The proposed Ridge Creek development is located within the City of Highland Park’s Briergate Tax Increment Finance District (“TIF”) designated in December, 2017. The former Solo Cup site (the Ridge Creek project location) was identified as a priority project within the Briergate TIF District plan.
TIF has become one of the most important techniques for development and redevelopment efforts in Illinois. This tool can be an effective method of directing public funds to leverage private investment.
The concept of TIF is fairly simple – the growth in property taxes resulting from development or redevelopment is utilized to spur private sector investment. This is done by effectively “freezing” the tax base of underdeveloped property and permitting growth in the tax base to be diverted to a special fund, which may be utilized for a number of development-related requirements including public improvements. The TIF district is in place over a 23-year period per State statute.
The TIF monies are designed to provide financing when there is a case that “but for” the injection of public capital there would not be private investment at all, of the nature desired, or on a timely basis. TIF utilization will not make a bad deal a good deal; nor will it be automatically available to add to the return on investment. TIF is most appropriate and effective at the margin – when private investment cannot be justified due to an inability to fund the development solely from private sources. TIF is not a “new” tax or additional tax rate, but as stated above, growth in overall taxes over a “base” amount results in increment and the increment is directed to the TIF district. Properties are assessed uniformly- within or outside of the TIF District - and the same tax rates also apply.
There are three principal reasons why TIF would be applicable to the Ridge Creek project:
- Basic infrastructure, benefiting more than just one individual development is required (e.g., extension of water lines, oversizing of sewer lines).
- Extraordinary costs must be financed to enable development to occur (e.g., environmental remediation or other barriers to site development).
- A “gap” exists between what the development can reasonably support in terms of private market investment and required total investment (e.g., lease rates to amortize a loan cannot be satisfied by prospective tenants).
Obviously, the utilization of TIF depends heavily on the City’s policies, and its past experiences with providing redevelopment incentives. Each case is different and an open approach and willingness to share information is critical to any potential for the utilization of TIF monies. The City must answer to its citizens and the decision on incentives must be viewed as warranted.
The Developer and the City are currently reviewing the use of TIF for the Ridge Creek development, as the Developer has indicated that it is an important part of the Project financing structure and is required for its implementation.
TIF funding also provides for the payment of ongoing school district tuition costs over the term of the TIF district - payable on an annual basis. The allocations for tuition costs pertain to new students residing in the TIF assisted development and are paid pursuant to formulas set forth in the TIF Act from project TIF revenues.
Based on the Developer’s fiscal impact study it is anticipated that the TIF revenues will offset any projected school district tuition costs associated with the residential development.
Municipalities have used or plan to use tax increment financing for a variety of purposes. For example, a number of communities have constructed parking facilities to complement anticipated private commercial development; others have acquired obsolete buildings and demolished them to provide sites that are resold to developers. Another popular use of tax increment funds is the construction of streets, curbs, gutters, and sewer and water lines and streetscaping. In addition, municipalities have addressed demolition or site preparation costs, made traffic engineering and transit improvements, and funded pedestrian related improvements or amenities.
TIF techniques may be used in conjunction with a range of other development tools such as: special service area financing, certain county initiatives, the issuance of tax-exempt revenue obligations, and other loans/loan guarantees by state and federal agencies.
The use of tax increment financing is clearly designed to stimulate private sector investments (and related employment opportunities) which otherwise would not have occurred within the City. TIF does not mandate public/private sector funding ratios as do certain other state and federal economic development grant programs – use of the program is subject to the City’s evaluation regarding the applicability of TIF revenues to the project.