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Aurora

Difficult to understand, tougher to explain



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Seiser
February 01, 2012 | 07:30 AM
When you read the words Tax Incremental Financing District, your eyes probably glaze over.

This is a topic that's not extremely interesting, fun or easy to understand.

But it is important. And although I am not positive I comprehend TIF in its entirety, I think it's valuable for those outside the local governments to understand its positives and negatives.

Many municipalities throughout the state have them, so in the grand scheme of things, they typically have positive results and benefits.

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TIF districts are created for several reasons, the main one is to eliminate blight by making improvements to an area. Blight can be considered many things — not necessarily focused on decrepit buildings and rough neighborhoods.

Depending on the type of TIF district, the targets for use range from eliminating blight, rehabilitation and conservation, promoting industrial development or other uses, environmental remediation or special projects that promote agriculture, forestry, manufacturing and tourism.

In Lake Geneva, blight refers to transportation problems in the downtown, and in places like Fontana, the focus was on improving pedestrian movement from the lakefront to the village's school and recreation areas. In Walworth, the TIF District is focused on development and no blight was cited as a reason to create the district.

Once a TIF District area is decided, the Department of Revenue determines the current value within the district. The valuation is known as the base value and will determine the amount of property taxes all taxing jurisdictions, such as the school, city and county, will be able to spend for their own purposes.

Any property value increases and subsequent rise in property taxes that occur in the TIF are known as the value increment and will be kept by the municipality to pay off the borrowing or spending used within the TIF.

A well-planned and executed TIF will result in benefits to the municipality, including a broader tax base in which schools and county share, elimination of blight, increased property value and creation of new jobs.

That's a simple explanation of how TIF works. It's taken years of watching multiple TIFs implemented, many Internet searches and discussions with people who think TIFs are good and others who do not, to understand.

There's no doubt people can look at TIF differently. As taxpayers, we are basically paying for the TIF projects. A confusing formula increases the levies for the county, schools, city and technical college. That increase goes into the TIF fund. We do pay that.

For our city taxes payable in 2012, that was a total of $1.77 million, or about 6 percent of our tax bills.

Some have called this a hidden tax and it basically is. However, it revolves around property values that probably wouldn't have existed without the TIF. The Department of Revenue calls this a "special allocation method for taxes collected."

I see it as a way to keep funding separate and complete projects a municipality wouldn't typically be able to do within the tight fiscal confines.

TIF has allowed the city to make improvements such as the Edwards Boulevard extension, the Main Street bridge, the Mill Street intersection all without borrowing a dime.

Regardless of what you believe, one thing is certain, Lake Geneva's TIF has been in good shape for quite some time. There's plenty of money to pretty much do whatever other projects city officials want to do. And when the TIF is closed, there will be plenty of additional tax base to add to tax roll.

To me, that sounds like the best of all worlds. Many needed projects completed, valuation growth and lower tax rates.

Seiser is the editor of the Regional News.

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