School district sues Mount Prospect, Ill., over TIF

School district sues Mount Prospect, Ill., over TIF

The case against Mount Prospect, Ill., shows how tax increment financing districts siphon tax money from school districts and other taxing bodies, and diverts needed resources and puts pressure on taxpayers to make up the difference.

Since the late 1970s, hundreds of municipalities across Illinois have created tax increment financing, or TIF, districts to spur local development.

Though most TIFs were adopted with little fanfare, the harm of TIFs – which includes the diversion of tax dollars schools, libraries, parks, etc. need, as well as a lack of transparency and government interference in the marketplace – has caused concern among taxpayers and other taxing bodies. A lawsuit a school district filed against the northwestern Chicago suburb of Mount Prospect provides a prime example of this.

What are TIFs?

A TIF district is a special economic zone the mayor controls, and property tax revenue above a certain level from any property located in a TIF goes directly to a special fund the mayor can use to encourage developers to undertake projects.

Similar to the state’s now-expired Economic Development for a Growing Economy, or EDGE, tax credit program, TIF allows the government to pick winners and losers among businesses while forcing taxpayers to foot the bill.

Like EDGE tax credits, TIF is not “free money.” It funds redevelopment at the expense of taxpayers and other taxing bodies, such as schools and public works.

Proponents of TIF note that increased economic development ultimately increases the funding given to taxing bodies such as school districts, as once the TIF is retired, all of the increase in increment goes to the taxing bodies.

But in the meantime, to make up for the revenue diverted to TIF funds, counties and municipalities resort to increasing tax levies. This contributes to taxpayers being saddled with some of the highest property taxes rates in the state and nation.

Mount Prospect TIF dispute

In Mount Prospect, officials implemented a new TIF in the downtown area that encompassed much of a recently retired TIF district. In effect, given that under Illinois law TIFs generally last 23 years and can be extended for 12 years, this means the deferred funding might not make its way to the school district for over 50 years. For this reason, Mount Prospect High School District 214 has sued the village.

The village has offered several concessions to appease the school district, including revenue sharing starting in year 12 of the TIF. However, these concessions only distract from the reality that TIF is a bad deal for just about everyone but the politicians who get to dole out TIF money and the developers they choose.

Politicians often claim that TIF is the only option to encourage development. “In my mind one of the areas that lags is our downtown,” Mount Prospect Trustee Paul Hoefert noted. “It is documented that (property value) in the downtown area is falling and it has been falling for the last five or six years. In my estimation, it would be extremely irresponsible for this board not to act.”

But Mount Prospect has chosen to funnel tax money to certain developers at the expense of school students. Unsurprisingly, local school districts are looking for new revenues. District 57, whose boundaries include the new TIF, has signaled that it is considering asking voters during the March 2018 election for more tax revenues.

The solution is simple: Eliminate TIFs entirely at the state level, thereby forcing cities to address their financial problems directly instead of continuing to play financial shell games.

However, taxing bodies don’t have to remain idle while waiting for the state to act. Much like Mount Prospect, Oak Park, O’Fallon, Woodstock and others, school districts can take legal action to prevent TIFs from diverting their funding. And local residents should let municipalities know they object to politicians doling out tax dollars to handpicked developers at the expense of school children and taxpayers.

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