Members of the City’s Economic Development Committee made no formal decision regarding a proposal from City staff to close two of the City’s tax increment financing (TIF) districts ahead of schedule but instead requested additional information about projects in both the Southwest and the Howard-Hartrey TIFs. Any decision by the Committee would be a recommendation subject to City Council approval.

Property-owners in a TIF District pay property taxes on the assessed value of their properties, but the portion of the taxes that is attributable to the increased value of the property after the TIF was approved goes into the TIF and may be used for certain improvements in the TIF and for other designated purposes. When the TIF is closed, any surplus funds must be distributed to the taxing bodies in proportion to their share of the property taxes, and the taxing bodies also begin to receive their share of all taxes paid on the property after that point.

Last month City staff recommended that the City close the Southwest TIF on Dec. 31, 2012, about two years early, and the Howard-Hartrey TIF on Dec. 31, 2012, about four years early. Staff concluded that given the limited “life” remaining on each of these TIFs, there was limited cash flow available to facilitate additional projects in these districts.

The Southwest TIF is located in the area generally known as the City’s southwest industrial corridor, south of Main Street along the North Shore Channel. Sam’s Club and Ward Manufacturing are located in this TIF.

The Howard-Hartrey TIF is located at 2201 West Howard St., in the City’s southwest corner. The development consists of a shopping center with several big-box stores, including Best Buy, Target, Office Max and Jewel-Osco.

At the July 27 Economic Development Committee meeting, Alderman Ann Rainey, 8th Ward, said she would not recommend closing the Howard-Hartrey TIF until the neighborhood there had seen some benefits. “Nobody in the Howard-Hartrey TIF has ever benefited in any way – except the wall,” she said. She was referring to a wall on the east side of the shopping plaza that acts as a buffer between the shopping plaza and the adjacent residential neighborhood – not to the wall that Chicago Alderman Bernard Stone began building in the middle of Howard Street when the project began.

Ald. Rainey said, “I have several projects that I have proposed to staff that have been ignored. I’m going to plead with this Committee to exclude the Howard-Hartrey TIF from the recommendation to the Council. … It’s horrible; it’s the worst-looking shopping center in town. We have never lifted a finger [to improve the area].” She added, though, “I’m not saying that in the final analysis I won’t support [closing the TIF].”

ECD member Dan Mennemeyer said he agreed with Ald. Rainey and asked why the two School Districts wished to have the TIF closed. Bill Stafford, CFO of School District 202, and Kathy Zalewski of School District 65 both said that closing the TIF would help the School Districts financially. While the bulk of the levy of a School District is capped by a state-imposed limit tied annually to the CPI (the tax cap), that cap does include new properties coming onto the tax rolls. Closing a TIF district, then, would add new property to the tax rolls that would not, in the first year, be subject to the tax cap and would thus broaden the base for subsequent levies.

Mr. Stafford said the School Districts recognize that the City has to balance its need to keep the revenues in the TIF with the benefits that closing the TIF would have for the School Districts. “We urge the Committee to give strong consideration to retiring the TIFs in 2012.”

Ms. Zalewski said District 65 also supported closing the TIFs. “The District is facing deficits again, and closing the TIFs would help.” She and Mr. Stafford urged the Committee members either to close the TIFs or to continue with an intergovernmental agreement for revenue-sharing. Because TIFs limit the School Districts’ levy amounts, the City has for several years entered into an intergovernmental agreement with the School Districts, under which a portion of the TIF revenues was shared with them.

Ald. Rainey said she had “no problem helping out the schools, but not at the expense of the TIFs.” She also asked for additional information about a proposed sewer project that could be paid for with funds from the Southwest (Sam’s Club) TIF. “[Staff is] saying, ‘Let’s close the TIF and shift the burden to all the rate-payers in the community.’”

Assistant City Manager Martin Lyons said City staff would provide information about all infrastructure projects in those two TIFs – including a sewer project along Cleveland Street – in time for the Committee’s August meeting. Staff will also have a proposed intergovernmental agreement with the two School Districts at that time, he said.

The City says there will be a modest surplus of funds left in the Southwest TIF and a higher surplus left in the Howard/Hartrey TIF if they are closed on Dec. 31, 2012. Assuming both TIFs were closed at the end of 2012, District 65 would receive a one-time payment of its share of the surpluses of about $1.5 million and District 202 would receive a one-time payment of about $1 million. In addition, after the TIFs were closed, District 65 could levy an additional $646,194 in property taxes and District 202 could levy an additional $434,915 each year.