

subdivision status not applicable

Redevelopment Plan must include other information:

Description of developer, user, tenant and facilities to be developed

Description of type & number of jobs to be created


Approval Process (Continued)

3. Plan Review Notify interested parties &

residences within 750’ of boundary

Public “meeting” (if 75/10 rule applies)

Submit Plan to local taxing bodies (45 days prior to public hearing)

Joint Review Board (JRB) meeting(s)

Newspaper notices of public hearing

Property owner notice of public hearing (resident notice also if 75/10 rule applies)

4. Public Hearing Interested parties get a

chance to speak Written comments heard

5. Adoption of Ordinances Three ordinances

(approving Plan; establishing TIF district: and adopting TIF)

14 to 90 days after close of public hearing

6. On-going Plan Implementation

Local administration Annual reporting & JRB

review

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Key Considerations

Financial Amount of tax increment

predicated on level of private investment (maximize leverage)

Financial structure Pay as you go Developer (promissory) notes Bonds (G.O. or alternate

revenue) Other revenues (e.g.; sales

tax) Development agreements

imperative Economic assistance policy

Gap financing % of increment returned

Public improvement needs

Area Designation Timeliness of development

throughout TIF area (the clock is running)

All properties should benefit Area size should be

reasonable More properties, more

complex Constraints on general fund Impact on taxing bodies

Support of Taxing Bodies Early dialogue Investing in the future Will benefit long-term

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application of tif in illinois

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