TIF District Questions and Answers
The Lincoln City Council has been talking about establishing a
Tax Increment Financing (TIF) district in downtown Lincoln for some
time. A Feasibility Study on the district was recently completed and
approved by the Council. In an effort to provide further information
on the next steps in establishing a TIF district, we thought it
might be helpful to answer some common questions.
Since the Feasibility Study has been approved by the City Council
does this mean a TIF District has been established? No. The
Feasibility Study does not establish the TIF district, it only
determines if the State requirements are satisfied for the area to
qualify as a TIF district. The Feasibility Study determined that the
downtown area is eligible for the establishment of a TIF.
How is a TIF District established? The process for the
creation of a TIF district is spelled out in State law:
approval of the Feasibility Study the next step is to develop a
Redevelopment Plan. That plan will contain a broad outline of
how collected TIF funds will be spent in the district.
Plan will be provided to the school districts and other taxing
bodies of the downtown area for review.
will be mailed to all residents within the TIF district and
those within 750 feet of the proposed boundary that the Plan has
been developed and is available for review.
A Public Hearing
will be held on the proposed Redevelopment Plan.
A Joint Review
Board will be established consisting of representatives of the
affected taxing bodies. The Joint Review Board will meet prior
to the Public Hearing and will continue to meet at least once
annually throughout the life of the TIF district.
Once all these
items are completed, the City Council will vote to formally
establish the TIF District. We are working towards having that
vote in February or March of 2013.
Why hasn't the City shared information on how TIF funds would be
spent? Because a framework for the expenditure of TIF funds
hasn't yet been developed. That will be prepared as part of the
Redevelopment Plan, the creation of which is the next step in the
What sorts of things can TIF funds be spent on? TIF funds can
be used within the district for public improvements, for matching
grants as incentive for private property owners to complete building
improvements, or to encourage new development on private property.
The public improvements could include things such as street
reconstruction, sidewalk improvements, sewer replacement, downtown
park improvements, etc. Having TIF funds available will be critical
in allowing us to secure additional State and federal grants for
downtown because those funds can serve as local matching funds.
What is a tax increment? The tax increment is the difference
between the amount of property tax revenue generated before the TIF
is established and the amount of property tax revenue generated
after the TIF is in place. Property taxes will continue to be
collected on properties within the TIF district at their full
assessed value. Any amount above the level of property taxes
collected at the time the TIF was established, however, will be
invested in the TIF district rather than being distributed to the
other taxing bodies
So if property taxes go up, the other taxing bodies will not get
that increased tax revenue for areas within the TIF district? It
is important to know that the Equalized Assessed Valuation (EAV) of
the proposed TIF district has declined for four of the last five
years and is now 10% lower than it was five years ago. That means
that all taxing bodies have been getting less tax from downtown
properties. If we do nothing to encourage investment in downtown,
the decline will likely continue. With the TIF district, any
increased property tax revenue is captured and invested in the
district to promote increases in the EAV of the properties.
Increases in EAV eventually lead to higher revenues for all taxing
[to top of second column]
Do TIFs take money away from the schools and other taxing bodies?
Creating a TIF will not reduce any property tax revenues
available to the other taxing districts. Actually, the hope is that
establishing a TIF district will create more revenue for the
other taxing bodies. If a TIF is successful, when it expires all of
the taxing bodies will benefit from increased property taxes in a
redeveloped downtown. The only revenue that goes into the TIF
district is from taxes derived from future growth that likely would
not have occurred without a TIF district.
How long will the TIF district last? State law prescribes
that TIF districts are in place for up to 23 years. While the
TIF is in place, all taxing bodies will continue to receive the
property taxes they are currently receiving. After expiration of the
TIF, the entire property tax, including the existing taxes and any
TIF-created taxes, become available to all of the taxing bodies.
Can the City use TIF funds to provide funds to a private
developer? Yes, but each case will need to be negotiated between
the City and the developer and the terms outlined in a
Council-approved redevelopment agreement.
How would that work? Let's say a commercial building within
the TIF district is currently generating $2,000 per year in property
taxes and has a value of $75,000. The property owner is willing to
make a $150,000 investment in renovating the building if the City
will provide $75,000 in TIF funds for a total expenditure of
$225,000. Following the development, the commercial property will
have a value of $300,000 and annual property taxes of $10,000. The
tax "increment" in this case is $8,000. With that amount of money
staying in the TIF district, the City can recoup its original
investment in less than ten years. After the initial investment is
paid off, the newly generated increment can be used for additional
investments in the area. Without this incentive, the property owner
would be unlikely to make such a large investment.
Why should tax dollars be used to help a private developer?
Successful TIF investment serves both the public at large and
private investors in a redevelopment area. Private investors are
helped by a reduction in development cost and risk, making
improvements that otherwise would not be feasible. The community
benefits by having a redeveloped central business district and from
the additional tax revenue available at the conclusion of the TIF
How do we know that a TIF district will actually redevelop
downtown? Although there is no guarantee that redevelopment will
occur after establishment of the TIF district, it will provide an
incentive that is currently lacking. It is evident from the decline
in property values of the area that redevelopment is not likely to
happen on its own. The tax increment is used to pay for the
improvements that attract private investment and stimulate economic
growth. The TIF district gives a reason for redevelopment that might
not otherwise exist.
Are TIF districts unusual? No, actually, they are quite
common. There are over 1,000 TIF districts in over 250
municipalities around the State of Illinois. There are two
communities with TIFs in Logan County, nine municipalities with TIF
districts in Sangamon County, and eight municipalities with TIF
districts in McLean County.
[Text copied from file received from Lincoln
Mayor Keith Snyder]