Tax Increment Finance (TIF) districts in Illinois hide property wealth from the state in the areas where they exist. TIFs affect the formula for how much money the state will send to school districts under an evidence-based funding model, and some state lawmakers say it’s time to change that.
TIFs are so-called economic development tools local governments create that artificially freeze property values when the TIFs are created. Any tax revenue created from the actual increase in property value is used to incentivize development within the TIF district. That additional tax revenue does not go to traditional government functions such as schools. And the increased property values are, under the Democrats’ proposed evidenced-based education funding formula, hidden from the state when it determines which school districts are most in need of additional dollars.
“It doesn’t give a clear picture as to how much wealth is within a district when we start talking about the allocation of state money,” state Rep. Steven Reick, R-Woodstock, said during a committee hearing earlier this month. “This is money coming out of districts that don’t have TIFs paying for ones that do.”
Gov. Bruce Rauner says that’s unfair to districts that don’t hide their overall property wealth through TIFs. That’s why he said he amended Democrats’ plan to add TIF property wealth to the overall calculation when determining which districts are most in need.
School districts say they don’t control the creation of TIFs, but some have cut side deals with municipalities that create them to get some of the increment for the schools. Those side deals also are not accounted for when the state doles out dollars.
Last week during a House committee hearing, Taylorville School District Superintendent Greggory Fuerstenau said his district struck a deal with one town to share in some of the money, and there are talks to capture a share in other TIFs.
“They’re talking about it,” Fuerstenau said. “They’re doing a study. They’re moving forward with it. The school district’s been at the table having a conversation,” but it’s still being negotiated.
State Rep. Jeanne Ives, R-Wheaton, said that type of negotiation isn’t addressed by the state, but should be accounted for “on what happens with property that’s put in TIFs and how it’s evaluated for state support, because you have side deals that are going on.”
“Taylorville is getting some money out of their TIFs,” Ives said. “I believe Centralia said they’re getting nothing.”
Ives also noted that hundreds of millions of tax dollars are hidden from the state in Chicago’s TIFs each year, as well as about $90 million in TIF money that Chicago Public Schools receive annually in a deal CPS made several years ago with the city.
Ives said Rauner addressed TIF districts in his changes to the Democrats’ funding reform bill to make for a level playing field for districts across the state.
Democrats, however, say TIFs should be dealt with later. Republicans say TIFs should be dealt with now because taxpayers in areas that don’t hide their overall property wealth should not be forced to pay to supplement those who do.
The House is scheduled to be in session Wednesday to possibly take up an override motion to the governor’s change. It also could vote on a new bill that mirrors the Democrats’ original school funding reform measure.