New Study Shows Declines in TIF Revenues

by Franczek Radelet P.C.
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[authors: Scott Metcalf and Ares Dalianis]

Tax Increment Financing (TIF) Districts throughout Illinois are experiencing declines in revenues as a consequence of the changes in the real estate market. TIF Districts operate by diverting a portion of property tax revenue generated within a defined geographical area to finance redevelopment costs in blighted and conservation areas over a 23-year period. When a TIF District is created, the equalized assessed value (EAV) of the TIF area is frozen. The amount of tax dollars allocated to school districts and other taxing agencies is determined by the frozen EAV. Tax dollars generated by increases in the EAV over the frozen level are paid to the TIF District and spent on eligible redevelopment projects. According to a study released today by Cook County Clerk David Orr, declining real estate values mean TIF Districts in Cook County are receiving less revenue than in the past.

The 2011 TIF Report is available here. According to the Report’s Executive Summary, “TIF Districts in suburban Cook County … saw an overall revenue decline of 7.7 percent, from $298 million in 2010 to $275 million in 2011. Revenue decreased for 133 of 280 active suburban TIF Districts.”

Any school district whose boundaries overlap a TIF District should be watchful for expiring TIF Districts. When a TIF District expires the school district may increase its levy to capture the recovered TIF value that is added back to the school district’s tax base. The benefit derived from the addition of the recovered TIF value can only be reflected in the levy in the first year after the TIF District expires. According to the 2011 TIF Report, three suburban Cook County TIF districts were closed in 2011. Those TIF Districts were located in Berwyn, Hanover Park and Bensenville. The Berwyn and Hanover Park TIF Districts ran the full 23 year term, while the Bensenville TIF District closed roughly ten years early.

A review of the report indicates that several Cook County TIF Districts may be expiring in the next few years based on their year of creation. TIF Districts by statute have a life span of 23 years, but can be extended by the General Assembly by an additional 12 years, for a maximum term of 35 years. Some of the TIF Districts created prior to 1990, and thus subject to termination in the coming year or two, include:

  • City of Chicago Heights – Cub Foods (1989)
  • City of Country Club Hills (1988)
  • City of Rolling Meadows (1988)
  • Village of Bedford Park (1987)
  • Village of Calumet Park (1989)
  • Village of Hazel Crest (1988)
  • Village of Lansing (1988)
  • Village of Matteson (1989)
  • Village of Melrose Park – Mid Metro Industrial Area (1989)
  • Village of Richton Park – Crossings (1988)
  • Village of Sauk Village – Sauk Plaza (1988)
  • Village of Sauk Village – 2 (Sauk Industrial Park (1988)
  • Village of Schaumburg – Olde Schaumburg 1 (1989)
  • Village of Skokie – Downtown (1989)
  • Village of South Holland – Interstate 80 (1989)

It is essential that school districts keep track of the TIF Districts within their boundaries, to ensure they are taking full advantage of their property tax levies. The recent 2011 TIF Report is one way to annually monitor the health and remaining life of TIF Districts.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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