Widespread non-compliance with TIF district reporting requirements

Tax Increment Financing, or TIF, districts are a controversial economic development tool – and there is no concrete evidence they actually work. In fact, a study from professors at the University of Chicago and Lake Forest College showed that Illinois communities with TIF districts “grew substantially slower than non-adopters.” By law, TIFs are intended to promote economic...

Tax Increment Financing, or TIF, districts are a controversial economic development tool – and there is no concrete evidence they actually work. In fact, a study from professors at the University of Chicago and Lake Forest College showed that Illinois communities with TIF districts “grew substantially slower than non-adopters.”

By law, TIFs are intended to promote economic development in blighted areas.

But the Chicago-based Tax Integrity and Fairness (TIF) alliance calls TIF districts “slush-funds typically used for corporate welfare and political back scratching.”

A new concerning TIF development is the fact that these special districts aren’t complying with state reporting requirements.

An April report from the Illinois Comptroller’s office shows municipalities all over the state are failing to meet state reporting standards.

The TIF Non-Compliance Report shows that as of April 16, 2013, 152 municipalities were in violation of state law, and statewide there were 531 non-compliance violations.

This may be an incomplete look at the problem because the comptroller’s website only released a report for the 2010 through 2012 fiscal years. Many communities show habitual problems in not providing their TIF district reports to the state comptroller and have failed to report three consecutive years. It is possible that many municipalities have failed to report for much longer than the past three years.

According to state law, 180 days after the end of a fiscal year municipalities in charge of TIF districts must file a report with the comptroller’s office, and to all taxing districts overlapping the TIF district. The comptroller then must post the TIF reports online within 45 days of receiving them.

The requirements of the report include:

•    Amendments to a redevelopment plan
•    Audited financial statements
•    Executive and legal statements certifying compliance with state TIF law
•    Description of property purchased
•    Itemized list of all expenditures
•    List of intergovernmental agreements
•    Information regarding contracts with third parties

Without proper reporting it is impossible for the public to hold taxing bodies accountable for their decisions. A lack of transparency is a recipe for fraud, waste and abuse of taxpayer dollars.

State reforms are necessary to fix this problem.

Suggestions for reform 

Unfortunately, there are no penalties for communities that don’t comply with Illinois TIF law. Essentially, communities only receive a light slap on the wrist when they fail to comply. This must change.

TIF law should be reformed to include strong penalties for communities failing to provide their TIF reports to the public on a timely basis.

If the comptroller finds that an annual TIF report is more than 90 days late, the offending municipality should be prohibited from issuing any new bonds or approving any new expenditures for anything other than compiling or filing its TIF reports.

If an annual report is filed more than 180 days late, TIF districts should face stiff financial penalties. If a TIF district were to have its tax increment base adjusted by its rate of inflation for each year they failed to file a report, we likely would see compliance rates improve dramatically.

Additionally, municipalities should be required to post annual TIF reports on their own website as soon as they are filed with the comptroller. Local residents footing the tab for TIF district spending are much more likely to visit their municipality’s website than the comptroller’s.

TIF district reporting non-compliant communities