Three days left for TIF reform in the veto session

Three days left for TIF reform in the veto session

Tuesday, Wednesday and Thursday. Those are the three days left in the Illinois General Assembly's fall veto session. What hangs in the balance? Tax Increment Financing District, or TIF, reform.

Under SB540, state Sen. Dan Kotowski is proposing to add a new layer of state oversight as a check on the way municipalities approach TIF spending. But the bill has been hijacked by a rogue amendment, focused on a tax break that aims to keep Sears Holdings Corporation's headquarters in Illinois. The amendment has made what should have been a fairly easy bill to pass a controversial measure.

Progressive groups like Housing Action Illinois are hoping the measure won't die.

But first, what would this TIF reform bill do? This bill aims to put some new restrictions on how TIFs--or special taxing districts that are drawn around an area to capture and redirect a portion of the property taxes toward spurring development--can be used and administrated. A few of the changes:

  • New administration rules: Municipal employees who administer TIFs would have to go through a mandatory training. Municipalities would be required to file annual TIF reports with the state. In turn, the state would post the reports online. Municipalities that fail to file their report would be called out online, and fines could be imposed. Also, taxpayers would see on their property tax bill how much of their taxes are going into a TIF fund, if they live within on of the special taxing districts.
  • New limits on TIFs:  If more than 35 percent of the estimated property value within a municipality falls within TIF districts, no new special taxing districts can be created. That rule only applies to municipalities with more than 25,000 residents.
  • No more tricky transfers: Right now, if two TIF districts are adjacent, a city can transfer, or port, money from one to the other. With this bill, the city would have to show that any funds transferred would be used to benefit both districts.
  • Time limits: This new law mandates that all TIF projects must be completed, and any related bond debt settled, when the TIF expires.

Are these reforms huge advances for TIF use in Illinois? No, said Bob Palmer, policy director at Housing Action Illinois. But they're still important and should be supported.

What's more, these new regulations were carefully negotiated between a lot of different groups--representatives from local government, the Ilinois TIF Association, the Illinois Municipal League, school groups and progressive groups like his own. It required compromise on the part of municipalities, something Palmer thinks might be hard to come by again.

"If the bill dies, they'll probably be happy, and it may be hard to go through this process again," Palmer said. "These are modest reforms, but worth supporting."

Initially, the bill was so uncontroversial it was adopted by the House with a near unanimous vote. So what happened? Members of the Senate noticed the controversial amendment, which was added at the last minute--apparently unbeknownst to many House members.

The amendment has nothing to do with TIF reform. Rather, it extends a special taxing district established in Hoffman Estates 23 years ago to benefit Sears. That's created a huge controversy with the local school system. Sears, which recently threatened to move out of the state, wants its tax break to continue. Locals say that the economic development area will divert $14 million from the local school district to the company.

Kotowski, who currently represents Park Ridge but may soon represent parts of Hoffman Estates under a legislative remap, has yet to answer my questions about the TIF reform amendment or the new bill. I spoke briefly with one of his staffers, Lee Whack, who said, "Negotiations are ongoing."  State Rep. John Bradley, who originally negotiated the bill, didn't return my calls either.

So the amendment sunk the bill. If it's taken off, will it float again?

It doesn't look good. Kotowski told the Elgin Courier that cities now have "some issues with the original bill." What are those issues? Again, Kotowski's office didn't get back with me. When I mentioned it to Palmer, he said he hadn't heard of any issues, especially since the bill was carefully negotiated between so many parties.

Will the TIF reform bill pass during this veto session? We've got three days left, and the clock is ticking.

Photo credit: Denise Krebs

© Community Renewal Society 2011

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