City economic director explains TIF Districts

The Vandalia City Council recently reviewed Tax Increment Financing (TIF) District funds for distribution to local requests for building improvements. However with the discussion came much discussion of explaining to the public the purposes and operations of a TIF district.

Vandalia has two TIF districts, which were formed to meet one or more of three conditions – blight conditions, conservation conditions or industrial park conservation conditions. Monies collected from such districts may be used for specified public improvements and development projects within those districts. The Vandalia City Council is the final authority when approving TIF funds.

Once a district is proposed, all taxing bodies within the proposed district must agree to form the TIF district, or a vote of three-fifths of the municipality may create the district.

Once a TIF is established, all EAVs (equalized assessed evaluation on properties, generally 33 percent of the appraised value) are “frozen,” creating a baseline on which participating taxing bodies will continue to receive revenue. Subsequent increases in EAVs are still taxed, however the increased revenues go into the TIF fund account until the life of the district expires, usually 23 years. Once a TIF district expires, it is hoped that with projects completed through TIF grants, the assessed valuation on properties will have increased, providing additional revenues to the taxing bodies. A TIF district may be extended by 12 years, with approval from the state legislature.

The funds collected must be spent within the TIF district, and businesses or projects outside of the borders of a district may not benefit from the funds collected. If infrastructure outside of a TIF District serves businesses located within a TIF (a lift station, sewer/water lines) a percentage of the cost is TIF eligible.  The councilmen would have to determine what percentage of such a project benefits the TIF District businesses and prorate costs accordingly.

“An easy way for a business or resident to see if they are in a TIF District is to check their tax bills,” says Vandalia Economic Director Amber Daulbaugh. “If you see either Vandalia TIF 1 or 2, you are in a TIF district.”

Prior to establishing the districts, a TIF Advisory Committee was created, consisting of a representative or designee from each taxing body receiving revenues from the TIF districts. Through their input, board members established a best practices policy in approving TIF requests.

These best practices, as newly amended for TIF District 1, are:

• the TIF advisory committee is comprised of members of the taxing bodies or their approved alternate, who shall not live within a TIF or be receiving TIF incentives, to review the requests, in addition to one city council member to serve on the committee prior to the approval of a grant;

• the “but for” provision is applied appropriately to each individual TIF request;

• each project  has the possibility of enhancing the overall economy by spurring job growth or an increase in the EAV;

• projects submitted by taxing bodies requesting financial assistance must be used for purposes under the TIF ACT;

• the council should try to commit not more than 25 percent of the total project cost, unless the project brings many jobs or a service or product to the community not otherwise available;

• any remaining revenue after all obligations are made and the life of the TIF district ends, shall be proportionally distributed by all taxing bodies involved, and

• a specification for circumstances in which all or part of a grant shall be paid back to the TIF funds.

The TIF ACT provides for projects that may include, but not limited to:

• administration of the a redevelopment project;

• property acquisition, renovation, rehabilitation and demolition;

• construction of public works or improvements;

• job training related to the TIF area;

• financing costs including interest assistance;

• studies, surveys and plans;

• marketing related to sites within the TIF, and

• professional services, such as architecture and design services.

City of Vandalia graphic
The two TIF Districts are shown in green on the above map depicting the boundaries of both. On the right and east part of the city is TIF District 1, and on the left, or west side of the city is TIF District 2. Monies collected from these districts are allotted to projects within the respective districts for improvements which will hopefully increase the equalized assessed evaluation of properties. TIF District 1 was established on Oct. 4, 1999 and was set to expire on Dec. 31, 2022. An extension was granted by the General Assembly through Dec. 31, 2034. TIF District 2 was created on Dec. 6, 2004, and is set to exprie on Dec. 31, 2027.