Over the course of 4 blog posts, we will describe research that we conducted on the growth in Equalized Assessed Value (EAV) in 5 of the City of Chicago’s Tax Increment Finance (TIF) Districts that terminated at or close to the end of their statutory lives of 23 years.  EAV is equal to the assessed value of a property multiplied by the State certified equalization factor.  In Illinois, TIF Districts are created to encourage development in areas where development would not otherwise occur.

A TIF District’s base EAV is determined when the District is created.  Taxes generated by the base EAV are paid to the overlapping taxing bodies during the life of the TIF District as if the TIF District did not exist.  Taxes generated by the EAV growth above the base – the tax increment generated by new development in the District – are paid into a special TIF District fund to finance certain improvements related to development within that District.

We compiled annual total EAV data for each of the 5 following TIF Districts:

1. Central Loop
2. Chatham Ridge
3. Chinatown Basin
4. Ryan/Garfield
5. West Ridge-Peterson

In addition to comparing these TIF Districts to each other, we wanted to compare EAV growth within these TIF Districts to EAV growth outside of them.  To do that, we calculated EAV growth for various townships in Chicago, all of which contained at least one of the TIF Districts that we examined.  Townships are local governments that are sub-units of the County.  Within Cook County, townships are essentially geographic designations. We included the following townships in our analysis:

1. Central (includes Central Loop and Chinatown Basin TIF Districts)
2. Lake (includes Chatham Ridge and Ryan/Garfield TIF Districts)
3. Lake View (includes West Ridge-Peterson TIF District)

Our township dataset consisted of more than 200,000 parcels.  Because our goal was to determine the natural EAV growth within the townships only, we limited our township dataset to parcels that were outside of any special taxing districts throughout the analysis period.  Ultimately, because of research limitations related to the ability to track township parcels on an annual basis, we were only able to derive the upper limit of the EAV growth rates for each township.

When comparing EAV growth within the TIF Districts, we found that 3 of the 5 TIF Districts experienced steady EAV growth over their terms and 2 of the TIF Districts experienced concentrated growth over shorter periods.  When comparing EAV growth to township growth, we determined that, in general, TIF District EAV grew faster than corresponding township EAV.  Average TIF District EAV growth was equal to approximately 17% while average township EAV growth was equal to approximately 9%.

Our research is limited to public information available on the Internet, from the City of Chicago Department of Housing and Economic Development and from the Cook County Clerk’s Department of Real Estate and Tax Services.  We did not confirm the accuracy of any of this data with any other source.

On March 21^st, 2012, Tennessee Governor Bill Haslam signed Senate Bill 2175, the Uniformity in Tax Increment Financing Act of 2012, into law.  The law is intended to make TIF easier for local governments to use as an economic development tool.

TIF is not a new concept in Tennessee. Before SB 2175, TIF was used in different ways.  Under Tennessee Code Annotated (TCA) Title 7, Chapter 53, an industrial development corporation is authorized to use TIF for industrial parks or other projects owned by the corporation. TCA Title 13, Chapter 20, allows a housing authority to adopt a redevelopment plan or urban renewal plan which includes incremental property taxes as a financing source. In addition, the Community Redevelopment Act of 1998 allows municipalities and counties to create community redevelopment agencies, adopt community redevelopment plans and issue redevelopment revenue bonds based on property tax increment.

Because the rules to create and use TIF in each of these three ways are different, the Tennessee legislature adopted SB 2175 to provide municipalities and counties with a more uniform tool for economic development. Generally, SB 2175 provides the following:

• TIF Districts established by housing authorities, municipalities and counties are limited to 30 years. TIF Districts established by industrial development corporations are limited to 20 years.
• The term of a TIF district can be extended with agreement from both the Commissioner of Economic and Community Development and the Comptroller of the Treasury if they decide such an extension is in the State’s best interest.
• Industrial projects may use TIF dollars to pay for privately owned land, improvements and equipment in addition to public infrastructure, site acquisition and site improvements if both the Commissioner of Economic and Community Development and the Comptroller of the Treasury decide such use is in the State’s best interest.

Elected and government officials have welcomed the adoption of SB 2175 because it will make it easier for communities to use TIF to encourage job growth.