Tax Institute Policy Review
October Edition 2008
IDOR TIF Study
In August of 2007, the Illinois General Assembly passed P.A. 95-227, which mandated that the Illinois Department of Revenue conduct a study “to determine the feasibility for each county to include, on the property tax bills for each taxpayer in that county, information concerning any tax increment financing project that affects the taxpayer.” Taxpayer education and transparency of economic impact were the stated primary goals of the legislature in mandating the study of this issue.
In August of 2008, the IDOR released it’s study and it’s conclusion as to whether it is feasible to include all of the information requested by the Illinois General Assembly on each affected taxpayer’s property tax bill. The short answer is “no”. This is not surprising since county property tax bills already contain as much information as the county can fit on the currently formatted bill.
However, both the Illinois Department of Revenue and most counties that participated in the study agreed that it was possible and more cost effective to simply put a website address on each tax bill. The website could be maintained by the appropriate state agency (although the agency was not identified, it may be a combination of the IDOR and DCEO) and offer taxpayers the information requested by the Illinois General Assembly. New legislation would be necessary requiring counties to submit all relevant information to the agency maintaining the website and to print the website address on each taxpayer’s tax bill. This would meet the GA’s goal of offering taxpayers a greater understanding of and transparency in the operation of TIFs within their county.
Click here to access the complete IDOR TIF Study:
P.A. 95-227
Understanding Illinois TIFs
Tax increment financing districts, commonly referred to as TIFs, have been the subject of scrutiny and debate since 1977, when the first Illinois TIF legislation was passed. Recently, the Illinois General Assembly has revisited the issue of TIFs and passed legislation mandating that the Illinois Department of Revenue study the feasibility of including TIF information on taxpayer’s property tax bills, a proposal that was determined to be too costly for the counties to implement. In lieu of printing TIF information directly on the tax bills, the Department has recommended that the State of Illinois maintain a website offering access to the TIF information, with the website address being included on the county tax bill.
The “Tax Increment Allocation Redevelopment Act” was designed to stimulate economic development in blighted or deteriorated urban areas. The mechanics of TIF allocation are fairly basic: an area is designated as a TIF district for a statutory period of time; during that time period, the property tax valuation is essentially frozen at the pre-redevelopment valuation; after redevelopment, any new property taxes collected as a result of an increase in the equalized assessed value (EAV) are used to cover the costs of redevelopment and further improve the TIF district.
Initially, the TIF program was not widely used by local governments and was deemed a failure. Prior to 1985, only 26 TIFs were created. The Illinois legislature responded by adding sales tax TIFs, offering to rebate a percentage of the State’s portion of the sales tax growth generated within the TIF district for any existing TIF or new TIF created before the 1987 deadline. With this additional incentive in place, TIFs quickly became a nearly unchecked source of local government funding and resulted in significant abuse of the TIF program with funding being used for projects beyond the initial scope of the legislation.
Today, approximately 389 municipalities (located in 77 counties) have created almost 1000 TIF districts. Although the sales tax TIF program is being phased out due to continued state budget shortfalls, the success of the TIF program as a whole can no longer be questioned. For many communities it is the first and only choice for general economic development and redevelopment.
Data courtesy of the Illinois Tax Increment Association
Detailed analysis of Illinois' TIFs
Other Economic Development Incentives (Or TIF Jr.)
Just as the State of Illinois is phasing out its use of sales tax TIF rebates, municipalities and counties are becoming increasingly aggressive in creating their own sales tax rebates to attract developers and retail businesses to their communities. In September, in an effort to mitigate the negative impact of escalating county taxes, Cook County proposed an ordinance creating a sales tax rebate within the county. If the ordinance is adopted, the county will “match sales tax rebates offered by the municipalities up to a cap of 50% of the County sales tax under certain conditions”. This rebate program is limited to businesses located outside TIF districts only.
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