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Should Rockford approve another TIF district?

Rockford City Council is discussing another tax increment finance district, the 30th, this one along East State Street between Alpine and Mulford. TIF districts are designed to encourage private investment in areas of a community that have proven to be underdeveloped or blighted and would not receive such investment “but for” TIF assistance.

TIF expenditure are usually debt financed in anticipation of future tax revenues, over a period of 23 years, to pay off the bond or initial loan. The process works for a truly blighted area.

If a TIF is set up in an area that is not blighted, an area that would have increased in value in time with or without the TIF, then the other taxing districts are giving up tax revenue for 23 years that would have been available to them without the TIF.

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

Many of the non-performing Rockford TIFs  have been temporarily bailed out using a couple of million dollars from the General Fund to cover debt service. Also, TIFs may be initiated along similar or adjacent boundaries and any residual money can be given to the new TIF instead of being used to repay lost revenue to the other taxing districts, with the final bill coming back to the residential and commercial Rockford taxpayers!

TIF balances have been taken from successful TIFs and given to adjacent unsuccessful TIFs, so what incentives do new businesses have to build in a successful TIF area when the money is redistributed to another TIF, rather than used to improve the “blighted area” which had earned it initially?

The law allows a TIF district to be extended for up to 12 additional years for a total of 35 years with proper approval. That’s a long time to wait for any “new” development to contribute to the services that their growth may have imposed on the other tax districts, schools, libraries, parks and the city and county taxpayers.

Heck, after 35 years, some areas may have actually depreciated in value and be deemed blighted again. The TIF laws allow the city to approve another 23 year TIF, with the same boundaries and transfer any residual TIF balance to the new TIF, rather than return it to the taxing districts, which will now be waiting up to 46 years.

The other taxing districts do not have a final vote on the TIF districts; neither do the residents who wind up in most cases supporting the TIFs through the General Fund for decades.

The City Council is right to question whether another TIF is needed. What is its intended purpose? Is East State Street between Alpine and Mulford really “blighted or underdeveloped?”

And do the Rockford taxpayers mind supporting the other taxing bodies who may have their sources of revenue diverted to TIFs rather that to the service they provide to the community? Is this area of Rockford truly underdeveloped or may it be more a product of our current economy, rather than a blighted area of the community.

 

 

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