Taxing bodies spar over impact of bill to limit special taxing districts

This story has been modified from its original publication to correct that the legislative proposal on the duration of TIFs will not change the current standard of a maximum of 23 years, plus the potential for an additional 12 years with legislative approval.

Legislators are considering a bill aiming to bring more accountability and transparency to tax increment financing, a funding tool used by many municipalities to pay for economic development projects in areas considered blighted and run down.

Some suburban communities are among the groups opposing the legislation they argue will limit their ability to spur economic development. But many school districts, park districts and similar taxing bodies support it, because they believe it will limit the amount of tax money that TIFs draw away from them.

"Under the current law, municipalities call all the shots and the joint review board doesn't have any authority," said state Sen. Ann Gillespie, an Arlington Heights Democrat. "And so, it's important that (the taxing bodies) have a say, because this impacts what they're able to do."

In a TIF district, other underlying taxing bodies, such as schools and park districts, receive property tax revenue based on the value of the land at the time the TIF district is created and throughout its lifetime. During that time, any additional funds raised from an increase in property value gets routed to pay for infrastructure development within its boundaries, including sidewalks, gutters, sewers and streetlights.

The proposal introduced by Gillespie and co-sponsored by state Sen. Melinda Bush, a Grayslake Democrat, originally called for limiting the life span of a TIF to 10 years with the potential for the joint review board made up of one representative from each taxing body and one member of the public to consider approving an extension of a TIF to 15 years. That idea was withdrawn in negotiations, however, and the standard was left at the current 23 years with the potential for an additional 12 years with legislative approval.

The bill does still require the municipality to enter into a written agreement with the board explaining how money left over after development costs are covered is distributed. It also shortens the time those surplus funds are dispersed among the taxing bodies from 180 days to 90 days.

In the bill, when vacancy is used to determine "blight," 25% of the buildings in the area have to be vacant, she said.

"What the bill aims is to put some objective standards to what constitutes blight so that it doesn't get used in areas that really aren't what most people would consider to be blight," Gillespie said.

It's these changes that moved the Northwest Municipal Conference, the Illinois Tax Increment Association and villages in the suburbs of Chicago to oppose the bill.

"The bill would effectively curtail the effectiveness and the ability for municipalities to use TIF as an economic development tool," said Mark Fowler, executive director of NWMC, an advocacy organization for local governments in Cook, DuPage, Kane, Lake and McHenry counties.

Some parts of the bill, such as defining blight and shortening the time frame of a TIF, "may increase uncertainty of being able to launch a successful redevelopment project," Fowler said.

He's concerned the bill gives the board veto-like powers over development projects.

Palatine officials were among those who opposed the bill during an April 2021 hearing, but in a statement, Reid Ottesen, the village manager, stated, "While we have had concerns with some aspects of what were in the original bill, we addressed those directly with Sen. Gillespie."

Neither Ottesen nor Gillespie would describe the village's concerns or how they were addressed.

An extension of Palatine's downtown TIF is under consideration by the legislature.

Other opposing communities include Arlington Heights, Northbrook, Hoffman Estates, Rolling Meadows and Northfield.

The Illinois Association of School Boards, which represents nearly every school board in the state, supports the bill.

"Obviously TIFs can be a very beneficial thing for communities that also carry over for schools," said Deanna Sullivan, director of governmental relations for IASB. "We just believe that there needs to be more inclusion of the local taxing districts in the process, so that schools aren't ​ unduly impacted."

School districts would like opportunities to collaborate with municipalities to determine how surplus funding is spent. Instead, taxing bodies can make recommendations to municipalities but have no authority over the funds, she said.

The bill is being considered as part of a property tax reform package that includes HB2393 introduced by state Rep. Stephanie Kifowit, an Aurora Democrat, and HB1079, introduced by state Rep. Rita Mayfield, a Waukegan Democrat. Both bills include similar language requiring a notification slip with every property owner's tax bill indicating how many dollars go toward a TIF.

Kifowit said having the public's understanding of how much money goes into a TIF "and how much is diverted from the taxing bodies is important."

She sits on the negotiating group alongside state Rep. Sam Yingling, a Round Lake Beach Democrat; state Sen. Robert Martwick, a Chicago Democrat; and a representative from the governor's office, tasked with reviewing the various TIF related bills for possible inclusion in a larger bill.

HB0179 received opposition from several groups, including the NWMC. Fowler said there is already transparency in the tax bill and said residents can go to their local government's website to find the municipality's budget and see how their taxes are distributed.