Polsky & Associates recently completed a TIF Study in which we examined the growth of equalized assessed value (EAV) in the City of Chicago’s TIF Districts as one measure of the success of the City’s TIF program. The analysis focused both on EAV growth from TIF District creation as well as on EAV growth between 2004 and 2009.  Results of the TIF Study include the following:

• Since 1984, TIF Districts in the Central and Southern Regions of the City have experienced the highest annual EAV growth, with annualized EAV growth rates averaging higher than 16%.  TIF Districts in the Southwest Region experienced the lowest annual EAV growth, with average annualized EAV growth rates of approximately 6%.

• Between 2004 and 2009, the average annual EAV growth rate in all of the City’s TIF Districts was approximately 14%, or about 150% higher than the City’s average annual EAV growth rate of approximately 9%.

• The average annual EAV growth rate for TIF Districts in all but one region of the City exceeded the City’s annual EAV growth rate between 2004 and 2009.

The Polsky & Associates Study analyzes data within the city’s seven regions and citywide based on publicly available information from the City and from Cook County.  The Study examines TIF performance both at the Citywide level and within the City’s seven regions.

The complete TIF Study is available on the Polsky & Associates website at:

http://www.polskylaw.com/2011chicagotifstudy/

Chicago’s newly elected Mayor Rahm Emanuel released his Transition Plan on May 10, 2011.  Among the 55 initiatives included in his Transition Plan is an initiative focusing on Tax Increment Financing (TIF).  The goal of the initiative is to reform Chicago’s TIF program by creating an expert panel which will develop investment policies for TIF funds and performance goals for TIF districts and TIF projects. In addition, the expert panel will work on improving TIF transparency by developing standards for annual TIF reports and audits.

According to the Transition Plan, the TIF panel will complete the development of investment guidelines and other standards within 100 days of Mayor Emanuel’s inauguration.  After the first 100 days, the TIF panel will assess the performance of existing TIF districts in Chicago and make further recommendations to the City.

The Transition Plan also notes that the City’s FY 2012 City budget will incorporate procedural changes related to TIF.  Additionally, financial and spending information on the City’s TIF districts will be posted on the City’s website in an easy to understand format.

North Dakota Governor Jack Dalrymple signed Senate Bill 2050 into law on April 26, 2011, establishing a time limit for the term of both TIF districts and TIF district extensions. Prior to this amendment, no time limits were imposed on TIF Districts and they could remain in place until any bonds, notes or other obligations to be repaid with TIF revenue had been fully retired.  The amended TIF law limits the term of a TIF district to 25 years.  For TIF districts established prior to July 1, 2011, the term can be extended for an additional fifteen years, or as many years as necessary to retire all outstanding debt for projects in the district.  For TIF districts established after July 1, 2011, the term can only be extended for an additional five years.  For all TIF Districts, prior to the approval of an extension, a new base year must be established.  The base year must not be any earlier than 15 years prior to the year the extension is approved.

In addition to establishing a term for TIF Districts, SB2050 also amends North Dakota’s TIF law by preventing agricultural property from being included in a blighted area unless the property has been located within a municipality for at least ten years.

Yesterday, the Chicago City Council approved an Ordinance amending the Vacant Building TIF Purchase and Rehabilitation Program. Not only does the program include provisions to assist first-time homebuyers who wish to purchase and rehabilitate homes in TIF areas but it now also allows developers to receive TIF funds to purchase and rehabilitate multi-family residential properties to be used for affordable rental housing.

The original Vacant Building TIF Purchase and Rehabilitation Program was designed to provide TIF funds to first-time homebuyers with household incomes of no more than 100% of the Primary Metropolitan Statistical Area median income (approximately $75,000 for a household of 4) to purchase and substantially rehabilitate eligible residential properties located in TIF districts.  Under the program, eligible homebuyers could receive TIF funds in amounts up to 25% of the total cost to purchase and substantially rehabilitate the residence.  A homebuyer receiving assistance would be required to use the home as a primary residence for a period of time determined by the amount of assistance received.

Yesterday’s Ordinance also allows developers to receive TIF funds to purchase and substantially rehabilitate eligible multi-family residential buildings.  In order for a multi-family residential building to be eligible, the building must include six or more residential units and must be vacant, in need of substantial rehabilitation and be located in one of the City’s approximately 150 TIF Districts.  Eligible projects could receive up to 50% of the total cost to purchase and substantially rehabilitate the residential building.  The amount of assistance would be based on the percentage of rental units affordable to households earning no more than 50% of the Primary Metropolitan Statistical Area median income (approximately $37,500 for a household of 4).  A regulatory agreement would be recorded against the property to ensure that those units would remain affordable for a minimum of 15 years.

The amended Vacant Building TIF Purchase and Rehabilitation Program may be a nod to proponents of the failed Sweet Home Chicago Ordinance, which would have required a 20% set-aside of all TIF funds generated in the City to be used for affordable housing projects.  Illinois TIF law does already include a provision that permits TIF funds to be used to pay for up to 50% of the costs of constructing or rehabilitating affordable housing units, but this amended City Ordinance may provide a broader policy framework to help such rehabilitation.