Vancil (2)

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City's TIF Districts Could Help Revenue Stream and Municipal Growth

Robert Vancil of Leroy, Ill., is an expert on tax increment financing (TIF), and he believes it can be part of the answer for financing city government in East St. Louis.

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A TIF district is established when the city can meet criteria involving the economic need for development. It gives to the municipality all the taxes on the increased value of developments within the district: that is, the taxes that normally would go to the state, to the county, to the school district, to fire districts, and to all those other tax bodies on your property tax bill - if it is a real estate TIF district. But the revenues can only be used for developments within the district. These developments can be streets, water and sewer lines, street lights - improvements involving the infrastructure to attract more development. The city recently hired policemen from its TIF funds ' and was immediately warned that was a no-no. But a police substation probably would be approved.

TIF funds also can be used to help a business or a homeowner - pay the interest on the development up to a certain point.

We're trying to keep this simple, and in a way it is. But it also is complicated. When the TIF district is established, all the properties within the district and their assessed values are recorded. Distribution of taxes paid on these properties remains unchanged. However, as assessments are increased because of improvements, the additional tax money goes to the municipality for a TIF trust fund. But if a property decreases, it is not taken away, it just is not counted. That obviously is a good deal.

Now, there's more. There are different kinds of TIF districts. Real estate districts are one kind. There also are TIFs for utility taxes and for sales taxes. Or there were for sales taxes. The Illinois Tax Federation screamed the state was giving away the store when it enabled the sales tax TIF, and so it was closed - but East St. Louis got in under the wire. Most of the city of East St. Louis is in the real estate TIF. The downtown business section and the riverfront are in sales tax and utility tax TIFs. That means the city doesn't just get one-cent tax on sales, it gets all 6-1/4 cents on all increased sales. And it means it gets not only its three per cent utility tax, it gets the state's three per cent also, on all increased utility tax bills. And, ladies and gentlemen, the entire riverfront is in all three TIF districts for the next 20 years or so, according to Vancil.

One way of looking at it is that if the riverfront develops, the city will get and be able to spend for whatever it wants, including payback of the loans under the Distressed Cities Act, from the natural city tax increase, and it will be able to use TIF funds for the improvements necessary to serve the new businesses, like walks, lights, even local share to match grants of acceptable types. It could provide incentives for apartment houses, hotels, even amusement parks and shops at the landing for the gambling ship that the governor saw to it was authorized.

But that's still not all.

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Vancil has worked out elaborate plans utilizing TIFs, community development block grants and revolving loan funds to find a way around the horrendous real estate tax rate that has just about frozen all new construction in the city. A $60,000 house should be assessed at $20,000 (one-third market value) and taxed at $20 per hundred equalized evaluation - theoretically the tax bill would be $4,000 a year or $333 per month. Put that together with the highest insurance rates in the state and a mortgage payment and you could easily be paying $1,000 a month.

Vancil's program of interest buy-downs from TIF funds, free site preparation and some other features can provide that $60,000 home for $500 a month with a 20-year loan, with the development by private builders. It would provide for the city to receive regular taxes on the property. One subdivision is in preparation now in cooperation with Target 2000, in the hope of drawing back to East St. Louis the school teachers and other professionals who have moved from the city.

Vancil says the Distressed Cities Act can stop the slide of East St. Louis into further debt, but it needs a revenue stream to pay its way out of debt. The various TIF districts all can help, but the housing can bring back into the city taxpayers, leadership and revenue. On each $60,000 house, he sees the city recovering in TIF funds $13,000 by the tenth year, $35,460 by the 20th. He lists as projects 11 on line" 240 units for Target 2000, 160 for Anna Estates, 36 at Mount Zion and 24 in Edgemont Court for a total of 460 new homes. He wants to make that 1,000.

In commercial development, the city received $507,000 in TIF funds for 1987-88, $680,000 the next year and will exceed $1,200,000 this fiscal year, Vancil said. "This increment developed while the total equalized assessment valuation decreased."

Vancil also has proposed that the city aggressively seek changes in legislation for TIFs in poverty cities like East St. Louis, and for the distribution of state sales taxes on the basis of population rather than where sales occurred (see article on page 104)

 

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