The Illinois Legislature is currently considering an Amendment to the Tax Increment Allocation Redevelopment Act that would change the way the total initial equalized assessed value (EAV) of a Redevelopment Project Area is calculated.  Currently, the total initial EAV is established after a Redevelopment Project Area is created and once that total initial EAV is certified, it remains the same throughout the life of the Redevelopment Project Area.

The proposed Amendment, which would go into effect on January 1, 2011 if adopted, is sponsored by State Senators Terry Link (30^th District) and Christine Radogno (41^st District).  It would require an annual increase in the initial EAV of a Redevelopment Project Area over the initial EAV of the previous year by the annual rate of increase of the Consumer Price Index.  The Amendment was introduced on February 9, 2010 and it has already been approved by the Revenue Committee.  If adopted, it would mean that each underlying taxing district in a Redevelopment Project Area could see an annual increase in the amount of property taxes received during the term of the TIF.

Not all TIF projects in Chicago receive all of their assistance in the form of incremental real estate taxes.  Certain projects receive a portion of their incentives in the forms of low-cost land or loans with favorable interest rates.

For example, the City has conveyed property to private developers at a nominal price for the development of affordable housing projects and mixed-use projects that include an affordable housing component.  Although most of the agreements for these projects contain covenants that all of the dwelling units must be affordable to households with incomes below certain levels, some projects that include both affordable and market-rate dwelling units have received this type of assistance. 

The City may also elect to lend money to affordable housing developers at favorable or even zero interest rates in order to incentivize affordable housing development.

Have a center built in the 60’s and until two years ago the only game in town.  Lost one anchor last year and the other is threatening not to renew unless we make a lot of concessions.  Trouble is the revenues don’t justify a lot of investment at this time.

How is your relationship with the City? Have you looked into  some kind of public/private partnership? Like TIF or sales tax rebates? Sounds like you would be  doing a redevelopment of the existing center and a lot of the costs might be covered by TIF or sales tax sharing. Is there any reason the City might want to help out on this?

Well, yes there is.  Two years ago a brand new center came on line in a neighboring town and that center is stealing our sales.

That new center is also taking sales tax revenue away from the City and that’s a good reason to approach the City on helping out with your redevelopment project. Economic development is a good thing. If the City can help you revitalize your center and the locals return to shopping there the City wins and so do you.

I didn’t think you could get TIF for retail …What kind of costs do they pay for?

Well, you definitely can, what kind of costs do you think you will have?

We need to demolish some in-line so that we can expand the remaining anchor by tearing down a wall and pushing into the parking lot…so we have demo and re-surfacing and re-lighting the parking lot…all new hvac on the anchor…they want some green system to reduce costs and they have some national program to “green “ their stores. We have to do some new curb cuts and some work on the intersection, add a signal and turn lane, due to the anchor expanding into the parking lot. We want to clean up the interior mall common areas.

Well it sounds like a lot of those renovation costs may be eligible for redevelopment incentives but usually the City will say, “you front the costs and we will reimburse you from the new sales and real estate taxes the center generates.” Generally, especially in this economic climate, they won’t do a bond deal where they sell bonds to pay you up-front for the renovation. Still, it sounds like you might be able to work with the City and more costs will be covered because you are renovating an existing center rather than coming out of the ground with a new one.

How long does it take to arrange something like this?

Depends. For TIF, three to six months depending on the City and the political climate and you have to meet certain qualifying criteria under the statute but your center is more than 35 years old so that shouldn’t be a problem and there is a political process…public hearings.   For sales tax it is a much faster process.

Traditional candidates for TIF assistance include residential, commercial and industrial projects, however the City has also pledged TIF dollars to construct educational facilities and redevelop cultural institutions. For example, the City and the Institute of Puerto Rican Arts and Culture entered into a redevelopment agreement in which the City agreed to pledge $1 million to the Institute for building renovation and gallery construction. The TIF dollars accounted for approximately 18% of the total project budget. 

The City also pledges TIF dollars to projects developed by local government entities such as the Chicago Park District, the Community College District, the Chicago Board of Education and the Chicago Transit Authority. The City and the Chicago Board of Education entered into an agreement to construct Westinghouse High School and pledged almost $54 million in TIF assistance to the project, or almost 90% of the total budget.

Jackson County, Missouri sued the Kansas City Tax Increment Financing Commission and the Mayor of Kansas City, alleging that the Commission broke a 1997 state law requiring Kansas City to seat an 11-member TIF Commission.  Kansas City never codified the law and while the Commission does have 11 members, only the 6 mayoral appointees have full voting rights.  The lawsuit alleges that the TIF Commission wrongly excludes Jackson County and certain other taxing jurisdictions from key votes and demands that each TIF Commission Member receive full voting rights on all TIF projects and amendments.

The Kansas City Tax Increment Financing Commission is an advisory body to the Kansas City Council and makes recommendations about TIF plans and projects.  The lawsuit requested a temporary restraining order against the TIF Commission, preventing the TIF Commission from holding meetings, hearings, voting on projects, or diverting any money from Jackson County into TIF projects, however Jackson County has withdrawn that request.  

In response to the lawsuit, on January 29, 2010 the Kansas City Council adopted an Ordinance giving all 11 members of the Kansas City TIF Commission full voting rights.   As a result, it is anticipated that Jackson County will withdraw the lawsuit.

Language in proposed Illinois HB0063 and SB0043 would amend the Prevailing Wage Act to provide that “public works” includes economic development project areas as defined in the Economic Development Project Area Tax Increment Allocation Act of 1995.  While the intent of this legislation was to require contractors and subcontractors to pay prevailing wages in all TIF Areas, the proposed legislation inadvertently defines economic development project areas in a limited way such that the prevailing wage requirements would only apply to closed military installations.