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Implementing and Understanding Tax Increment Financing (TIF) Districts

Implementing and Understanding Tax Increment Financing (TIF) Districts. TIF Overview What is Tax Increment Financing (TIF)? When is it the Right Tool? How is it Implemented? How is the TIF Financed?.

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Implementing and Understanding Tax Increment Financing (TIF) Districts

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  1. ImplementingandUnderstanding Tax Increment Financing (TIF) Districts

  2. TIF Overview • What is Tax Increment Financing (TIF)? • When is it the Right Tool? • How is it Implemented? • How is the TIF Financed?

  3. TIF is a municipal financial incentive tool created by the Illinois State Legislature in 1978 to assist communities implement sound economic development. TIF can be used to acquire property. TIF can provide infrastructure. TIF can pay for consultant, engineering, attorney and other applicable soft costs.

  4. TIF As Part of Local Planning

  5. WHEN IS IT THE RIGHT TOOL? Will the area benefit from a TIF designation? What is the area’s current condition or past history? • To Induce Industrial Projects • To Induce Commercial Projects including Downtown areas • To Induce Residential and Mixed Use Projects

  6. Determine the Area to be Studied Adopt a Feasibility Resolution Qualify the Redevelopment Area Conservation Area Blighted Improved / Vacant Industrial Jobs Recover Area (IJRL) HOW IS TIF IMPLEMENTED?

  7. “PAY AS YOU GO” Developer Note Redevelopment Agreement Maximum TIF term – 23 years, Financing obligations – 20 years “UP FRONT” GO TIF Bond Taxable Revenue Bond HOW IS THE TIF FUNDED

  8. TIF Basics • Review of TIF Financing TIF involves splitting property tax revenue generated from properties within the TIF District into two components or “buckets”: Bucket for Incremental Revenues – For Redevelopment within TIF Bucket for Base Revenues – For All Local Governments

  9. TIF Mechanics Review of TIF Financing - Ideally, a successful TIF produces positive incremental revenue over time

  10. General Assumptions

  11. Absorption Schedule

  12. Property Tax Assumptions

  13. Background • Review of TIF Financing • - But, a successful TIF is not guaranteed ASSESSED VALUE YEAR

  14. Present Value Analysis

  15. Policy Considerations • Is there a “but for”? • What effect will the TIF have on other taxing districts? • What type of developments should be funded? • What resources are available to the municipality? • How does the estimate of incremental taxes compare to the costs to develop?

  16. Timing Considerations • Under the current TIF Act, the entire TIF designation process can take between 4 to 6 months. • There are numerous public notices and meetings/hearings that must either be published in local newspapers, sent by regular mail, or sent by certified mail. • Local taxing districts are invited to a Joint Review board to act in an advisory capacity early in the process.

  17. Timing Consideration Cont’d. Typical Steps required as part of the TIF designation process: - Public Meeting to review TIF concept - Public Hearing Ordinance/Resolution Approval to set Public Hearing - Joint Review Board meeting ( taxing districts and village )

  18. Timing Consideration Cont’d. Notice of Public Hearing sent to taxpayers in TIF, and to interested parties; and 2 newspaper notices - Public Hearing to review TIF plan • TIF ordinances may be introduced 14 to 90 days after the Public Hearing - If the TIF ordinances are approved, they are then filed with the County Clerk The timetable occurs over a 120 to 180 day period

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