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A TIF primer

Friday, Sep 21, 2018

* Daniel Kay Hertz and Amanda Kass

Tax increment financing–or TIF–made the news this summer with the release of a report by Cook County Clerk David Orr. The Tribune covered the report with the headline “Nearly a third of city property tax collections diverted into special taxing districts.”

But do TIF districts really “divert” hundreds of millions of property tax dollars that would otherwise go to the city or its schools? The short answer: mostly not. But to understand why not, and why “mostly,” you’ve got to understand how TIF and property taxes both work.

Go read the whole thing. It’s very good.

* If you don’t have time, here’s the short version…

- Posted by Rich Miller        

  1. - Da Big Bad Wolf - Friday, Sep 21, 18 @ 10:39 am:

    The city could just have raised property taxes anyway without the TIFs. TIFs can only be used in the district in which they are raised, taking away flexibility for the city.
    But what gave the TIFs notoriety was some instances where they were used for projects that didn’t benefit the city.

    For example,corporate welfare for projects that the private owners wouldn’t have trouble making a profit in anyway. Like a hotel next to a convention hall. Or a stadium for a nonprofit university that would never have to pay property taxes.

  2. - Last Bull Moose - Friday, Sep 21, 18 @ 10:56 am:

    Thanks for providing such a clear explanation. It should be part of high school civics.

    As this article makes clear, a property tax freeze is a spending freeze on local government. Spending levels are better controlled at the local level.

    In Naperville we get more value from our property taxes than from state sales taxes and income taxes. As you reported earlier, DuPage County only gets back some 54 cents on the dollar from the State.

  3. - BlueDogDem - Friday, Sep 21, 18 @ 10:57 am:

    TIF’s are not based on free market principles.

    An extremely insightful analysis was performed by the East-west gateway council a few years back on the effectiveness of TIF districts. A very good read.

  4. - anonymous - Friday, Sep 21, 18 @ 11:14 am:

    Don’t I pay more of the levy when the EAV is lowered, only including their base? Does all the increment taxes go where it is beneficial to my district?

  5. - JS Mill - Friday, Sep 21, 18 @ 11:51 am:

    =It should be part of high school civics.=

    With respect, and I completely get your point, but it shouldn’t be taught in high school civics. The list of mandates is a million miles long.

    Every adult should understand how a TIF works, and TIF’s should not be allowed. TIF’s allow municipalities to steal revenue from other taxing bodies (who are independently elected.

    I get what you are trying to say but high schools are not the answer for everything.

    = Spending levels are better controlled at the local level.

    In Naperville we get more value from our property taxes than from state sales taxes and income taxes.=

    This is 100% spot on. For the past 15 years the ILGA has skillfully passed the buck to local governments for expenses. The ILGA increased property tax exemptions for political gain only. These exemptions did not change revenue to the state and it increased pressure on schools and other local government. What is worse, the ILGA never even looked at the impact, which they even admitted.

    To date, I am only aware of one successful TIF district challenge in Illinois and that was in Burr Ridge. It was ridiculous to begin with.

    =Don’t I pay more of the levy when the EAV is lowered, only including their base? Does all the increment taxes go where it is beneficial to my district?=

    You need to do your own research. If you are in a PTELL county and your EAV drops your rate will increase because the tax extension is guaranteed. PTELL is commonly referred to as “tax caps” but it really does not do that. It was put in place to counter fast growing communities where property values are increasing rapidly and to try to slow tax increases even when the rate did not change, they never took into account a decrease in values.

    In a TIF, the municipality gets the increased tax revenue from the increased value of property in the TIF. Other taxing bodies are frozen out of the increase. The municipality is supposed to use that money for infrastructure improvements. Lawyers always get their cut off of the top, and you have to have a lawyer.

  6. - Last Bull Moose - Friday, Sep 21, 18 @ 4:01 pm:

    JS Mill. I get your point on unfunded mandates.
    I remember studying the Illinois Constitution back in 8th grade. Is that still required? I thought how taxes work could be added to the teaching. I don’t remember that as part of the course.

Sorry, comments for this post are now closed.

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