TIF district loans and balances need to be transparent, so we all get a good deal

In the last post, the basics of Tax Increment Financing (TIF) districts were explained in that government attracts a local developer to invest in a blighted area by helping the developer with upfront cash, that is used to develop and improve the area. This cash is repaid over a 23 year period using the increment in property taxes, above that which existed prior to the investment, as TIF property increases in value.

Other taxing bodies, the schools, library, county and parks forego this increase in property taxes, for the duration of the TIF, as their investment for future development and increasing future revenue for their customers that would not have existed but for TIF assistance.

This process works for a truly “blighted” area.  If a TIF is set up in an area that is not blighted, that would have increased in value in time with or without the TIF, then the taxing districts are giving up tax revenue for 23 years, that would have increased the tax base without the TIF.

Without those tax dollars, the tax on the rest of the property in the city may have be raised to pay services the taxing districts need – annual salary and benefit increases, for example, while the TIF is taking all increased taxes.

The new growth itself may cause more services to be required and since the TIF increment is being used by the TIF to pay off upfront costs, existing taxes (General Fund) may be temporarily used until the TIF can pay for itself, which may impact property taxes of existing taxpayers.

Since TIFs may affect all taxpayers for 23 or more years, not just property owners in the TIF boundary, full transparency in the use of TIF funds is required. An full accounting of all existing TIF funds, positive and negative is needed to understand how certain TIFs are performing for future investment decisions by the city.

Two basic questions that need to be answered are how much of the non-performing TIF district’s bonds have been paid by the General Fund and what happens to those successful TIF districts fund balances, during the 23 years, and at the conclusion of the TIF? Any remaining funds are supposed to be distributed to the taxing districts, which indirectly helps the taxpayers because some of those taxing district’s expenses are no longer required to be paid by the existing district’s taxpayers.

If a TIF has a balance at the end of the 23 years, the taxpayers need to know if the city reestablishes the same or adjacent TIF and transfers the TIF balance to the new TIF rather than allowing existing TIF area to cease to exist – it has served its purpose.

TIFs advisory groups should be under the Open Meetings Act. TIFs should also be on-budget, so the citizens know how the successful TIF’s money is spent and where – on developments within the TIF or adjacent TIFs. Without tansparency, how do we know where any of this money is spent?

Next time, status of some Rockford TIFs.

Related posts:

• What is a Tax Increment Financing District?
• Park District survey says: Maintain don’t expand; taxes will be sufficient to do so
• Tax Caps prevent unlimited increases in tort and pensions being added to current tax bills
• District 205 right to amend 2011 budget to reduce spending $41M from cash reserves
• Bare majority of school board passes $41M deficit budget, the largest in district history