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What is a TIF District?

March 31st, 2010

Illinois, as well as other States, allows municipal governments to allocate specific area(s) within the municipality as Tax Increment Financing Districts (TIF).  These TIF districts are designed to support economic growth within the TIF. Sales taxes and property taxes continue to be collected within the TIF district, but these tax revenues are used for improvements specific to the TIF district. These improvements include road repair, new sewers, sidewalks, and other capital improvements. The idea is new economic growth will be encouraged by updating of the TIF district’s infrastructure and increasing the long-term tax revenue of that particular area.

Tax Increment Financing districts are areas chosen from a municipality which are in need of redevelopment from decay or deterioration. Often a community’s deserted downtown area is designated a TIF district in order to support or generate regrowth. This allows the area to be redeveloped, repairing buildings, encouraging businesses to open, etc.

According to the Illinois Tax Increment Association:

“When a TIF redevelopment project area (often called a TIF district) is created, the value of the property in the area is established as the “base” amount. The property taxes paid on this base amount continue to go to the various taxing bodies as they always had, with the amount of this revenue declining only if the base declines (something that the TIF is expected to keep from happening) or the tax rate goes down. It is the growth of the value of the property over the base that generates the tax increment. This increment is collected into a special fund (the Special Tax Increment Allocation Fund) for use by the municipality to make additional investments in the TIF project area. This reinvestment generates additional growth in property value, which results in even more revenue growth for reinvestment.”  From: Illinois Tax Increment Association’s Web site

How does this impact a public library? Over time, the TIF district increases its tax revenue, due to the concentrated improvements and redevelopment, but the library continues to receive property taxes only on the base amount established when the TIF district was created.

Libraries need to know where the area Tax Increment Financing districts are located as they impact the library’ property tax revenue. TIF districts may be the size of a town block, or half the municipality. Additionally, the municipality may establish multiple TIF districts over the years. When a TIF is established, the municipality must inform the taxing bodies which will be impacted, for example the school, community college, and library districts. If the library is a municipal library, it does not need to receive its own notification, as it is considered part of the municipality.

The TIF district(s) are factored into the library’s Equalized Assessed Valuation (EAV) by the county clerk. This is why the municipality’s EAV might be different from the library’s as time passes. Remember, the library continues to receive property tax revenue from the TIF area, but the sum is factored on the “base” amount of when the TIF was established. Once the TIF district expires the library and other taxing bodies benefit from the increased property values. However, TIF districts do not expire for 20+ years, and they can be extended.

Public libraries (municipal and district) along with other taxing bodies (school, community college, etc), may request TIF funds from the TIF Board of Review. These funds would be used for capital repair or maintenance of the library.  Each TIF district has a review board, so contact your municipality for information on the TIF Board of Review and how to apply for their TIF funding.

Resources for additional information on Tax Increment Financing (TIF):

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