Tax Increment Finance (TIF) Districts
Tax Increment Financing (TIF) is a valuable economic development tool that helps local governments support, encourage, and accelerate redevelopment and public improvement projects in a designated area of the community which can be described as run-down or blighted prior to redevelopment.
TIF funds help municipalities to make needed improvements, like new roads and sewers, or provide incentives to attract desired private development and new businesses. TIF designation also helps existing businesses expand or improve their properties that might otherwise find more attractive options elsewhere. TIF helps to overcome the extraordinary costs that often prevent development and private investment from occurring, including property that is an advanced state of disrepair and/or has become obsolete and characterized by unoccupied or underutilized buildings which adversely influence the area due to the extent and/or duration of the vacancies.
Property values in a run-down or blighted area will continue to decline.
Development and redevelopment in these areas may not be economically feasible. Businesses do not sink capital into decaying areas, and most local governments cannot afford the needed costly improvements without raising taxes. But in a TIF district, dollars for improvements are generated by businesses—new and old—attracted by the TIF benefits. Specifically, money for infrastructure improvements and other incentives comes from the growth in property tax revenues—the tax increment.
In a TIF District, the current equalized assessed valuation (EAV) of taxable real estate within the designated TIF district is “frozen” at the level the date the TIF District is adopted. This is referred to as the base EAV. For a period of up to 23 years, as development occurs and property values increase in the TIF District, the new value that is created above the base EAV is called the increment (the difference between the current total value and the base value). The increment is collected into a special fund that the Village can then invest back into the District under specific rules established by the State of Illinois.
Establishment of a TIF District does not reduce property tax revenues available to the overlapping taxing bodies. These taxing bodies continue to collect the property taxes at the base value throughout the life of the TIF District. Upon the expiration of the TIF District, property taxes continue to be distributed to the school districts, county, community college, and all other affected taxing districts in the same manner as if the TIF District did not exist.
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There are some areas where traditional market mechanics may not support redevelopment. TIF provides local governments with a tool to overcome economic barriers in these specific areas and partner with developers and investors to make improvements. State law has specific rules for how TIF increment may be spent, including pursuant to public private partnerships with a business or developer. An example of this would be if an investor wanted to rehabilitate a former industrial building into a new high-end office space, but the site had environmental contamination from its previous use. The high cost of the environmental clean-up may be enough for the project to be financially infeasible. Recognizing that the proposed concept would be beneficial to the community and long-term fiscal health of all the local taxing bodies, the Village could use TIF increment to cover the costs of the environmental remediation, thus moving forward a project that would not have otherwise occurred.
TIF can create money for schools. Schools continue to receive all the tax revenue they were entitled to before the creation of the TIF District. Also, improving areas of the Village that are in significant decline will increase the tax base in the long-run. The property tax revenue generated from private development attracted by a TIF designation is truly “new” money. Without TIF, development would not occur and the tax increment would not be produced.
Some critics of TIF argue that school districts are entitled to immediately receive a percentage of the TIF increment. However, it is the TIF increment that pays for the improvements that attract private investment and stimulates economic growth. If the increment cannot be used for financing improvements and incentives, private investment and economic development will not occur, and no increment will be made available to any taxing bodies. With redevelopment, property values will rise in properties surrounding the District, providing added revenue to the school district and preventing further deterioration of the tax base.
When the TIF District expires, the tax increment is returned to the tax rolls and available to schools and other local taxing bodies—even in areas where property tax “caps” have been adopted.
Illinois TIF law specifies a number of requirements that must be satisfied for an area to qualify as a TIF District, beginning with identifying the District and the physical and economic deficiencies that need to be cured. Then municipal officials and a Joint Review Board made up of representatives from local taxing bodies must review a plan for the redevelopment of the proposed TIF District. A public hearing is held where residents and other interested parties may express their thoughts on the proposed TIF District. The proposal must then be approved by the municipal governing board. Finally, the Village President will sign the ordinances creating the TIF District into law. No State or federal approval is required.
A Redevelopment Plan is an assessment of an area in need of economic assistance. The Plan demonstrates why the area needs to be redeveloped and how the municipality plans to revitalize the area.
Illinois TIF law requires review by the major overlapping local taxing bodies, through a Joint Review Board, and a public hearing on the Redevelopment Plan prior to TIF designation. The Plan must be made available for public review and inspection at least 45 days prior to the public hearing.
A Redevelopment Plan includes the following elements:
- A description of the boundaries of the district recommended for redevelopment
- Reasons for redevelopment of the area
- Documentation of how the area satisfies the “but for” requirement in order to qualify for TIF eligibility
- Redevelopment goals and objectives for the area
- An explanation of how the land in the proposed TIF district will be used
- A budget for the life of the TIF district, including the total TIF-eligible costs of the plan (it is important to note that the descriptions of TIF-eligible costs under the Illinois TIF Act are not a commitment by the Village to fund these expenses. Any Village funding will be established in a Redevelopment Economic Incentive Agreement adopted by the Village Board).
In the establishment and operation of a TIF District, there are many opportunities for public participation:
- Before a TIF District is created, the Redevelopment Plan must be available for public review at least 45 days prior to the public hearing. The public hearing offers the community an opportunity to raise questions and voice their concerns about the proposed redevelopment. A member from the community, representing the public, serves on the Joint Review Board along with representatives of the major taxing bodies overlapping the TIF.
- A registry of interested residents and organizations must be created for each TIF District, and notices of important TIF activities are sent to registrants.
- Village Board meetings afford the public another opportunity to on a proposed TIF District.
- The Joint Review Board meets annually.
- Extensive annual reports are required for each TIF District and are available to the public through the State Comptroller's web page.
Municipal officials control the allocation and disbursement of funds within a TIF District.
The creation or amendment of a TIF District does not mean that any debt will be created or incurred. The Village Board may decide to issue bonds and incur debt with the revenue source being the incremental property tax, or the Village Board may choose to just assist via funds which have already been built up in the restricted TIF District fund.
Yes, TIF Districts can be changed. In the case of minor changes to the Redevelopment Plan, notice must be given to all taxing bodies and to the public through publication in a newspaper of general circulation within the area prior to the TIF being established. However, major changes to the Redevelopment Plan adding parcels of property to the TIF district, changing land use, changing the nature of or extending the life of a TIF, increasing the number of low income households to be displaced, add new redevelopment costs to the budget, or increasing the budget by more than 5% after adjustments for inflation, require another public hearing, and all the opportunities for public input that were available during the initial establishment of the TIF District.
Local governments monitor the progress of the TIF district. By law, all the school districts and major taxing bodies meet with the TIF municipality annually to review the progress of each TIF. Under Illinois law, municipalities have an obligation to cooperate with other taxing bodies in monitoring TIFs. By law, the Joint Review Board must meet annually to review the effectiveness and status of the TIF district.
Illinois TIF law allows a TIF District to collect incremental property taxes for a maximum of 23 years. Any TIF District may be terminated earlier if all financial obligations are paid off and the Village Board votes to terminate the district. An extension is available if legislation is passed by the State Legislature.
If no redevelopment project has been initiated within a TIF District within seven years following district designation, the municipality must terminate the TIF District. Upon termination of a TIF District, the full tax base, including the incremental EAV which had been generated within the TIF District, becomes available to all taxing bodies for their use in the future.
NORTHBROOK TIF DISTRICTS
Proposed Northbrook Court II TIF (2023)
Brookfield Properties, the owner of Northbrook Court since 1995, presented a Conceptual Master Plan for the Redevelopment of Northbrook Court on April 25, 2023 and on May 16, 2023, Village of Northbrook and Brookfield Properties entered into a non-binding Pre-Development Agreement which noted the Developer’s request for public financing to include Tax Increment Financing for the complete 100 +/- acre Northbrook Court site to replace the existing Northbrook Court TIF.
A draft of the Northbrook Court TIF Redevelopment Plan and Qualifications Report can be found at www.northbrook.il.us/NC-TIF-Report. Copies of the report are available in the Village Clerk's Office and the Development and Planning Services Department at Village Hall.
- Joint Review Board Meeting – July 18, 2023 at 3:30 pm - Village Hall Terrace Room - Agenda
- Joint Review Board Meeting – July 18, 2023 - Minutes
Village Ordinances and Resolutions:
- Ord. No. 23-38: Establishing an Interested Parties Registry.
- Ord. No. 23-37: Convening the JRB and Setting the Time and Place for a Public Hearing.
Adopted Northbrook Court II TIF (2023)
On October 30, 2023, after terminating the existing Northbrook Court TIF designated in 2019, the Village Board of Trustees approved a new Northbrook Court II TIF. Prior to October 30th, the required Joint Review Board meeting was held on July 18, 2023 to discuss eligibility requirements and criteria. Subsequently, a required public hearing for establishing the new TIF was held on August 22, 2023.
In conjunction with approving a new Northbrook Court II TIF, the Village Board of Trustees also approved a new Business District for the same commercial parcels within the new TIF which will allow for an assessment of a separate 1% business district tax on retail sales. This business district tax will be above and beyond typical sales taxes assessed and be used towards the developer incentives.
The following documents pertaining to the creation of the new Northbrook Court II TIF can be viewed at the links below:
- Ord. No. 23-67: Approving a Tax Increment Financing Redevelopment Plan and Project for the Northbrook Court II Redevelopment Project Area.
- Ord. No. 23-68: Designating the Northbrook Court II Redevelopment Project Area Pursuant to the Tax Increment Allocation Redevelopment Area.
- Ord. No. 23-69: Adopting Tax Increment Allocation Financing for the Northbrook Court II Redevelopment Project Area.
- Ord. No. 23-72: Approving a Redevelopment & Economic Incentive Agreement by the Village and Developers and Providing for the Issuance of Notes to the Developer in Connection to these Incentives.
Northbrook Court TIF (2019)
In late 2018, following the September 25 preliminary review with the Board of Trustees, Northbrook Court approached the Village with a request to create a TIF District. On December 11, Village President Frum presented the proposed TIF District to the Board of Trustees.
A draft version of the Northbrook Court TIF Redevelopment Plan and Qualifications Report can be found here. Copies of the report are available in the Village Clerk's Office and the Development and Planning Services Department at Village Hall.
Following the approval of the development in late 2019, the developer for Northbrook Court underwent the building permit process and completed the demolition of the Macy's building. In early 2020, COVID-19 pandemic put a pause on the construction process for numerous sites, including Northbrook Court. During the pandemic the developer determined that a larger overall redevelopment project may be more optimal for the shopping center.
The developer requested several extensions of the originally approved plan while determining the most appropriate next steps. The developer concluded that a new overall redevelopment plan for the entire center would be the next step and on May 23, 2023 the Village of Northbrook approved Resolution No. 23-R-106 granting approval of a Pre-Development Agreement for an overall redevelopment plan.
This TIF District was terminated early by the Village Board of Trustees on October 30, 2023.
- Joint Review Board Meeting – October 21, 2021 at 4:00 pm - Village Hall Terrace Room - Agenda
- Joint Review Board Meeting - October 12, 2022 at 4:00 pm - Village Hall Terrace Room - Agenda
- Joint Review Board Meeting - October 24, 2023 at 4:00 pm - Village Hall Terrace Room - Agenda
Village Ordinances and Resolutions:
- Ord. No. 19-01: Establishing an Interested Parties Registry.
- Ord. No. 19-02: Convening the JRB and Setting the Time and Place for a Public Hearing.
- Ord. No. 23-64: Terminating the Designation of the Northbrook Court TIF Redevelopment Project Area and Dissolving the Northbrook Court Special Tax Allocation Fund.
Skokie/Dundee TIF (2006 & 2014)
The Skokie/Dundee TIF was initially established in 2006 and amended in 2014. The Village of Northbrook adopted Ordinance No. 2014-019 approving the current TIF plan for the northwest corner of Skokie Boulevard and Dundee Road. This TIF District includes the intersection of Skokie Boulevard and Dundee Road, as well as the commercial development anchored by the Mariano's grocery store.