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Tax increment financing districts have steered more than half a billion dollars in property taxes into funds designated to provide incentives to businesses in St. Clair and Madison counties since 2005.
Experts caution the incentives raise property taxes and can be misused to reward the politically connected with unneeded tax breaks. Supporters say the revenue spurs development that would otherwise not come to a city and funds can be used for public projects, such as improving roads and sewers.
The districts, commonly known as TIFs, collected more than $581.7 million in property taxes in the nine-year period between 2005 and 2013, according to county records. Records detailing TIFs in St. Clair County were not available prior to 2005.
City officials create the districts as a way to provide tax incentives for businesses or pay for infrastructure projects. Any increase in property taxes collected in the district is placed within a separate fund. City officials then determine where the funding will be spent.
About $414.4 million in property taxes went to TIF funds in St. Clair County in the past nine years. In comparison, about $167.3 million in taxes went to TIF funds in Madison County during that time.
Brian Costin with the Illinois Policy Institute, a nonpartisan research group based in Springfield, said TIF districts do not work as intended and raise property taxes for residents.
"The reason why politicians are looking towards these tools is the economic climate in Illinois is not good. They are looking for ribbon-cutting ceremonies where they can say we used property tax dollars to attract these businesses to town," Costin said.
"They don't talk about the other side where everyone else pays. It's harder to see when people have $50 or $100 less in their pockets because of a TIF district. That money is probably going into special deals for new developers, businesses or existing businesses threatening to leave the area."
Belleville Mayor Mark Eckert said TIF districts have provided funds to repair the city's aging infrastructure and spur economic growth following a period in the late 1980s and mid-1990s when the city was "really struggling." Belleville hosts 19 TIF districts, the most of any city in St. Clair and Madison County.
"TIF is made out by a few to be this monster. I didn't create TIF, the state founded the program," Eckert said. "I'm not saying it's the best thing going but it's been a tool in the tool box for Belleville to be able to use. ... How can we raise that kind of money to effectively make repairs the (Environmental Protection Agency) requires, fix infrastructure, buy police cars, buy a fire truck? And we are facing major work on our police department, which is 50 years old and greatly outdated. If we don't have TIF money, where is that money going to come from?"
More than $43.6 million went to TIF districts in St. Clair County this year, and more than $23 million went to TIF funds in Madison County.
And the number of TIFs is continually growing. Cities in St. Clair County added 19 TIFs since 2004. The number of TIFs in St. Clair County has grown from 48 to 67 districts -- a 40 percent jump since then. In Madison County, the number of TIFs grew from 28 to 38 in that time.
David Merriman with the Illinois Institute of Government and Public Affairs said the increase was caused in part by cities seeking to attract development in the recent recession and he expected more TIF districts to be created as real estate markets recover. The Institute of Government and Public Affairs is a public policy research organization based at the University of Illinois.
"Many cities had a crimp in real estate development during and after the Great Recession. Many are desperate to stimulate development however possible," Merriman said.
Only four cities in St. Clair County do not have a TIF district: Smithton, Lenzburg, Lebanon and Summerfield. The remaining 23 cities in the county all host at least one TIF district.
In Madison County, 17 of 29 cities now host TIF districts.
Mary Rocchio with the East-West Gateway Council of Governments said the increase stemmed from local governments attempting to spur development without seeking voter approval for additional taxes. East-West Gateway is a planning organization that advises local governments.
"It's difficult for new taxes to be passed because of the economic nature we're in right now," Rocchio said. "New tax increment financing districts are a tool local governments have to work around that and allow them to finance economic develop otherwise not able to with existing revenue streams."
Washington Park Mayor Angie Rodgers said the TIF district in her city was "crucial" and providing much-needed services for residents. The TIF district in Washington Park, which collected more than $3.6 million in property taxes since 2005, recently received an extension for an additional 12 years.
"We needed this in Washington Park. We wouldn't be able to survive without the extension for another 12 years," Rodgers said. "We are using the TIF dollars for redevelopment and infrastructure. When I came in (office) in May the sewers were operating at 15 to 20 percent. Now our sewers are operating with a new pump and panels at 85 percent and we are still working. The streets are being patched right now. We are going through alleyways, which is something probably not done in 20 years. Our residents are seeing the difference in Washington Park."
Rodgers said $100,000 in TIF funds will also help the Southern Illinois Regional Wellness Center open an office in Washington Park at 1835 Kingshighway Blvd. in a few months. The center offers medical services for residents regardless of whether they have insurance.
Expert: TIFs raise property taxes
More property taxes have been collected in TIF funds in Belleville than any other city in St. Clair and Madison counties. More than $136 million has been steered into TIF funds since 2005.
Eckert said the money has paid for numerous public works projects, including street repair, extending bike trails, purchasing emergency vehicles, renovating a fire station, federally mandated improvements to the city's wastewater plant and constructing miles of sidewalks in neighborhoods with schools and churches.
TIF funds also have spurred development of destination shopping at Greenmount Commons, Belleville Crossing and Eckert's Orchards, Eckert said. The three shopping areas only receive reimbursements from the property tax generated at the sites. The businesses also receive a 1 percent reimbursement of sales tax revenue generated through a separate incentive.
"People think we are doling out money ahead of time and it's not true," Eckert said. "These TIFs have been extremely successful and helpful to Belleville by generating sales taxes. These projects have brought people to Belleville for destinations. ... We are getting people to shop in Belleville (we) haven't had since the '60s when Belleville had all the stores before the mall (St. Clair Square in Fairview Heights) was built in the '70s."
About 30 percent of all property taxes in Belleville are placed within TIF funds, according to tax records.
Costin said any official stating a TIF district is not increasing property tax rates is "straight up lying to taxpayers." Since a group of taxpayers are not paying full taxes to schools and other taxing districts, Costin said, the remaining taxpayers must make up the difference.
Belleville's tax rate has risen 68 percent during since 2004, according to county records, from $0.9626 to $1.6147 per $100 of a home's assessed value. The higher tax rate translates to a $217 increase in the property tax bill of a resident with a $100,000 home in Belleville.
Eckert said the tax rate increase stems from investments that fund the city's fire and police pension taking a major hit since 2008 due to the recession. About 49 percent of the city's total tax rate increase occurred in the city's pension and retirement funds since 2008.
"I think these experts sit in institutions from afar and in theory make these statements, but really don't know how Belleville uses their TIF and how we work together (with other taxing bodies)," said Eckert, who noted the city is turning 200 next year.
"Belleville is not dying, it's growing. ... With all the improvements we've done, we have strengthened the city."
As examples of the city working with taxing bodies, Eckert said the city reimburses half of the revenue collected by TIF to local school districts, and has used TIF funds to make improvements to buildings within the Belleville Public Library system. The city gave about $4.1 million to school districts in the 2012-2013 fiscal year, according to a city audit.
TIF revenue has also allowed the city to match funding from federal and state grants otherwise out of reach for the city, Eckert said.
Costin said the prevalence of Illinois communities to use TIF districts is because it's a complex subject for most residents.
"The average citizen doesn't understand how TIF districts work and public officials use misleading terminology. Public officials often say property taxes are frozen in a TIF district. What it really means is property taxes are frozen in how much property taxes can go to taxing bodies," Costin said.
Costin said property tax rates in Illinois are on average the second highest in the nation for owner-occupied housing with only New Jersey homeowners paying more.
TIFs within East St. Louis collected $98.1 million in taxes in the past nine years -- the second highest amount of money in TIF funds in St. Clair and Madison counties. About 46 percent of all property taxes in the city were placed within TIF funds this year.
East St. Louis' tax rate has risen 46 percent in that time from $2.7176 to $3.2482. East St. Louis Mayor Alvin Parks could not be reached for comment.
School districts collect a majority of revenue from property tax bills, however, the state's funding formula subsidizes the loss of property tax revenue. School districts are also able to increase their tax levy to a maximum set under the law to make up the loss.
"To the extent that TIF lowers the tax base of school districts, it can cause tax rates to rise in school districts if the school district is below its tax rate cap," Merriman said. "In Illinois, state funding formulas replace much of the revenue that is lost when a school district tax base is reduced by TIF so the impact on tax rates may be relatively small."
Experts see problems with tax incentive
The popular tax incentive can provide benefits for blighted areas but can also be misused, according to Merriman and Costin.
"TIF can potentially drive economic development in a positive way because it can align the incentives of the developer (real estate appreciation) with the incentives of the municipal government -- get additional property tax base," Merriman said.
"The difficulty is that TIF can be misused in a number of ways. TIF can be used to reward friends of the politically powerful. TIF can be used to subsidize development that would have happened anyway or it can be used by municipal governments to capture property tax base from school districts and other special purpose governments."
Costin said a key problem with TIF districts is residents in overlapping cities and counties are taxed without representation.
For example, Costin believes a city creating a TIF in a school district spanning multiple cities places a heavier tax burden on residents in other cities in support of the school district.
"Any overlapping taxing body stretching into the next town or county will have taxpayers in TIF districts over time not paying their full share into school districts, county, townships, etc. Those people paying higher taxes because of the TIF districts might be in a neighboring community and have no real representation on the TIF board. TIF districts are entirely controlled by the municipality," Costin said.
The Policy Institute proposes TIF districts face approval in countywide referendums or cities use other tax incentives that draw property taxes only from those benefiting from the incentive.
Another problem is a loose description of what property qualifies to become a TIF district, Costin said.
"Under state law as constructed right now literally every parcel of land in the state of Illinois qualifies as a conservation area or blighted district because the rules are so loose there is no objective standard to what is a blighted area," Costin said. "That means municipalities across the state have carte blanche power to create TIF districts. There are no checks and balances. It's being abused.
"The intent of the law was to address severely blighted areas. Now it's being used for everything under the sun, every pet project, every special deal made with connected developers. It's time for a complete overhaul of state TIF rules."
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Contact reporter Daniel Kelley at email@example.com or 618-239-2501.