Archive for June, 2011

IL House Amends Senate Bill 540 by Adding TIF Related Provisions

Tuesday, June 14th, 2011

On May 31st, 2011, the Illinois House of Representatives adopted House Amendment 003 to Senate Bill 540, significantly broadening the scope of SB 540.  When it was originally adopted by the Senate on April 15th, 2011, SB 540 was designed to amend the State Comptroller Act and several other sections of the Illinois Municipal Code.  SB 540 would require the State Comptroller to establish a training program for Tax Increment Finance administrators, and it would require a municipality to electronically submit financial statements and other related documents for each redevelopment project area to the State Comptroller and to all overlapping taxing districts, among other requirements.

House Amendment 003 would add additional provisions related to the Tax Increment Allocation Redevelopment Act, the Property Tax Code and the School Code.  Amended SB 540 may be an alternative to several other bills currently being debated in the legislature, many of which would impose more rigid restrictions on the use of TIF, including the following:

  • House Bill 1207/Senate Bill 1626 which would require that the portion of taxes levied by a school district in a redevelopment project area established by the City of Chicago be allocated to the school district rather than deposited in the Special Tax Allocation Fund.
  • House Bill 1575 which proposes that any taxing district has the right to opt out of a redevelopment project area, meaning that the all taxes would be paid to that taxing district and would not be deposited in the Special Tax Allocation Fund. 
  • House Bill 1208/Senate Bill 1620 which would require that any TIF revenues not specifically allocated to defined project costs within a redevelopment project area at the end of a municipality’s fiscal year be considered “surplus funds.” 

House Amendment 003 includes the following provisions, among others:

  • No redevelopment plan may be approved that allocates more than 25% of the estimated redevelopment costs to residential projects unless the residential projects include housing units affordable to low-income and very low-income households.
  •  TIF surplus funds would include both accumulated TIF funds not designated for a specific redevelopment project or use and designated TIF funds not used within 10 years.
  • If a redevelopment agreement or other written agreement contains provisions regarding job creation or retention, a detailed list and description of the jobs created or retained must be submitted to the municipality.

Although House Amendment 003 was adopted by the House, the Senate Local Government Committee did not take action before the Legislative Session was adjourned on May 31, 2011.  It is possible that this bill will reappear either during the Fall Veto Session or during the regular Legislative Session that begins in January 2012.

Voter Approval Requirements for California Infrastructure Financing Districts May Be Repealed

Friday, June 3rd, 2011

On May 16, 2011, the California Senate approved SB 214, repealing several voter approval requirements for Infrastructure Financing Districts (IFDs). Under current California law, both cities and counties can form IFDs and use property tax increment generated within the IFDs to finance, for example, the purchase, construction or rehabilitation of public capital facilities with communitywide significance, such as highways, interchanges, sewage treatment facilities, child care facilities, libraries, parks, recreational facilities and open space.  However, voter approvals are required at all stages of the process:

  • Two-thirds of voters must approve the formation of an IFD;
  • Two-thirds of voters must approve the issuance of TIF bonds; and
  • A majority of voters must approve the principal amount of the proposed bond issuance, the maximum interest rate and the distribution of bond proceeds.

Typically, TIF projects in California are implemented by Redevelopment Agencies and voter approvals are not required.  However, since the California Governor has proposed to eliminate Redevelopment Agencies, IFD projects could be a potential alternative method to use TIF for redevelopment in California.  If SB 214 becomes law and these voter approval requirements are repealed, it may be easier for local governments to use TIF for IFD projects.