| 1. | What is Tax Increment Financing?
Tax increment financing (TIF) is a mechanism that municipalities have to help assist with
redevelopment costs such as construction of water and sewer mains, road reconstruction,
streetscape improvements, and other public improvements. This tool allows areas to be
jump started economically by attracting new development and redevelopment of existing
properties. TIF allows for property tax revenues from new and old businesses to pay for
the improvements that will affect their properties.
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| 2. | How Does a TIF Work?
When a TIF District is established, a base property tax level is established. All of the
growth in property taxes after the base year are put in a TIF Fund that helps to pay for the
improvements. This increased property tax is called the TIF increment. 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. This increment is collected in a TIF Fund that help to pay for a number of
projects in the designated TIF area.
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| 3. | What is the boundary of the TIF District?
As stated in the TIF Redevelopment Plan, the boundary roughly is the area bounded by
Interstate 90 on the southwest, Riemer Way on the east and Higgins Road on the north,
and it includes the historic village core along Railroad Street and Galligan Road north of
Higgins Road (Illinois Route 72).
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| 4. | What was the process the Village followed to create the TIF District?
The extensive process involved an eligibility analysis and creation of a Redevelopment
Plan. Notifications of public hearing were mailed to the appropriate property owners and
taxing districts. Notice of the public hearing was also printed in the Daily Herald. The
Village Board conducted a public hearing on August 5th, 2008. To complete the TIF
creation process, the Village Board will need to approve ordinances adopting the TIF
Plan, Designating the TIF area, and Adopting Tax Increment Financing.
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| 5. | What is the Joint Review Board?
The joint review board (JRB) is a collection of taxing districts that are affected by the TIF
District. The group is charged with reviewing potential districts based on the areas
ability to meet the statutory requirements to constitute a TIF District. This group makes a
recommendation to the Village Board. Once a TIF District is in place, the JRB also
annually reviews the progress of the TIF District.
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| 6. | What affect do TIF Districts have on other Taxing Districts?
Each taxing district will continue to receive the same level of property tax income that
they were receiving the year the TIF District is established. Property taxes collected on
properties included in the TIF at the time of its designation continue to be distributed to
the school districts, county, community college and all other taxing districts in the same
manner as if the TIF did not exist. Once the initial improvements are paid for, all of the
taxing districts benefit from the taxes generated by the full value of the improved
properties that were in the TIF district. The full value of the improved properties is
treated as “new construction” under the tax cap restrictions on increased property tax
collection.
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| 7. | What controls are in place to safeguard the TIF Fund?
There are a number of controls that are in place by state statute. All TIF revenue is
placed in a specific TIF Fund that can only pay for improvements in the designated TIF
area. The Joint Review Board annually reviews the TIF budget to gauge the progress of
the project. Legislative action is required to increase the TIF budget by more than 5%,
after adjusting for inflation. All of these controls create a structure that helps to safeguard
the TIF Fund.
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| 8. | What financing options are available to pay for TIF related improvement?
The first option is to wait for sufficient revenue to be available to start projects.
Depending on the TIF, this can be a substantial amount of time. Property owners could
fund some of the costs early on in the project so the project can get started. The Village
could issue a bond that will use TIF increment to pay for the costs of the redevelopment.
If a developer is redeveloping the area, the Village could use TIF notes that will
reimburse the developer, using TIF revenues, as the projects are completed.
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| 9. | How will the TIF District affect Old Town?
Over the 23 year life of the TIF district, some infrastructure or public improvements
might be needed. While no projects are imminent, including Old Town in the TIF
District gives the Village options and flexibility if a need arises in the future.
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| 10. | What affect will the TIF Districts have on taxes?
TIF Districts themselves do not raise tax rates or the amount any property owner pays in
taxes. TIF Districts instead rely on the increasing property values in the TIF District
area. Property owners will continue to pay property taxes at the rates established by the
levies set annually by various taxing districts (e.g. school, fire, etc.). The property taxes
paid will increase over time to reflect the increased market value of the property,
inflation, and the benefits of the TIF-funded improvements.
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