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TIF Overview What is Tax Increment Financing (TIF)? When is it the Right Tool?

Implementing and Understanding Tax Increment Financing (TIF) Districts Prepared for the Village of Alsip May, 2017. TIF Overview What is Tax Increment Financing (TIF)? When is it the Right Tool? How is it Implemented? How is the TIF Financed?.

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TIF Overview What is Tax Increment Financing (TIF)? When is it the Right Tool?

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  1. ImplementingandUnderstanding Tax Increment Financing (TIF) DistrictsPrepared for the Village of AlsipMay, 2017

  2. TIF Overview • What is Tax Increment Financing (TIF)? • When is it the Right Tool? • How is it Implemented? • How is the TIF Financed?

  3. TIF is a municipal financial incentive tool created by the Illinois State Legislature in 1978 to assist communities implement sound economic development. TIF can be used to acquire property and prepare site. TIF can provide infrastructure and other public improvements. TIF can pay for consultant, engineering, attorney and other applicable soft costs. TIF can pay for other eligible costs pursuant to state law.

  4. TIF As Part of Local Planning

  5. WHEN IS IT THE RIGHT TOOL? Will the area benefit from a TIF designation? What is the area’s current condition or past history? • To Induce Industrial Projects • To Induce Commercial Projects including Downtown areas • To Induce Residential and Mixed Use Projects

  6. Determine the Area to be Studied Adopt a Feasibility Resolution Qualify the Redevelopment Area Conservation Area Blighted Improved / Vacant Industrial Jobs Recover Area (IJRL) HOW IS TIF IMPLEMENTED?

  7. “PAY AS YOU GO” Developer Note Redevelopment Agreement Maximum TIF term – 23 years w/out extension Financing obligations – 20 years “UP FRONT” GO TIF Bond Taxable Revenue Bond HOW IS THE TIF FUNDED

  8. TIF Basics Review of TIF Financing TIF involves splitting property tax revenue generated from properties within the TIF District into two components or “buckets”: Bucket for Incremental Revenues – For Redevelopment within TIF Bucket for Base Revenues – For All Local Governments

  9. Other Review Guidelines: there are grey areas or costs subject to interpretation. Undertake budget review as early as possible – avoid surprises – especially if bonds are involved. Try to anticipate procedures for vetting the costs – what will developers need to provide in order to document costs and will the documentation be understandable by staff (avoid the box of paid invoice submissions) . Identify more costs than needed – in the event there are changes.

  10. First Steps -TIF Eligible Costs • Review detailed project budget components: both private and public costs. • Important to break out private site preparation costs: excavation, grading, and related costs from other vertical hard construction costs. • Review detailed soft cost components as well. • Identify any local policy requirements (e.g., is land acquisition acceptable or are certain infrastructure costs expected to be paid by the developer not TIF?)

  11. TIF Eligible Cost Review • If bonds are issued will need bond counsel review of eligible costs – from both TIF State law compliance requirements and federal regulations – if the bonds or notes are tax exempt. • Involvement of local counsel as part of redevelopment agreement preparation. • Are there any local TIF application requirements or policies that limit costs – in addition to the TIF Act? • Due diligence – retail relocation

  12. TIF Mechanics Review of TIF Financing - Ideally, a successful TIF produces positive incremental revenue over time

  13. Background Review of TIF Financing - But, a successful TIF is not guaranteed ASSESSED VALUE YEAR

  14. General Assumptions

  15. Property Tax Assumptions

  16. Policy Considerations • Is there a “but for”? • What effect will the TIF have on other taxing districts? • What type of developments should be funded? • What resources are available to the municipality? • How does the estimate of incremental taxes compare to the costs to develop?

  17. Timing Considerations • Under the current TIF Act, the entire TIF designation process can take between 4 to 6 months. • There are numerous public notices and meetings/hearings that must either be published in local newspapers, sent by regular mail, or sent by certified mail. • Local taxing districts are invited to a Joint Review board to act in an advisory capacity early in the process.

  18. Timing Consideration Cont’d. Typical Steps required as part of the TIF designation process: - Public Meeting to review TIF concept - Public Hearing Ordinance/Resolution Approval to set Public Hearing - Joint Review Board meeting ( taxing districts and village )

  19. Timing Consideration Cont’d. Notice of Public Hearing sent to taxpayers in TIF, and to interested parties; and 2 newspaper notices - Public Hearing to review TIF plan • TIF ordinances may be introduced 14 to 90 days after the Public Hearing - If the TIF ordinances are approved, they are then filed with the County Clerk The timetable occurs over a 120 to 180 day period

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