Wednesday, March 14, 2012
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City hears suggestions to consider a TIF district for downtown rehabilitation

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[March 14, 2012]  Tuesday night Lisa Kramer of Prairie Engineers and John Myers, an attorney with Rabin & Myers in Springfield, addressed the Lincoln City Council regarding TIF districts.

HardwareTax increment financing, more commonly referred to as TIF, is a means by which municipalities can use tax revenues gained by increased property values to reinvest in rehabilitation projects inside a given area or TIF district.

There are different types of TIF that can be created in an area: for either rehabilitation of existing buildings, development of new buildings for business or development of residential areas.

Myers and Kramer were introducing specifically a TIF program that would involve rehabilitation of existing structures in the downtown business district. This type of TIF is called a conservation TIF

During his presentation, Myers referred to the Illinois Tax Increment Association website, saying that it could provide a great deal of information to those who were interested in reading more.

Below is an example from that website of how a rehabilitation project could be funded by the TIF, and after a period of time, result in creating additional investment revenue:


For example, assume that a municipality wants to develop an area that includes two parcels that contain substandard commercial buildings. Let's also assume that both of these parcels are paying $30,000 per year in property taxes. However, the municipality finds that by making an investment of $500,000 to rehabilitate the buildings on the two parcels and provide necessary infrastructure, private developers will commit an additional $2,000,000, making the commercial buildings available for new use. This additional investment causes the property to increase in assessed value, for example and conservatively leading to the tax paid on each parcel going from $30,000 per year in property taxes to $60,000 per year. The public and private investment would increase the total property taxes paid from $60,000 each year ($30,000 per parcel), to $120,000 each year ($60,000 per parcel). The project would result in $60,000 in new tax increment, which the municipality could use to off-set its original investment in less than nine years. After this initial investment is paid-off, the newly generated increment can be used for additional investments in the area.

Myers told the council he has worked with several municipalities on creating their TIF districts, and they have been very successful. He noted the village of Sherman, where on the north side of the community, just off Interstate 55, several new businesses have gone up. These are the result of a development TIF.

Lincoln Mayor Keith Snyder also noted there is a rehabilitation project in the city of Normal that is the result of TIF dollars. He said the work that has gone on in that area is amazing.

Myers also noted the village of Elkhart had used a residential TIF to increase housing in that area.

In order for the city to create a TIF district in the downtown area, there would first need to be a feasibility study. Kramer and Myers are proposing to do that study for $25,000.

The first step in qualifying for the TIF would be to determine that at least 50 percent of the downtown buildings are more than 35 years old. In addition, there would be a need for rehab of structures in the downtown area.

Kramer also noted there would be an equalized assessed valuation of the properties in the downtown area. She noted that over the last five years, there has been a declining assessment of the downtown structures as a whole. The declining assessment is one of the criteria for establishing a TIF and also a good indicator that one is needed.

Snyder asked how the TIF would work with the enterprise zone. Myers said if businesses in the downtown area are participating in tax relief through the enterprise zone, they cannot use the TIF. It has to be an "either-or" situation. The business can either drop out of the enterprise zone and use the TIF, or stay in the enterprise zone and continue to receive what is available there.

Myers explained that the TIF could also be used to attract new business. If a developer wanted to come into the district and build a new structure, the TIF could help with the preparation of the building site, but could not invest in the new brick-and-mortar structure.

In addition to TIF, Myers said another incentive that can be coupled with TIF is the sales tax sharing program.

The city of Lincoln is familiar with sales tax sharing and just recently completed its term in that type of program with Wal-Mart. In that scenario the city reimbursed Wal-Mart for the increase it saw in sales tax collections through increased sales of products. The amount was set to be spread out over a period of time, and the city ended up paying Wal-Mart $600,000, divided into annual payments of roughly $180,000 each. In that particular case, the agreement included Wal-Mart footing the bill for infrastructure improvements around the new store.

City attorney Bill Bates asked if the TIF program would, for example, pay for a new facade on his law office. Myers said it could be used in that manner. He explained that the city will establish the terms of the TIF agreement and should be certain the amount eligible for use on a building is based on the tax increment gained on that specific building.

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Alderwoman Melody Anderson asked about the opposition to TIFs that often comes from the school districts in an area.

Myers said yes, school districts can be opposed to TIF districts, but generally their opposition falls around districts that, when created, increase the student population.

He said, for example, a development TIF may bring more residents with more children to the community, but the school doesn't necessarily get more money to educate those children.

Myers said in the case of a conservation TIF, where existing businesses are the main ones using the money, the likelihood that the student population will grow as a result is slim. Therefore, the school districts shouldn't have much of a problem with this type of TIF.

Chuck Conzo, city treasurer, asked about others who might oppose a TIF district. Myers said in the cases of development projects, many folks are not interested in seeing big-box stores come into their neighborhoods. He said residents often feel the large retail businesses "trash the neighborhood."

Chief Ken Greenslate of the police department wondered if the TIF could be used in building municipal buildings. He said Lincoln needs a police station and a new fire department building.


Ultimately, Myers said, it really doesn't work for city buildings, but on the other hand, it could be used to buy a new fire truck.

He explained that if the local fire department didn't have the equipment needed to fight a fire in a new building -- for example, a four-story in a city without a ladder truck -- then yes, the TIF funds could assist with that.

Myers said another problem sometimes comes from the business owners in a proposed TIF. He compared it to an insult to them when the city says their building qualifies for rehabilitation. He explained those business can asked to be removed from the district.

However, Alderwoman Kathy Horn later asked what happened if they decided they wanted back in, and Myers said it would equate to starting over from scratch.

Bates, however, noted that just because a building is included in the TIF, that is not an indication the business owner has to do anything.

Another stumbling block for TIF is that the public sometimes assumes there is a tax increase involved. Myers said there is no levy of taxes in a TIF. The public will not see a change in their tax bill. What will happen is the taxes collected will be changed in how they are distributed back to local government.

The tax increases that will occur are going to be in the increased assessed value of a building after it has been rehabilitated. This increase is what funds the TIF. The EAV is subtracted from the new assessed value. The difference goes to the TIF funds.

Snyder asked how the TIF could work with downtown revitalization grants. Kramer said the TIF would be more flexible in what it could be used for and therefore could be used to pay for enhancements the grants won't

She said one example of this is benches on the sidewalks. If a grant requires the benches be bolted and they are not, the grant won't pay for them. TIF funds could pay for the benches, and the grant money could be used elsewhere.

She said the best advantages are that the TIF funds are under local governance, are less regulated and come with fewer strings attached than a state or federal grant.

At the end of the discussion, Snyder talked about how the city would pay for this. On the city books there is a revolving loan program that is not being used. He said it has been discussed for a while to collapse that program and use the money elsewhere.

In addition to the $25,000 for the feasibility study, an additional $10,000 would be needed for legal and engineering expenses for work that would have to be done prior to the adoption of an ordinance.

Myers told the council another option is to self-finance these costs through expected TIF revenues. He said TIF could pay for the feasibility study, but only if the city goes through with adopting a TIF district.

At the moment, the targeted area for the TIF district runs from Decatur to Delavan Street and Logan to Sherman. It would exclude all residential properties inside those boundaries.

At the end of the discussion, Snyder asked aldermen to continue giving this their consideration. He wants to keep the discussions going on this and hopes to talk about it again in the very near future.


Related website:

Illinois Tax Increment Association:


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