Village News TIF

What is Tax Increment Financing?
Tax Increment Financing is an economic development tool enacted by the state to enable local governments to restore run-down areas or jumpstart economically sluggish parts of town. It allows governments to make improvements to the property and provide incentives to attract businesses or help existing businesses to expand, without tapping into general funds or raising local property taxes.
A tax increment is the difference between the amount of property taxes generated before and after the property has received TIF designation. Property taxes produced by the incremental gain in tax revenues once the property has been redeveloped are available to the municipality to offset some of the redevelopment expenditures within the TIF area. In other words, money for improvements and other incentives comes from the growth in property tax revenues -- the tax increment. Thus, the dollars for improvements are generated by the businesses.

How does a property qualify as a TIF?
State law identifies a number of qualifications for an area to designated a TIF district, beginning with identifying the district and the physical and economic deficiencies that need to be redeveloped. Some of the more notable ones are:
Depreciation: Property values on the site that have been declining.
Deterioration: Blighted conditions as defined in the state statute, which include the viability and economic obsolescence of structures.
Excessive vacancies: A vacancy rate on the site that contributes to the property's deterioration.
Obsolescence: The condition or process of falling into disuse; structures have become ill suited to their original use.

How much will a TIF district cost tax payers and will it increase property taxes?
TIF captures incremental increases in tax revenues without any change in tax rates. In TIF districts, properties are assessed and taxed the same way as in non-TIF districts. The only change is that during the life of the TIF, the property tax revenues are distributed differently, with the incremental increase in tax revenue - the "new funds" generated - going to the municipality to offset some of the redevelopment expenditures within the TIF area. The TIF district will not raise local property taxes.

How is a TIF District created and developed?
As set by state law, a site must be studied to determine whether or not it qualifies as a TIF District. City officials and a joint review board, made up of representatives from local taxing jurisdictions, must review a plan for the redevelopment of the TIF area. A public hearing is held where residents, businesses and other interested parties can express their views. The City must pass a Tax Increment Financing District Enabling Resolution. No state or federal approval is required.

How long will a TIF be in place?
By law, the TIF can be in effect up to 23 years.

Why consider a TIF?
TIFs help municipalities attract private development and new businesses. TIFs also help overcome the extraordinary costs that often prevent redevelopment in older communities where infrastructure is lacking, property values are high and demolition, often combined with environmental cleanup, make redevelopment financially unfeasible for private investors. In other words, TIF funding helps eliminate the competitive disadvantage of redeveloping older property by allowing the use of future property tax dollars to help pay for some of the site's improvements.

What affect does a TIF have on other taxing bodies?
A TIF district will not take tax dollars away from other taxing bodies. It freezes revenues at current levels, where the revenues likely would have remained if the property was not improved and developed. Overlapping taxing bodies continue to receive all the property tax revenue they were entitled to before the creation of the TIF district. When the TIF expires, taxing bodies will benefit from the increased property taxes produced by the thriving new business. The permanent increase in economic value then becomes part of the tax base that is returned to the full use of all taxing bodies. It is possible to make agreements with other taxing bodies to share some of the revenues generated by the growth in property tax revenues.

Why is this a good deal for the taxpayers?
TIF helps retain existing businesses that might otherwise find more attractive options elsewhere and helps bring new businesses to the community. This means more jobs, more customers and more private investment.

How widespread is the use of TIF districts in Illinois?
TIF has been available to local governments in Illinois for more than 20 years. Illinois was the 25th state to adopt this incentive program and it is the major mechanism for municipal economic development in Illinois today, especially since the decline of federal and state economic development funding. Over 300 municipalities, including fully developed communities, have used TIF financing and sales tax sharing as a way to restore run-down commercial property.

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