Vernon Hills plans to retire 2 special tax increment financing districts

Two of three special financing districts created as incentives for what have become successful developments along Milwaukee Avenue in Vernon Hills are headed for retirement.

Village officials have authorized steps to end tax increment financing districts designated for the Town Center area, established as a southern gateway at Milwaukee and Route 45, and the Mellody Farm retail/restaurant center to the north at Route 60.

Sometimes controversial, TIF districts are established to spark activity in underutilized areas by allowing developers to be reimbursed for eligible expenses.

That's done by freezing property taxes paid to taxing bodies when the district is created. Taxes generated by the increased value (the increment) go to a separate fund.

Town Center has reached the end of its state designated 23-year life, while Mellody Farm has been generating enough new property tax to warrant an exit after only nine years.

Besides saving the village nearly $700,000 in required annual payments, and potentially $3 million in interest, dissolving the districts will allow various taxing bodies to share a bounty of property tax revenue that has been unavailable as part of the TIF mechanism.

When the districts officially end, values on which property taxes are based will no longer be frozen and taxing bodies will be able to collect based on much higher current values.

For example, the equalized assessed value when the Town Center redevelopment was created was about $2 million compared with a current value of $30.6 million. That translates to a combined share of about $2.5 million in annual property taxes compared with $178,971 initially.

The numbers are more profound at Mellody Farm, which has increased in value from $290,981 when the TIF was created in 2017 compared with $52 million currently. Taxing bodies will share in $4.4 million in property tax revenue rather than $26,077 generated before.

Both developments involved hefty village incentives — up to $15 million for Town Center and $20.2 million for Mellody Farm. The Town Center debt will be paid off as scheduled by the end of the year.

There would be 11 years of payments left on the Mellody Farm TIF debt unless the balance of about $14.2 million is paid off, according to Finance Director Thomas Lyons. Doing that would save $3 million in interest.

The village this fiscal year “will be in a position financially to pay off the outstanding debt obligations for the TIF district,” said Village Manager Kevin Timony. The development is built out and no components remain.

What did the village get in return for its investments in TIF? At Town Center, it was 53,965 of retail space and 280 dwelling units. At Mellody Farm, it was 252,635 square feet of retail space and 260 dwelling units.

The third and newest TIF district was established in 2019 for the redevelopment of the Hawthorn mall property. The village has pledged $46.5 million in pay-as-you-go incentives.

Formal approvals ending the Town Center and Mellody Farm districts are expect to be considered by the village board this fall.