ACTION REQUESTED:
Title
Communication from the City Manager with a Request for a POLICY SESSION to Discuss TAX INCREMENT FINANCING DISTRICTS.
Body
BACKGROUND: The Peoria City Council held a Policy Session on Sales Tax Special Service Areas and Economic Development Incentives on January 26, 2019. A policy session on Tax Increment Financing Districts (TIF) was to be covered, but delayed due to lack of time. The TIF Policy Session information presented to Council included the following:
1. Tax Increment Financing Districts
Tax Increment Financing is a tool for economic development under Illinois law, 65 ILCS 5/11-74 that may be implemented by local municipalities. The purpose of TIF is to induce development in an area that has been declining or has been deficient in growth and development. Once the area is defined, a redevelopment plan is adopted to address the conditions that have led to a lack of development. The Council must conclude that development would not happen but for the use of TIF as an incentive to the developer. TIF activity is managed by the City of Peoria’s Economic Development Department, Finance Department and other taxing bodies have input through the Joint Review Board.
The following explanation of Tax Increment Financing comes from the Illinois Tax Increment Association:
Tax Increment Financing is simple in concept. TIF calls for local taxing bodies to make a joint investment in the development or redevelopment of an area, with the intent that any short term gains be reinvested and leveraged so that all the taxing bodies will receive larger financial gains in the future. The funds for this investment do not come from current revenues, but from future tax revenues, not otherwise expected to occur. These new revenues are generated by increased public and private investment in identified, underperforming areas.
When a TIF redevelopment project area (often called a TIF district) is created, the value of the property in the area is established as the “base” amount. The property taxes paid on this base amount continue to go to the various taxing bodies as they always had, with the amount of this revenue declining only if the base declines (something that the TIF is expected to keep from happening) or the tax rate goes down. It is the growth of the value of the property over the base that generates the tax increment. This increment is collected into a special fund (the Special Tax Increment Allocation Fund) for use by the municipality to make additional investments in the TIF project area. This reinvestment generates additional growth in property value, which results in even more revenue growth for reinvestment.
In this way 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.
TIF revenues can be used for a variety of purposes outlined in the statutes: rehabilitation and renovation costs (not new construction); relocation of businesses; job training for businesses and citizens within the district; property acquisition; demolition and site preparation; studies surveys and plans for the district; marketing expenses; financing costs; construction of public works; and administrative expenses.
Currently, the City has 11 Tax Increment Financing Districts. The projected fund balance in 2019 is $2.6 million. At their inception, the TIF District budgets were established in a total amount of $1.2 billion: $513 million for redevelopment (43%); $400 million for infrastructure and public works (33%); $164 million for financing costs (14%); $89 million for other taxing district capital costs, porting to other TIF districts, and PILOTS (7%); and $39 million for studies, marketing and administration costs. Since their inception, $59.6 million in property and sales taxes have been collected, $43.9 million of bonds have been issued, and $100.6 million of expenditures have been made.
The current expiration dates, base EAV, most recent EAV, incremental EAV and property tax increment of all Peoria TIFs is as follows:
|
TIF DISTRICT |
Expiration |
Base Eav |
2017 EAV |
EAV Increment |
Tax Increment |
|
Central Business District |
2021 |
2,672,940 |
19,684,710 |
18,310,520 |
1,705,412 |
|
Northside Business Park |
2022 |
2,681,110 |
4,161,900 |
1,950,430 |
183,080 |
|
Midtown Plaza |
2022 |
750,370 |
1,511,700 |
761,330 |
1,525,886 |
|
Downtown Stadium |
2023 |
404,330 |
3,676,880 |
3,272,550 |
315,486 |
|
Warehouse District |
2030 |
16,141,140 |
23,800,050 |
9,115,000 |
867,559 |
|
Eagleview |
2030 |
4,201,080 |
5,166,620 |
1,309,440 |
125,425 |
|
Hospitality Improvement Zone |
2031 |
12,168,960 |
23,275,320 |
12,813,890 |
1,225,628 |
|
East Village Growth Cell |
2034 |
42,385,367 |
37,645,066 |
4,091,087 |
349,457 |
|
South Village |
2036 |
16,574,170 |
15,207,030 |
1,130,060 |
100,174 |
|
Downtown Conservation |
2036 |
42,926,328 |
40,479,480 |
1,285,790 |
120,420 |
|
River Trail |
2036 |
0 |
0 |
0 |
0 |
|
TOTAL |
|
$140,905,795 |
$174,608,756 |
$54,040,097 |
$6,518,527 |
Policy Questions
TIF is a powerful economic development tool that allows the City to grow the tax base. Within targeted geographic areas, it allows the City to facilitate investment and job creation, improve infrastructure, and meet specific redevelopment goals that the City Council may want to achieve.
Specifically, during the 2019 budget discussion, Council wanted to have a policy question to discuss the following policy questions:
1. When should the City create a TIF District? What factors should be present in a specific geographic area that would lead to the City creating a TIF District. According to the law, the City needs to show that various blighting factors must be present in an area to establish a TIF district.
2. How should the City implement the proposed budget within the TIF Districts? In general, the City has established a TIF District and allowed developers to drive redevelopment projects, and then follow with infrastructure improvements as a secondary benefit of the district. Should the City be more assertive about improving infrastructure within the district in conjunction with private development?
3. How should the City staff report activity within the TIF Districts? Does Council desire a more comprehensive report on public and private activities over the budget and audit reports that Council currently receives?
4. How should the City close TIF Districts? Should remaining funds be used to complete items originally budgeted, such as public infrastructure? Should unprogrammed funds be distributed back to other taxing bodies? Should unprogrammed funds be ported to other TIF Districts?
5. When should the City seek a legislative extension of a TIF? Currently, as TIFs mature, the opportunity to foster private redevelopment diminishes. Does the Council want to define specific criteria for approving a legislative extension of a TIF District, or does the Council want to act on a case-by-case basis?
Staff would like to walk through the document and gather feedback from the Council.
FINANCIAL IMPACT: Economic development incentives have a varying impact upon the City. Larger projects with large incentives may be riskier for the City. Balancing the risk of loss with the proposed development and the return on the investment being made by the City is important.
NEIGHBORHOOD CONCERNS: Concerns and compliments have been raised about economic development incentives have been made by residents and business owners alike.
IMPACT IF APPROVED: NA
IMPACT IF DENIED: NA
ALTERNATIVES: NA
EEO CERTIFICATION NUMBER: NA
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2017 - 2032 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Financially Sound City
2. Grow Peoria
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Keep taxes and fees competitive.
2. Grow employers and jobs.
3. Invest in our infrastructure and transportation.
4. Reinvest in neighborhoods.
DEPARTMENT: City Manager's Office