Illinois Press

TUA President Jim Tobin was quoted by Sauk Valley Media about TIF districts in Sterling, Dixon and Rock Falls, Illinois.
This week brings to a close the fourth month of the Dixon downtown streetscape project. Much of its $6 million cost will be paid for with money from the city’s Central Business District TIF district.
The project includes new streets, curbs, sidewalks, water and sewer lines, and landscaping throughout downtown.
The project has a dual purpose, to beautify the downtown and improve infrastructure, which in turn could attract new economic development downtown that would not have been there without the improvements.
People familiar with the complex laws on tax increment financing know this as the “but for” test – but for the improvements from the TIF district, the development wouldn’t have happened.
Dixon and Rock Falls each have two tax increment financing districts, and Sterling has three. The TIF districts, which are intended to spur economic development, were made possible by the state’s Tax Increment Allocation Redevelopment Act in 1977.
When a TIF district is established, a base equalized assessed valuation (EAV) is set. As the area is developed and vacant properties or blighted conditions are removed, the EAV – along with property taxes – often increases. That tax income garnered above the base level goes to the city to pay for the development that caused the increase.
While TIF districts have been criticized for misuse, many experts agree that they can be valuable tools of economic development for cities.
Mike Peddle, an associate professor in the division of public administration at Northern Illinois University, focuses on economic development tools and policies and public finance.
He said that despite the prominence of TIFs and their impact on cities, there’s much disagreement about interpretation of the laws and how to evaluate their success.
“As difficult as it is, I don’t think there’s any one-size-fits-all answer,” he said. “I like to say there are probably more good TIFs than bad TIFs, but the bad ones stick out like a sore thumb.”
Critics say TIF districts missallocate resources or are used to benefit politically connected businesses.
Jim Tobin, president of the Chicago-based Taxpayers United of America, said TIFs are another form of subsidies for businesses.
“They’re a taxpayer ripoff,” he said. “We’re totally opposed to them.”
TIFs can become subsidies for businesses if they’re used for development that would have happened anyway, which would fail the “but for” test, said Ralph Martire, the executive director of the Center for Tax and Budget Accountability, a Chicago-based bipartisan, nonprofit research and advocacy think tank.
Martire said that evaluating the value of TIFs can come down to whether the expenditures to promote economic growth are more important at any given moment than investing in schools, police departments, or fire departments.
That’s a discussion that doesn’t often happen, he said, because of a lack of transparency. And that lack of transparency and discussion leads to the perception of impropriety.
“I think that’s a real significant problem,” Martire said. “But whether or not it’s happened, it appears as if it’s a slush fund for politicians – it’s what it looks like. That makes it really hard for communities to trust it.”
TIFs could be made more transparent, he said, by more analysis leading up to establishing a TIF, and by more third-party reviews and public accounting.
Likewise, Peddle agreed that transparency can be an issue with TIF districts, mainly because they’re complex and involve property taxes. Even the annual TIF reports can be difficult for citizens to understand, he said.
Citizens should know what’s being collected and what that money is being spent on, he added.
“There’s a difference between opaqueness from what the documents represent and opaqueness created by the desire to not be straightforward,” Peddle said. “You can hide behind accounting methods and the like. The best practice would at least explain, in narrative fashion, what’s going on in the TIF.”
The local TIFs
Sterling, Dixon and Rock Falls have seven TIF district’s total. But they aren’t the only municipalities in the Sauk Valley with TIFs, and that highlights their popularity.
Theresa Wittenauer, executive director of the Blackhawk Hills Regional Council, said that in the six-county area she works with, at least a third of the 72 communites have at least one TIF district.
“Even communities under 1,000 population are able to successfully utilize TIF (or multiple TIFs), when it’s managed properly,” she said in an email.
The TIF districts in Sterling have been used to develop retail space for businesses in the area around the library, the Kohl’s and PetSmart site, and for environmental and redevelopment work along the riverfront where the factories once were.
Dixon’s TIF districts have been used to pay for the current streetscape project, provide assistance for the construction of the Townhomes of Rivershore, and help to redevelop the former USF&G Building, which became the current KSB Town Square Center building.
The Rock Falls TIF districts have been used to redevelop and clean up sites of former factories along the riverfront and provide assistance to businesses moving into the districts.
Peddle said an appropriate use of TIF districts is to get a business that has no preference on location to move downtown or into a district instead of out by the interstate or outside of the city.
TIF districts can provide an economic jumpstart, Wittenauer said.
“Ideally, this tool should be used in deteriorating (blighted) areas where development of new business or retention of existing businesses would not otherwise happen,” she said. “TIF allows communities to reinvest the district’s incremental property value increase in the area without having to use general funds from the community or raising taxes to make the needed improvements.”
A recurring theme in the goals each city determined for its TIF districts was to eliminate or reduce blighted conditions and encourage or assist private investment and redevelopment in the districts.
In May, the Rock Falls City Council entered a redevelopment agreement for construction of a $6.1 million Holiday Inn Express & Suites at the east end of its riverfront.
During the next 10 years, the 68-unit hotel to is expected to generate $1 million in property taxes for the TIF district, which will go toward green space that, when completed, will include an entertainment venue, restrooms, a splash pad, and a bike path.
Those quality-of-life benefits, Peddle said, are the secondary benefits of TIF districts.
Uses and evaluation
Cities can use bonds to pay for improvements or developments designed to attract businesses. The increase in property taxes above that base then goes to pay off the bonds.
While TIFs can create new economic growth, Peddle said, they can also have collateral advantages for residents.
“You get the benefits of that [economic development],” Peddle said. “If done correctly, you get value that expands beyond financial value. You get jobs, quality of life, new firms to the city that wouldn’t have been there.”
Reconditioning some of the former factories is exactly how TIF funds should be used, Peddle said. Infrastructure upgrades, if work hasn’t been purposely neglected, is another positive use of TIF funds.
Evaluating the success or failure of TIF districts is difficult because they’re designed for longterm benefits, not immediate results.
But there are some early indicators that a TIF district is working.
An increase in the EAV in the district could be a sign of success, but experts note that the same increase might have happened anyway. And even if the EAV in the district has decreased, Peddle said, the TIF district could have prevented it from declining at a quicker rate.
A lot of the evaluation can come from the “but for” test – “But for” the TIF district, would what’s going on there be better or worse? Would the development have occurred or the blight have been eliminated without a TIF district?
Additionally, Peddle said, signs of success could be economic development near to, but not inside, the TIF district and an increase in jobs in the district. But he warned that those indicators were “circumstantial evidence,” and he emphasized the longterm nature of TIF districts.
In addition to new jobs and development, there’s another indicator that a TIF district could be working, Wittenauer said.
“As simple as it seems, a lot of times you can visually tell if a TIF is doing well,” her email said. “If the area is experiencing improvements and is alive with redevelopment, often times the TIF district area is active, vibrant and doing what it’s supposed to.”
A closer look at TIFs
In the coming months, Sauk Valley Media will take a closer look at TIF districts in Sterling, Dixon and Rock Falls, reviewing economic development they’ve spurred in each city where they’ve been used.

TUA Executive Director Rae Ann McNeilly was quoted by the Daily Herald in a front-page story about Illinois property taxes and property values.

The amount of property taxes owed by Avon Township property owners last year was 14.7 percent of the assessed value of all the property there.
Five years earlier, it was just 9.5 percent.
The growth of the tax portion in that Lake County township is the biggest among 44 suburban townships analyzed by the Daily Herald for tax years 2009 to 2013. But property owners in other townships like Hanover and Leyden in Cook County, Wayne in DuPage County and Dundee in Kane County are in similar positions.
It’s one way of showing how homeowners’ taxes can rise even as their property values drop.
“That’s huge,” said Rae Ann McNeilly, executive director of Taxpayers United of America. “For the average citizen, their home is their most valuable asset, so when it decreases in value, that hits them very hard. When their tax bill is higher, they’re squeezed out.”
During those five years, properties in Avon Township, which includes much of the Round Lake area, experienced a 32.8 percent decrease in value, while property tax obligations increased by 3.5 percent.
On average, the equalized assessed value of the 44 townships decreased by 26.8 percent during those five years. Meanwhile, taxing bodies in those townships averaged an 8.3 percent increase in tax levies.
In every township, the property taxes owed grew as a percentage of the overall assessed value. The growth in taxes owed compared to property values tended to be most pr nounced in less affluent areas.
“Some areas were hit harder than others,” said Craig Dovel, DuPage County supervisor of assessments. “You look at those communities and maybe the market didn’t do as well.”
In Naperville Township, property owners in 2009 owed taxes equaling 6.7 percent of the total assessed value of the township’s properties. Five years later taxes were 8.5 percent of the total assessed value, an increase smaller than the average 3.1-percentage-point growth. The situation was similar in townships like Downers Grove, Cuba and Ela.
Many property owners seek lower assessments as a way of reducing their tax burden. However, since the Great Recession began in 2008, every owner essentially saw a decrease in property value while taxes continued to climb, erasing any financial benefit for most individuals.
The biggest drop in assessed value over the five years was in Hanover Township, with a 36.4 percent decrease. Maine, Elk Grove and Schaumburg townships in Cook County each saw assessed values drop by 34.7 percent during that time, according to assessment records.
Batavia Township property owners saw the smallest decline in property values with a 15.8 percent drop between 2009 and 2013.
Dovel believes the residential market is stabilizing and could soon grow.
“You have to remember, (assessors) are looking at a three-year history,” he said.
In 2009, taxpayers in all 44 townships owed more than $7.4 billion in property taxes. By 2013, that figure had increased to a little more than $8 billion, according to tax extension records from the treasurers’ offices in Cook, Kane and Lake counties and the DuPage County clerk’s office.
Property owners in Kane County’s Aurora Township saw their property tax obligations increase just one-half of 1 percent from 2009 to 2013. Meanwhile, property owners in Rutland and Plato townships in Kane County had property tax increases of more than 26 percent during that time span.
Property owners in Wauconda Township in Lake County also saw their property tax obligation increase by more than 20 percent, according to the tax records.
“It’s scary when you think about it because you really don’t own your home,” McNeilly said.
“You can’t keep your property if you don’t pay your hefty tax bill.”

TUA’s pension project on Stephenson County, Illinois, is featured in this article from Journal-Standard.com.
FREEPORT — A retired local teacher stands to collect $4.2 million over the course of his lifetime pension payout, according to Chicago-based organization Taxpayers United of America.
The group held a press conference Wednesday at the Freeport Hampton Inn at which it released documents naming scores of retired public employees in Stephenson County receiving what the group calls “gold-plated government pensions.”
The documents highlight one 2003 retiree from Freeport School District 145 who is receiving more than $130,000 in annual pension, increasing by 3 percent compounded interest per year. The organization said that retiree already received more than $1.1 million from the fund and stands to get $3 million more by the time he turns 85. The group said he contributed less than $120,000 to his pension and retired at age 56.
The group obtained the information by filing Freedom of Information Act requests with retirement systems such as the Illinois Teachers’ Retirement System, Illinois Municipal Retirement Fund and State Universities Retirement System, according to the organization’s executive director, Rae Ann McNeilly.
Taxpayers United of America is a self-described “tax fighting” organization formed 38 years ago. Members of the group have traveled to 19 states to disclose details of the results of their FOIA requests.
“It’s important to get these individual numbers out to the community to slice it down to the numbers that average taxpayers can understand and relate to,” McNeilly said.
Those numbers include the names of more than 150 former employees in Stephenson County that Taxpayers United of America say contributed less than 10 percent to their estimated lifetime pension payout.
Also highlighted was a Highland Community College retiree who had contributed more than $154,000 to a pension by the time he retired at age 55. The retiree receives more than $100,000 annually and could receive more than $3.3 million in estimated lifetime payout.
Highland spokesman Pete Willging said the college cannot discuss individual pensions, but the rules and laws behind pensions are not set locally.
“Pension numbers and the formulas that go into the retirement plans are established by the State Universities Retirement System and the laws overseeing it are set by the state,” Willging said.
Representatives from the State Universities Retirement System were not immediately available for comment.
McNeilly said the goal of Taxpayers United of America is to encourage pension reforms.