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TAX INCREMENT FINANCINGTRENDS AND OPPORTUNITIES
29th Annual Rural Community Economic Development ConferenceMarch 7, 2018 / President Abraham Lincoln Hotel, Springfield, Illinois
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Tax Increment Financing (TIF) is an essential tool for rural Illinois leaders who seek a robust approach for successful
economic development. This presentation offers current updates and insightful strategies for helping local leaders use
TIF to keep a competitive edge and achieve new economic vitality in 2018 and beyond.
A special emphasis today will be on
how to work cooperatively with other taxing bodies.
WELCOME TO TAX INCREMENT FINANCING TRENDS AND OPPORTUNITIES
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Steve is President and Chief Executive Officer of The Economic Development Group, Ltd. (EDG) in Bloomington and Peru, Illinois.
In tandem with Jacob & Klein, an economic development law firm, EDG specializes in the creation and administration of Tax Increment
Financing Districts and provides economic development services to municipalities located throughout the State of Illinois.
MEET YOUR PRESENTER
STEVEN KLINE, PRESIDENT/CEO, THE ECONOMIC DEVELOPMENT GROUP, LTD.
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Herb is an Attorney and President of Jacob & Klein, Ltd. (J&K) in Bloomington and Peru, Illinois.
Herb specializes in areas relating to Government Law – (representing both municipalities and other taxing districts); Economic Development Law;
and Real Estate Law. Herb has extensive experience in Tax Increment Financing with an emphasis on negotiating municipal/taxing district
intergovernmental agreements and private redevelopment agreements.
MEET YOUR PRESENTER
HERBERT J. KLEIN, PRESIDENT/ATTORNEY, JACOB & KLEIN, LTD.
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Illinois needs competitive
tools to attract new private
investment and create jobs.
TIFIS AN INSTRUMENTFOR CHANGE
THE RISK OF INACTION IS REAL
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339 (27%) of TIF Districts
in Cook County, including
130 within City of Chicago
175 (14%) of TIF Districts in
5 Collar Counties:DuPage
Kane
Lake
McHenry
Will
88 (7%) of TIF Districts in
6 Adjacent Counties:Boone
DeKalb
Grundy
Kankakee
Kendall
Winnebago
1,238TIF DISTRICTS
IN ILLINOIS IN 2015
636 (51%) TIF Districts in84 of the Downstate Counties
WINNEBAGO
DE KALB
GRUNDYKANKAKEE
KENDALL
BOONE
COOK
DUPAGE
LAKE
KANE
MCHENRY
WILL
ADAMS
ALEXANDER
BOND
BROWN
BUREAU
CALHOUN
CARROLL
CASS
CHAMPAIGN
CHRISTIAN
CLARK
CLAYCLINTON
COLES
CRAWFORD
CUMBERLAND
DE WITT
DOUGLASEDGAR
EDWARDS
EFFINGHAM
FAYETTE
FORD
FRANKLIN
FULTON
GALLATIN
GREENE
HAMILTON
HANCOCK
HARDIN
HENDERSON
HENRY
IROQUOIS
JACKSON
JASPER
JEFFERSON
JERSEY
JOHNSON
KNOX
JO DAVIESS
LA SALLE
LAWRENCE
LEE
LIVINGSTON
LOGAN
MCDONOUGH
STEPHENSON
MCLEAN
MACON
MACOUPIN
MADISON
MARION
MARSHALL
MASON
MASSAC
MENARD
MERCER
MONROE
MONTGOMERY
MORGANMOULTRIE
OGLE
PEORIA
PERRY
PIATT
PIKE
POPE
PULASKI
PUTNAM
RANDOLPH
RICHLAND
ROCK ISLAND
ST. CLAIR
SALINE
SANGAMON
SCHUYLER
SCOTT
SHELBY
STARK
TAZEWELL
UNION
VERMILION
WABASH
WARREN
WASHINGTONWAYNE
WHITE
WHITESIDE
WILLIAMSON
WOODFORD
Data Source: Illinois Department of Revenue (Table 14-A found at http://www.revenue.state.il.us/AboutIdor/TaxStats/PropertyTaxStats/2015/). Compiled by: The Economic Development Group, Ltd., 1701 Clearwater Avenue, Bloomington, Illinois.Revised: Nov. 8, 2017
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The total “TIF” Equalized Assessed
Valuation (EAV) reported for all TIF
Districts in Illinois for 2015 was
$12,383,763,632.
TOTAL EAVOF IL TIF DISTRICTSIN 2015
City of Chicago, $6,649,457,359, 54%
Balance of Cook County,
$2,066,604,970, 16%
Collar Counties, $967,795,232, 8%
Adjacent Counties, $345,423,920, 3%
Downstate Counties, $2,354,482,151, 19%
70%THE AMOUNT OF TIF EAV GENERATEDIN CHICAGO & REST OF COOK COUNTY
Data Source: Illinois Department of Revenue (Table 14-A found at http://www.revenue.state.il.us/AboutIdor/TaxStats/PropertyTaxStats/2015/). Compiled by: The Economic Development Group, Ltd., 1701 Clearwater Avenue, Bloomington, Illinois.Revised: Nov. 8, 2017
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The total Real Estate Tax Increment generated
by Illinois TIF Districts in 2015 was
$1,085,770,013.
TOTAL TIF INCREMENTOF IL TIF DISTRICTS
IN 2015
$0
$50,000,000
$100,000,000
$150,000,000
$200,000,000
$250,000,000
$300,000,000
$350,000,000
$400,000,000
$450,000,000
$500,000,000
City of Chicago(42%) Balance of Cook
County(24%)
Collar Counties(9%) Adjacent Counties
(4%) DownstateCounties
(21%)
$460,637,731
$257,476,637
$100,860,177
$37,669,441
$229,126,027
Data Source: Illinois Department of Revenue (Table 14-A found at http://www.revenue.state.il.us/AboutIdor/TaxStats/PropertyTaxStats/2015/). Compiled by: The Economic Development Group, Ltd., 1701 Clearwater Avenue, Bloomington, Illinois.Revised: Nov. 8, 2017
⅔ of TIF Increment is generated in Chicago & Cook County
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AND STILL WE PERSIST
Growth in assessed valuation within the TIF
Districts in Rural Illinois was 5 times more difficult
to generate than compared to neighboring Greater
Chicago Metropolitan Area and Adjacent Counties.
RURAL ILLINOISHAS TO WORKMUCH HARDER
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Heritage Fields Residential Subdivision, Oglesby, IL
RESIDENTIAL DEVELOPMENT
Love’s Travel Plaza, North Utica, IL.
COMMERCIAL DEVELOPMENT
Del Monte Corporation, Mendota, IL
INDUSTRIAL DEVELOPMENT
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Morris, IL
South Jacksonville, IL
Carthage, IL
Gibson City, IL
Peoria Heights, IL Cambridge, ILMarion, IL
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Peoria Heights
HOBART BUILDING(BEFORE)
Peoria Heights
TREFZGER’S BAKERY(AFTER)
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THE TREFZGER’S DEAL NEEDED TIF TO FILL A GAP
“Multi-Source Financing” is necessary for Private Redevelopment Projects.
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Mt. Sterling
UPTOWN BLOCK(BEFORE)
Mt. Sterling
UPTOWN BLOCK(AFTER)
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Sullivan
STORM DAMAGE(BEFORE)
Sullivan
STORM DAMAGE(AFTER)
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Created on August 31, 2017, the 12-member
Tax Increment Financing Reform Task Force is
examining the benefits and costs of TIF as
well as the interaction between TIF law and
funding for public schools.
ILLINOISTIF REFORMTASK FORCE
REPORT DUE APRIL 1, 2018
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TIF BENEFITS & COSTSIs it working? What
does it cost the State?
TIF & SCHOOL FUNDINGHow does TIF law and
school funding interact?
Among the questions before the Tax Increment Financing Reform Task Force, two of them are:CENTRAL QUESTIONS
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To date, Legislators have
indicated there are at least two
aspects of TIF being examined
as it relates to School Funding.
TIF & SCHOOL FUNDING
TIF INCREMENTALEQUALIZED ASSESSED VALUATION (EAV)GENERATED WITHIN A SCHOOL DISTRICT
TIF INTERGOVERNMENTAL AGREEMENTS
The TIF Act and the School Code currently include language which
requires the State Board of Education to ignore increases in EAV
within a TIF District when calculating the amount of financial
assistance the State will provide to school districts.
After the General Assembly adopted the new Evidence-Based
Funding for Student Success Act last summer, some Legislators
suggested the above EAV provision should be eliminated, thereby
penalizing school districts that co-exist with TIF Districts – even
though the TIF EAV is not included in a school district’s real estate
tax base upon which it can annually levy real estate taxes.
A municipality and a school district may agree to cooperate with
each other by using portions of new real estate tax increment to
encourage economic development AND reimburse schools for
certain capital expenses incurred by the school district.
Again, after the new school funding bill was approved last year,
some Legislators believe the amount of TIF reimbursement a school
district receives should also be subtracted from any additional
funding it would otherwise be eligible to receive.
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The overall cost to the State of Illinois in Tax Year 2015 Payable 2016 for the estimated $371.5 million of General State Aid Entitlements that can be
attributed to TIF EAV within school districts, equated to approximately 0.56% of the $66 billion of new private investment occurring within the State’s
TIF District Redevelopment Project Areas. Is ½ of 1 percent of $66 billion of new development too much for the State to support economic development?
WHAT IS THE COST TO THE STATE OF ILLINOIS?
IS THIS AN ESTIMATE? YES. BUT IT’S PRETTY DARN CLOSE.
2015 Payable 2016 TIF EAV(1)
2015 TIF R.E. Tax Increment
Total Estimated Investment(2)
Total Est. State Aid Entitlement(3)
City of Chicago $6,649,457,359 $460,637,731 $43,294,753,864 $199,483,721Bal. of Cook County $2,066,604,970 $257,476,637 $11,819,855,890 $61,998,149
Collar Counties $967,795,232 $100,860,177 $2,903,385,696 $29,033,857
Downstate Counties $2,699,906,071 $266,795,468 $8,099,718,213 $80,997,182
TOTALS $12,383,763,632 $1,085,770,013 $66,117,713,663 $371,512,909
Total Estimated State Aid Entitlement as a Percentage of Total Estimated Investment: 0.56%Sources/Notes:(1) 2015 TIF EAV & Increment: http://tax.i l l inois.gov/AboutIdor/TaxStats/PropertyTaxStats/2015/ (Table 14A)(2) Cook County Clerk: Total Estimated Investment for Chicago and Balance of Cook County based on
breakdown of EAV data received from Cook County Clerk. Total Estimated Investment assumes that Total EAV (outside Cook County) = 33 1/3% of Market Value.(3) Estimated State Aid Entitlement: based on an average of 3% of the Total TIF EAV.
TOTAL ESTIMATED TIF INVESTMENT AND STATE OF ILLINOIS CONTRIBUTIONS
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A cooperative effort between
municipalities and public school
districts to use Tax Increment Financing
is not only possible, it actually works.
TIFINTERGOVERNMENTAL
AGREEMENTS & SCHOOLS
Lasalle, IL
Oglesby, IL
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Myths and misconceptions have persisted over the years to suggest it is somehow inappropriate for municipalities to work
cooperatively with school districts and other units of local government. Those opinions are based on poor information.
IT’S OKAY TO WORK WITH OTHER TAXING DISTRICTS
NO, REALLY. IT’S OKAY.
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LEGALAUTHORITYEXISTS
REIMBURSECAPITAL COSTSSection 5/11-74.4-3(q) of the TIF Act
defines “redevelopment project costs” to
mean and include the sum total of all
reasonable or necessary costs incurred or
estimated to be incurred, and any such
costs incidental to a redevelopment plan
and a redevelopment project.
Section 5/11-74.4-3(q)(7) states that “to
the extent the municipality by written
agreement accepts and approves the
same, all or a portion of a taxing district’s
capital costs resulting from the
redevelopment project necessarily
incurred or to be incurred within a taxing
district in furtherance of the objectives of
the redevelopment plan and project.”
MAKE & ENTER INTO ALL CONTRACTSWITH OVERLAPPING TAXING DISTRICTSSection 5/11-74.4-4(b) of the TIF Act provides authority
to municipalities to enter into all contracts with property
owners, developers, tenants, overlapping taxing bodies,
and others necessary or incidental to the
implementation and furtherance of its redevelopment
plan and project.
INTERGOVERNMENTALCOOPERATION ACTThe 1970 Illinois Constitution, Article VII, Section 10, and
the Illinois Compiled Statutes, Ch. 5 Section 220/1 et.
seq. provide legal authority for intergovernmental
privileges and authority to be enjoyed jointly by school
districts and municipalities as well as other public bodies
politic
EXPENSES FORECONOMIC DEVELOPMENT ACTSection 5/8-1-2.5 of the Municipal Code allows a
municipality to appropriate and expend funds for
economic development purposes, including,
without limitation for commercial enterprises that
are deemed necessary or desirable for the
promotion of economic development within the
community.
NOTE: A HOME RULE CITY HAS ADDITIONAL AUTHORITY IN THESE AREAS.22
Design TIF Plan with Cooperative OptionsIncorporate a thoughtful impact analysis and anticipate
some future assistance to other taxing bodies in the TIF
Redevelopment Plan and Projects.
Count New Students from TIF ProjectsThe TIF Act has a default method for assisting school
districts by reimbursing a portion of TIF increment for a
resulting “net increase” in student enrollment.
Annual Capital Cost ReimbursementIt may be possible to design a method based on an
annual flat percentage or formula amount to reimburse
capital costs. Some capital cost reimbursements are
“triggered” by certain events, such as the occurrence of
new residential development.
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In-Kind AssistanceIf located within the TIF District Redevelopment Project
Area, municipality could repair or construct public
infrastructure (e.g., roads, sidewalks, storm drains, etc.).
Return TIF Increment per Bond Referendum RateMunicipality could agree to return TIF increment derived
from a tax rate resulting from a taxing body’s bond
referendum. Taxing body should then adjust annual levy.
Surplus FundsMunicipalities may declare TIF surplus funds if unobligated TIF funds
exist or such surplus was anticipated when the TIF Redevelopment Plan
was designed. Such TIF funds are returned to County Collector who
then re-distributes the money to taxing bodies based on current real
estate tax rates.
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Periodic, Lump-Sum ReimbursementMunicipalities may agree to periodic reimbursement of
TIF funds for specific capital projects, such as building
improvements or repairs, purchase of equipment, or
other capital expenditures.
4 Payment in Lieu of TaxesPayment of estimated tax revenues from property in a TIF Area that
that is derived from property acquired by the municipality which, per
the TIF Plan, is to be used for private use. Such funds are paid to
County Collector who then distributes the money to taxing bodies.
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Numerous approaches are available for using TIF real estate tax increment to encourage cooperation among local stakeholders.
WAYS TO COOPERATE WITH TAXING BODIES
NOTE: WRITTEN AGREEMENTS ARE NECESSARY IN EACH CASE.
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EACH AGREEMENT IS THE RESULT OF A NEGOTIATION
For Tax Year 2016 Payable 2017,
Jacob & Klein, Ltd. and The Economic Development Group, Ltd.
assisted over 50 municipalities to administer reimbursements
totaling $14.3 million of real estate tax increment relating to
over 240 Intergovernmental Agreements.
REIMBURSEMENTOF CAPITAL COSTS
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Here are some important concepts to keep in mind as you use TIF and negotiate deals in the future.
LESSONS LEARNED
WE’RE JUST SAYIN’. . .
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Community leaders need to be on the same
page for understanding why economic
development is needed and how Tax
Increment Financing can be appropriately
applied.
CHANGEBEGINSFROM WITHIN
LEADERSHIP IS KEY
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Do not be too quick to dismiss an idea, because it hasn’t been done before, or the resources for implementing a new
approach is not readily apparent. Sometimes the best ideas come from the most unlikely sources.
BE BOLD. BE INNOVATIVE.
PUT ON THE “THINKING CAPS”
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Embrace innovation, but seek to reduce the
risk to the municipality and the taxpayer at all
times. It is good for Private Investors to earn
a profit, but do the math and understand
what the community is getting out of the
deal.
MANAGERISK
LIMIT EXPOSURE TO THE TAXPAYERAND LET THE PRIVATE SECTORCARRY THE RISK.
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Are the Projects undertaken within the TIF District creating jobs, increasing revenue and achieving the results the community is seeking?
MEASURE THE RESULTS
NO TWO TIF REDEVELOPMENT PLANS ARE ALIKE. NO TWO TIF REDEVELOPMENT PROJECTS ARE THE SAME.
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Rural community economic development requires imaginative,
innovative solutions, but municipalities using such approaches
must always follow the law of the land and be as transparent as
possible.
FOLLOW THE LAW… ALWAYS
THE TIF ACT ANDOTHER APPLICABLE LAWS,RULES, POLICIES AND REGULATIONSMUST BE RESPECTED AT ALL TIMES.
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www.tifillinois.com
1701 Clearwater AvenueBloomington, IL 61704Ph: (309) 664-7777
925 Shooting Park Rd., Suite APeru, IL 61354Ph: (815) 223-7550
Offices
About Jacob & Klein, Ltd. and The Economic Development Group, Ltd.
In tandem with The Economic Development Group, Ltd. (EDG), Jacob & Klein, Ltd. (J&K) hasadvised municipalities and developers on matters relating to economic developmentthroughout Illinois since 1979. Our group specializes in the creation and annualadministration of Tax Increment Financing Districts. As a Registered Municipal Advisor withthe Securities Exchange Commission and the Municipal Securities Rulemaking Board, EDGalso assists municipalities with matters relating to the issuance of municipal bonds, notesand other municipal financing products.
J&K/EDG comprises the largest economic development group in Illinois. They are the onlyeconomic development group that includes experts in law and development. To date,J&K/EDG has established over 220 TIF Districts in more than 80 Illinois cities, towns andvillages -- nearly one-third of the TIF Districts in downstate Illinois. Our group has assisted inthe development of private projects valued at more than $2.5 billion which have createdand preserved more than 4,000 jobs. J&K/EDG administers more than 700Intergovernmental and Redevelopment Agreements each year and directs municipalities onthe statutorily compliant use of more than $57 million of new real estate tax incrementannually.
These firms maintain full-service offices in Bloomington, Illinois and Peru, Illinois. J&K/EDGprincipals and staff consist of: three attorneys; three professional consultants who possessmaster-level degrees in economic development, business, finance and mathematics; andfour support staff with backgrounds in accountancy, business information systems andadministrative support services. For more information about Jacob & Klein, Ltd. and TheEconomic Development Group, Ltd., please visit www.tifillinois.com.
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THANK YOU
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