In the 1960’s and 1970’s, the federal and state governments, including Illinois, began cutting back economic development programs that cities could use to revitalize communities. TIF districts are one of the few remaining tools that local governments can use to attract new business, invest in infrastructure and rebuild blighted areas. TIF districts are a popular and effective redevelopment tool, used in 47 states across the country and in over 250 Illinois cities. For more information on the history, and laws governing TIF districts, please visit the Illinois Tax Increment Association
Frequently asked Questions
What is a TIF? "TIF" stands for Tax Increment Financing. TIF is a financial tool used to assist a municipality in the redevelopment of a specific area that is blighted or showing signs of becoming blighted. A tax increment is the difference between the amount of property tax revenue generated before TIF district designation and the amount of property tax revenue generated after TIF designation.
The TIF redevelopment project creates a vital cycle, increasing development and redevelopment in the area, such that when the TIF project ends — and Illinois law allows a TIF project to exist for a period of up to 23 years — all of the taxing bodies benefit from the new growth.Only property taxes generated by the incremental increase in value of TIF district are available for TIF projects. Tax rates do not change when a TIF is created. TIF districts do not increase taxes. The image below helps demonstrate the purpose and benefits of a successful TIF district.
What are the benefits of a TIF Districts? TIF Districts create short and long term benefits for communities. These benefits include:
Providing development incentives requiring no tax increases. Properties are assessed and taxed the same way as in non-TIF areas.
Increasing property values. TIF redevelopment projects are an investment that causes property values to increase thus broadening the tax base and benefiting everyone who pays taxes.
Inducing private investment and development. Village's and Cities can utilize TIF funds to offset relocation costs, development costs, and improve needed infrastructure to facilitate redevelopment.
Creating jobs, job retention and training programs. Increased development, redevelopment and relocation mean a greater demand for workforce, and often times a higher skilled or higher educated workforce. Redevelopment also impacts areas outside of the TIF enabling other businesses to grow and prosper as well.
Creating a stronger, broader tax base. Infrastructure improvements, demolition or redevelopment of blighted areas attract private developers to invest in the community. As a result, the overall equalized assessment value increases, lessening the property tax burden.
Maintaining local control. Municipal officials are responsible for determining the best utilization of TIF funds, not the state or federal government.
Generating incremental revenue, which is reinvested in the TIF district. TIF funds are only utilized within the TIF district as a means to encourage the redevelopment of the area.
Benefiting other taxing bodies. At the end of the TIF the entire property tax generated by the newly revitalized property goes to the underlying taxing bodies providing a revenue increase for schools, parks, libraries and so forth without raising taxes.
What sorts of costs are eligible for TIF Funding? Illinois State Statute only allows TIF revenues to be used for certain kinds of private expenditures. Since the purpose of a TIF district is to encourage development or redevelopment in areas of need, private sector firms are eligible to receive funding to offset the costs of a development or redevelopment project in a TIF district. However, the funds can only be used for public improvements, which typically fall into one of the following categories:
Do TIF's divert money from schools? No. On the contrary, TIF’s, when executed properly, generate money for schools. First, schools continue to receive all the tax revenue they were entitled to before the creation of the TIF district. Second, under most circumstances, a school’s state aid is greater when a school district overlaps a successful TIF. The incremental growth in property values is excluded from the property tax base when the state calculates the amount of aid it should award to a school district. The "poorer" a school district, the more it stands to benefit from having a TIF district.
Are TIF plans & expenditures public? When a TIF is established there are numerous legal requirements designed to insure the public and also other local taxing bodies are informed. Public hearings are held and all expenditure decisions must be made in public by locally elected officials charged with representing the community.
Is a TIF District a tax increase? No, it is not. Creating a TIF does not reduce property tax revenues available to overlapping taxing bodies like schools. Property taxes collected on properties included in the TIF at the time of its designation continue to be distributed to the school districts, park district, library district, and other taxing districts and are not reduced by the TIF creation. Only taxes derived from future growth that would not have occurred, go solely to projects in the TIF.