The City and the County have prepared fact sheets and answers for questions that are commonly asked by the public. We have provided information directly  from the City of Chicago and Cook County Websites.

City of Chicago

Tax Increment Financing Program

    Tax Increment Financing is a special funding tool used by the City of Chicago to promote public and private investment across the city. Funds are used to build and repair roads and infrastructure, clean polluted land and put vacant properties back to productive use,  usually in conjunction with private development projects. Funds are generated by growth in the Equalized Assessed Valuation (EAV) of properties within a designated district over a period of 23 years.
Available for download:TIF_ApplicationTIF Interested Parties Registry

Funding levels for specific projects are coordinated with area plans and goals. When an area is declared a TIF district, the amount of property tax the area generates is set as a base EAV (equalized assessed value) amount. As property values increase, all property tax growth above that amount can be used to fund redevelopment projects within the district. The increase, or increment, can be used to pay back bonds issued to pay upfront costs, or can be used on a pay-as-you-go basis for individual projects. At the conclusion of the 23-year period, the increase in revenue over the base amount is distributed annually among the seven taxing bodies in the city that are based on property values.

Under state law, areas proposed for TIF designation must possess numerous blighting factors to be eligible:

  • Age
  • Obsolescence
  • Code violations
  • Excessive vacancies
  • Overcrowding of facilities
  • Lack of ventilation, light, sanitary facilities
  • Excessive land coverage
  • Inadequate utilities
  • Deleterious land use or layout
  • Lack of physical maintenance
  • Lack of community planning
  • Dilapidation or deterioration

Objective
To help local companies expand and create employment oportunties for Chicago residents.

Qualifications and Restrictions
TIF assistance for eleigible projects usually exceeds $1 million. Participating companies and projects must comply with all federal, state and local program requirements.

How has Chicago used TIF funds to improve neighborhoods and promote economic development?

TIF’s have created jobs, strengthened Chicago’s school system, revitalized neighborhoods, boosted the local economy, and improved the quality of life for Chicago residents. TIF expenditures for public improvements like street and sidewalk repairs, parks, and open space account for nearly one-third of TIF expenditures each year. And for every $1 in TIF funding that has been invested in Chicago’s neighborhoods, $6 was invested by the private sector. As a result, $7 billion in private funding has been invested in the City of Chicago as a direct result of TIF investments.

These public-funded TIF investments include:

  • $762 million over several years to rehabilitate and construct new public schools as part of the Modern Schools Across Chicago plan
  • $560 million for improvements for streets, alleys, and other neighborhood infrastructure since 1997
  • $278 million to support nearly 11,000 affordable housing units
  • $198 million for capital improvements in 2008 alone (including CTA improvements)
  • $13 million in grants to help more than 400 businesses in more than 40 TIF districts through the Small Business Improvement Fund (SBIF); and
  • $11.5 million through 181 grants to train 10,417 workers and hire 840 new employees

How are TIF districts created, and how many exist today? (As of August 5, 2011)
For every proposed TIF district, the City asks outside experts to prepare a study to determine eligibility under state law. The City also holds community meetings in each area, as well as public hearings before the Community Development Commission (CDC) and the City Council. The CDC makes a recommendation, and the City Council has approval authority for creating a TIF district, as well as the TIF district redevelopment project area and redevelopment plan.

Since TIF began in the City of Chicago in 1984, 173 districts have been created, two districts have expired, and six districts have been terminated. There are currently 165 active TIF districts.
What TIF Can Fund

Per state law, only certain expenses are eligible for TIF funding. Those projects/costs include

Per state law, only certain expenses are eligible for TIF funding. Those projects/costs include

  • TIF program administration costs
  • property acquisition
  • rehabilitation or renovation of existing public or private buildings
  • construction of public works or improvements
  • job training
  • relocation costs for private businesses
  • financing costs, including interest assistance
  • studies, surveys and plans
  • marketing studies within the TIF
  • professional services, such as architectural, engineering, legal, and financing planning
  • demolition and site preparation

What TIF Cannot Fund

  • General government operations, defined as costs that would be incurred regardless of whether a TIF area was designated, or costs not directly tied to TIF program administration
  • Program operating costs
  • New construction (except for affordable housing and certain municipal projects)

Note: It is recommended that you review the City Ordinances and State of Illinois laws from time to time to be sure this information is still the most accurate.

Cook County

TIFs 101: A taxpayer’s primer for understanding TIFs

http://www.cookcountyclerk.com/tsd/tifs/Pages/TIFs101.aspx

Q: What’s a TIF?

A: “TIF” stands for “Tax Increment Financing,” a special tool that a
city such as Chicago can use to generate money for economic development in a
specific geographic area. TIFs allow a city to re-invest all new property tax
dollars in the neighborhood from which they came for a 23-year period.

These “new” revenues arise if new development takes place in the TIF
district, or if the value of existing properties rises, resulting in higher tax
bills. These funds can be spent on public works projects or given as subsidies
to encourage private development. But TIFs can also make it easier for a city to
acquire private property and demolish buildings to make way for new
construction.

With consistent community participation, TIFs can be a tool for implementing
a community-based revitalization plan through encouraging affordable housing
development, improving parks and schools, fixing basic infrastructure, putting
vacant land to productive use, creating well-paying jobs, and meeting other
local needs.

Q: How does a TIF work?

A: There are three basic stages in a TIF:

      1. Creating the TIF
      2. Obtaining revenue from increased property
      values
    3. Spending the money

Creating the TIF and Making a Plan

The state law that allows Illinois cities and towns to create TIFs requires that they are only established in areas that are “blighted,” or in danger of becoming blighted (often called a “conservation area” TIF). To determine if an area is eligible, the City hires a consultant to conduct an “eligibility study” of the proposed TIF. If the area meets the State standards, then the City (actually a consultant the City hires) conducts a study of the area and writes a “redevelopment plan” and a “project budget” – an overview of the development priorities for the area and how TIF dollars will be spent during the TIF’s 23-year life. The redevelopment plan must be approved by the City Council, but the TIF district may make changes to its
TIF project budget at any time.

“Freezing” the Tax Base and Collecting “Increment”

TIFs are politically appealing tools because they do not require the City to raise your tax rate. Instead, TIFs generate money for redevelopment by raising the value of the property that is taxed. It works like this:

  • When the TIF is established, the County looks at the value of all the property in the TIF. (The County uses the term “EAV,” or “Equalized Assessed Value,” to describe property value.) This is the “Base EAV.”
  • Remember, TIFs capture money by devoting all new property taxes to redevelopment. That means that once a TIF is established, taxing bodies (the City of Chicago’s general treasury, the Chicago Public Schools, the Chicago Park District, etc.) get no new revenue from the TIF. Their share of the property taxes is “frozen” at the level it was at just before the TIF was approved. The taxes on all the new property value in the TIF go into the TIF fund and are reinvested in that area.
  • Where does this new property value come from? It can happen in one of three ways. First, there could be new development on vacant land that, before the new project was built, paid little or no taxes. Second, there could be improvements to existing properties, such as an addition to a house, a factory, or a store. Third, the taxes on existing properties could go up, either because of inflation (sometimes called “natural growth” in property values) or because of gentrification in the neighborhood. In any of these cases, the new tax dollars
    go to the project fund controlled by the TIF district, not to the City, the schools, or any other taxing body. Money can be transferred between TIFs, but only between adjacent TIFs.

Here’s an example:

Step Description Amount
1. Base EAV The total value of all property in the TIF just before the TIF
district was established.
$10,000,000
2. Year One EAV The total property value of the TIF one year after it was
created.
$11,000,000
3. Growth in EAV The difference between the Base EAV and the current EAV. $1,000,000
4. Tax Rate The percentage of EAV (property value) that goes to taxes. 10%
5. Increment The growth in property value multiplied by the tax rate – i.e.,
the new taxes that go to the TIF fund.
10%

Spending the Money

TIFs are politically appealing tools because they do not require the City to raise your tax rate. Instead, TIFs generate money for
redevelopment by raising the value of the property that is taxed. It works like this: TIF money can be used for:

  • Planning expenses, such as studies and surveys, legal and consulting fees, accounting, and engineering.
  • Acquiring land and preparing it for redevelopment, including the costs of environmental cleanup and building demolition. Especially in older areas, where making a site ready for a developer reduces costs and eliminates a major barrier to redevelopment. To aid this process, the TIF law gives the City expanded powers to acquire private property through its power of “eminent domain.” If the City can show it is acting for a “public purpose” – a very loosely defined idea – it can force property owners to sell their land to the City at “fair market
    value.” The City then re-sells the land to a private developer, often at a deep discount, or uses it for a public building.
  • Job training and day care expenses for companies located within the TIF, or for companies that are planning to locate within the TIF. There are also proposals on the table that advocate establishing job-training centers that would serve the job-training needs of all the companies within a TIF district, regardless of whether or not they have received a direct TIF subsidy.
  • Renovation and rehabilitation of existing buildings.
  • Financing and interest subsidies for the loans a developer takes out to pay for a project.

Q: What is the role of the County Clerk’s office in the TIF process?

A: Under Illinois law, the Clerk’s office receives and processes a municipality’s ordinance establishing the TIF district and directing the Clerk
to dictate to the Cook County Treasurer the allocation of revenues to the TIF.These ordinances authorize the Clerk to set a frozen value for each parcel in the district, called the “initial equalized assessed value” (EAV). This amount is derived from the most recent values available at the time the TIF is created. Revenue is generated for the TIF as property values increase within the TIF district.

Under state law, the Clerk’s office must redistribute revenue to the TIF districts according to the amount of the increment or increased value since the initial or frozen value. Parcels are taxed utilizing the current property value of the property, but any taxes collected because of increases to the value beyond the frozen or initial value of the property are diverted from other tax districts and distributed to the TIF.

Q: Does the Clerk’s office make this information available to the public?

A: Yes. In November 2007, the Clerk will release an extensive TIF report.

The Clerk’s report includes the traditional Tax Increment Agency Distribution Summary, as well the “Taxpayer’s TIF Revenue Summary,” which offers a summary and comparison of total district revenues over the past two tax years, with the percentage change over that time. It also provides the beginning year of the TIF.

The “Taxpayers’ TIF Revenue Summary” can be reviewed three ways:

Summary A: Includes TIFs from the City of Chicago, as well as the suburbs. You will notice that the alphabetical order reflects that some municipalities are called cities, some villages, and Cicero is listed as a township. For example, Alsip is found among the villages, as it is the Village
of Alsip.

Summary B: Includes TIFs in just the City of Chicago.

Summary C: Includes TIFs in suburban Cook County only. Again, the alphabetical order reflects the same conventions as Version 1 in that it is
organized by cities, villages, and has Cicero listed as a township.

Summary D: The Tax Increment Agency Distribution Summary provides more detailed information regarding each TIF. In addition to the revenue totals for each TIF, this report also includes the current equalized assessed valuation, as well as the frozen (“initial”) equalized assessed valuation for the TIF. Within each TIF there is a further breakdown of the values and revenue according to tax codes. These codes are used internally to identify which taxing districts the parcels have in common.

Each tax code listed shows the composite tax rate and distribution percentage that is used to tax and distribute revenue collected on each parcel within that code. These rates and percentages are often different, even within the TIF, because different taxing districts, such as different parks or schools, may fall within the same TIF.

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