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A suggestion that the City close two of its five tax-increment financing districts (TIFs) three years early in order to boost school district financing, presented to the City’s Economic Development Committee in July, drew a harsh reaction from two aldermen at the Aug. 24 meeting of the committee.
In a TIF district, the property tax differential between the unimproved and improved parcel (the tax increment) is not distributed to all eligible taxing bodies but can be used by the City to finance infrastructure improvements within the district.
The reactions came during an overview presentation by members of the City’s Community and Economic Development Department about the City’s current TIFs and the possibility of creating new TIF districts. Charged with presenting such a report after the July meeting, Nancy Radzevich, economic development manager, said, “We listened to the Committee. We have done some of our homework. … The next step is to talk to the aldermen and department heads” about which projects remain to be done in TIF districts.
TIFs and School Districts
Ms. Radzevich then added that the school agreement, under which the school districts receive payment from the TIF as a partial offset for lost tax revenue, needs to be negotiated. Two aldermen pounced.
“I just don’t want Howard-Hartrey [TIF] to close early,” said Alderman Ann Rainey, 8th Ward.
“The District 65 Superintendent [Dr. Hardy Murphy] is getting a large raise; they want to build a new school. Are they really in need of money or just crying poor?” said Alderman Colleen Burrus, 9th Ward. “We need infrastructure improvements. … [but] they keep claiming they need the money desperately while they’re giving raises.”
“[The School Districts] need to fight for every TIF. … Schools have done nothing but benefit big time from our TIFs. … To close out the TIFs early to help the schools is a bad idea,” said Ald. Rainey. “I think these [TIFs] are more important than helping schools.”
Ms. Radzevich said that the City was not proposing the closing of any TIFs early. Alderman Delores Holmes, 5th Ward, said that she preferred to stay out of School District business such as salaries and raises and that the only reason the early closure was on the table was because the two TIFs in question, Howard-Hartrey (home of the Target development near Howard Street and McCormick Boulevard) and the Southwest TIF (Pitner Alley and Pitner Avenue south of Main Street), are scheduled to close in 2014 anyway.
Ald. Rainey pointed to the downtown TIF that closed last year, the theater development along Church Street, as a tremendous success story. “That still would have been the world’s largest surface parking lot,” surrounded by auto repair shops, she said.
Assistant City Manager Marty Lyons said, “The Downtown TIF is one of the most successful TIFs ever, as far as original value vs. closing value.” The City was able to provide the infrastructure needed through leveraging the TIF, allowing the successful conversion of the parking lot to a thriving retail development in downtown. “It explains why developing infrastructure first is important. … It is an effective methodology,” he said.
The City can leverage TIFs by borrowing on the future tax increase, through bonds, in order to create basic infrastructure improvements, then use TIF funds to repay that debt, said Mr. Lyons. TIFs last a maximum of 23 years under Illinois law, but can be terminated earlier if all debts are paid off and all projects within the district have been completed.
Ms. Radzevich sought Committee approval to hire a TIF consultant to study the possibility of creating additional TIF districts in Evanston. Two locations that were mentioned included the Dempster-Dodge area and the Main-Chicago development. Johanna Nyden of the economic development staff said an area as small as 1.2 acres can become a TIF district.
The committee approved the request, but asked that the consultant include the possibility of reducing, splitting, or combining with another district the West Side TIF, which currently stretches in a narrow, meandering strip from Simpson Street and Green Bay Road south past Greenleaf Street, shifting over Dodge and all the way to McDaniel at one point in the process.
Further TIFs may well be on the horizon, and it looks highly unlikely that the Howard-Hartrey and Southwest TIFs will close before their planned 2014 expiration.