TIF Districts

Tax Increment Financing (TIF) is a powerful economic development tool available to Illinois municipalities. It can generate the funds necessary for a municipality to catalyze private development in blighted or conservation areas through property acquisition, infrastructure extensions or other developer assistance.

TIF does this not through additional taxes, but by re-directing where incremental property tax revenues go. Normally, property taxes are collected by the county and distributed to the city, township, school district, etc. When a TIF district is in place, however, a base level of property tax assessment is established. Increased revenues generated by increases in that assessed value, due to expansions, improvements, or new developments within the district are directed to a redevelopment fund, established and controlled by the city.

These funds can then be used for qualified redevelopment costs within the district.

The municipality can make improvements as the money becomes available. They can reimburse a private developer for qualified costs that are incurred in the redevelopment of the district, or it can borrow against the future revenues in order to make large scale improvements today.

Once the district is established, it remains for 23 years unless the city terminates it earlier. All Illinois municipalities have the authority to create TIF Districts under the Illinois Tax Increment Reallocation Act and many have used it to great advantage.

Municipalities can use tax increment revenues for all of the following

  • Studies, surveys, redevelopment plans, etc;
  • Property assembly costs;
  • Construction of public works or improvements;
  • Financing costs;
  • A taxing district capital costs resulting from the redevelopment project;
  • Relocation;
  • Payment in lieu of taxes;
  • Job training;
  • Up to 30% of interest costs incurred by the developer.

Municipalities can establish a TIF District by ordinance after:

  • Providing proper notice,
  • Convening a joint review board,
  • Holding a public hearing,
  • Making all necessary findings, and
  • Adopting a redevelopment plan.