Tax Increment Financing – even less effective as property values decrease
Tax Increment Financing is a dubious economic development tool used by Illinois municipalities seeking to increase the assessed value of property within “blighted” areas of the municipality, through public investments, to create new growth and new taxes.
Any increase in the assessed value of property within the TIF district over a period of 23 years, which is above an initial base Equalized Assessed Value (EAV) that existed when the TIF was created, is called the Tax Increment EAV.
This Tax Increment EAV is multiplied by the current tax rate of each taxing body within the municipality to determine the TIF tax increment to be removed by the County Clerk from each taxing body’s property taxes, prior to distributing those taxes to each district.
The TIF tax increments diverted from each taxing body in the city are deposited into Rockford’s Tax Increment Allocation Fund for investments in the TIF project areas and/or to repay any investment capital obtained by debt financing or bonds.
The City of Rockford’s total Tax Increment EAV this year dropped to $30,809,162 from $37.9M last year, and over $41.6M two years ago, a 25.9% drop due to decreasing property values.
Therefore, at a current tax rate of $6.6884*$30,809,162/100, RSD205 had $2,060,640 of their property taxes diverted to Rockford’s TIF districts in 2013. Similarly, the city paid $776,114, the county paid $290,314, and the Park District paid $292,687 to TIFs.
The total tax increment received by Rockford’s TIF districts was $30,809,162/100 *the current tax rate of $12.9016 (Tax Code 001) = $3,974,875. The city’s tax increment was $4,708,650 in 2010, a 15.6% decrease in two years, which exacerbates the TIF Increment Allocation Fund deficit. The decrease in TIF tax increment was less than EAV drop because tax rates were increased under Tax Caps.
The City of Rockford is presently considering its 33rd TIF District, despite the current consolidated TIF districts annual deficit estimated to be $2.75M by the end of FY2013. In the next decade, the annual deficit in the TIF Allocation Fund was projected to be $4.1M, not taking into account the recent drops in the city’s TIF tax increment.
Rockford’s consolidated TIF Allocation Fund isn’t projected to have a positive balance until 2031, 18 years from now, and only two years before many TIF terms expire. This projection also doesn’t take into account the city’s current decreasing TIF tax increment.
The consolidated TIF deficit will require continued support from successful adjacent TIF districts and the General Fund until such time as property values reverse their downward spiral or until the TIF terms expire in 2033, resulting in higher property taxes or diverting funds from other city services to repay the TIF bonds.
Rockford filed its 2011 TIF Report with the State of Illinois Comptroller’s office but at this time had not filed their FY 2012 TIF Report, which ended on December 31, 2012, almost a year ago.
However, the 2012 Rockford TIF data was available from the Winnebago County Clerk’s office from their Tax Computation Reports, since that department calculates the tax increment to be removed from the other taxing bodies for the Rockford TIF districts.
These reports show a few of the 32 decreasing tax increments generated from Rockford TIF Districts, which are substantial in some districts.
Tax Increment District 2011 increment 2012 Increment Percentage Loss
West State & Central TIF $186,632 $121,335 (35%)
East State & Alpine TIF $200,541 $135,312 (32.5%)
West State & Kilburn TIF $14,662 $8914 (39.2%)
Jackson School TIF $93,551 $56,532 (39.6%)
Eastside TIF $350,103 $312,764 (10.7%)
Westside TIF $444,888 $415,656 (6.6%)
Seventh Street TIF $1,061,593 $857,440 (19.2%)
Totals $2,351,970 $1,907,953 (18.9%)
To answer the question – have Rockford TIF districts been successful in developing growth, we must look at how many districts have expired with a positive cash balance and placed a larger asset back on the tax rolls, than the blighted area asset that was present 23 or more years ago – Anyone, anyone?
Tax Increment Financing in this economy of decreasing property values, decreasing tax increment EAV and decreasing tax increment has not provided the economic goals for which it was intended. The 32 TIFs have been more of a drag on Rockford’s economy, than a source for economic growth.