State senator proposes reduction in 23-year life span of TIF districts

  • The redevelopment of the former AT&T campus in Hoffman Estates is using one of five tax increment financing districts in the village as an economic incentive for its nonresidential components. A new state bill is proposing reducing the life span of TIF districts from 23 years to 10.

      The redevelopment of the former AT&T campus in Hoffman Estates is using one of five tax increment financing districts in the village as an economic incentive for its nonresidential components. A new state bill is proposing reducing the life span of TIF districts from 23 years to 10. Joe Lewnard | Staff Photographer, 2018

 
 
Posted2/19/2020 5:30 AM

Democratic state Sen. Ann Gillespie of Arlington Heights is sponsoring a bill that seeks to reduce from 23 years to 10 the life span of a sometimes controversial but often used property tax incentive for redevelopment.

Tax increment finance districts, or TIFs, are frequently touted by developers and municipalities as tools for economic development of blighted or underused properties. But other local taxing bodies, such as school districts, have sometimes cast a critical eye on the incentive because it freezes their property tax revenue from the improving site for nearly a quarter century.

                                                                                                                                                                                                                       
 

Gillespie introduced Senate Bill 2938 on Feb. 4. It is scheduled for a hearing before the senate's revenue committee Wednesday.

The bill, which has a proposed effective date of July 1, includes some new criteria to tighten the determination of whether a site is sufficiently "blighted" for use as a TIF district.

The district works by freezing property taxes within a designated area at the level of the first year. As the property is improved and its value rises, the tax revenue increase goes to a municipally held fund to pay for public improvements complementary to the private development.

Such districts historically have expired after 23 years or when all their public improvements have been paid off, which ever is first.

While TIF districts can be extended to as long as 35 years, Gillespie's bill proposes allowing extensions only to 15 years.

Gillespie said her research determined that, on average, officials know if a TIF district has been successful within 10 years. She also found TIFs are most successful when used for industrial redevelopments and least successful for retail.

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She added her research found TIF districts are used in more redevelopment situations than was originally intended.

Gillespie said she anticipates some attempts to negotiate changes to the bill, but that it would keep its July 1 effective date if it passes on or before May 31.

Mark Fowler, executive director of the Northwest Municipal Conference, said one thing the new bill doesn't take into account is the number of times TIF districts have been retired early.

Though the conference probably won't establish a stance on the bill until next month, Fowler said there has been a history of efforts to reform the TIF law as well as resistance to those efforts.

"They've been a very effective tool," he said.

Hoffman Estates has five active TIF districts, including one for redevelopment of the former AT&T campus into the Bell Works "metroburb" of offices, stores, and entertainment venues. The project's residential component was specifically excluded from the TIF.

                                                                                                                                                                                                                       
 

Another, for 64 acres at the northwest corner of routes 59 and 72, was approved by the village board last month.

Hoffman Estates Economic Development Director Kevin Kramer said TIF districts aren't always the most effective tool for every situation, and his village did hope to make use of a proposed new "Big Empties" incentive for the AT&T campus. That was designed not to freeze property taxes to local governments, but wasn't approved in time by the state legislature.

Kramer said there are probably pluses and minuses to most available incentives, but there are also projects that can take longer than 10 years to fully develop.

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