The Village of Lakewood has pretty much decided to create a Tax Increment Financing District of about one square mile.
This Tuesday at 7 PM, the SportsPlex development, in its second iteration, will be presented at a public meeting at the ball room of Turnberry Country Club.
The final Tuesday of the month a formal zoning hearing will be held, same time, same place.
The proposed Tax Increment Financing District is in the upper left hand corner of the map.
It’s located in the Woodstock School District and the Huntley Park District and is designed, according to village officials to allow commercial growth in the area of Routes 176 and 47.
Steve Willson and others have been researching the topic. Here is some of what Willson found about TIFs:
Extracts from Formal Academic TIF Studies
Since Lakewood is potentially taking millions of dollars in taxes away from our local schools by creating a TIF district, one might expect they would demand strong evidence to support this action.
In fact, virtually no evidence exists.
Those who favor TIFs point out that TIF districts usually result in increased assessed value.
Of course they do.
Whenever you offer deep subsidies, you will attract investment that would not otherwise occur.
And, in fact, TIFs are usually created at the request of a business seeking a subsidy, virtually guaranteeing a project will result and assessed value will go up.
The studies that show increases are all by firms and agencies that benefit from the creation of TIF districts and all they show is that assessed value went up.
Looking only at increases in assessed value in TIF districts does not answer the question of if, in the long run,
TIFs create more value than would occur without TIFs, the question of how much development would have occurred, not only in the TIF district but elsewhere, if there were NO TIF district.
The only truly independent studies, performed by academics, indicate that TIFs do not have a net positive impact.
Below are extracts from three such studies:
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Tax Increment Financing, A Tool for Local Economic Development
Richard Dye and David Merriman; January 2006
“The first study (Dye and Merriman 2000) uses data from 235 Chicago area municipalities…. We found that property values in TIF-adopting municipalities grew at the same rate as or even less rapidly than in nonadopting municipalities…. Our findings were a surprise to those, especially nonacademics, who naively had inferred TIF caused growth by observing growth within a TIF district….
“[W]e undertook a second study (Dye and Merriman 2003)…. We used three different data sets: property value data for 246 municipalities in the six-county Chicago area; less complete property value data for 1,242 municipalities in all 102 Illinois counties; and property value data for 247 TIF districts in the six-county Chicago area….we still find no positive impact of TIF adoption on the growth… ”
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from: Determinants of Property Value Growth for Tax Increment Financing Districts
Paul F. Byrne, Department of Economics, University of Illinois (2002)
“Michael Dardia’s (1998) work stands alone as the only previous paper studying the effects of TIF at the disaggregate level. He used a matched-pair approach to measure TIF effectiveness. Dardia created a matched pair for each TIF district by looking for areas with similar values for a vector of census variables. Comparing the growth difference between TIF districts and their respective matches, he found that TIF designation increased property value growth but not by enough to justify the tax increment the TIF district received.”
(Michael Dardia, 1998. Subsidizing Redevelopment in California, San Francisco: Public Policy Institute of California.)
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Does Chicago’s Tax Increment Financing (TIF) Program Pass the ‘But-For’ Test? Job Creation and Economic Development Impacts Using Time Series Data
- William Lester Assistant Professor University of North Carolina, Chapel Hill; April 2013
“To evaluate the effectiveness of TIF and similar economic development practices, one needs to ask if future development would have occurred without the up-front intervention. While this “but-for” test is necessary to evaluate if TIF is an effective redevelopment tool, and thus a wise use of public funds, it is an elusive question for planners and policy researchers to accurately address.…
“Despite its extensive use throughout the City of Chicago, this paper finds no evidence that the TIF program resulted in any significant new job creation. While some individual TIFs may have positive impacts, Chicago’s use of TIF has not resulted in positive net employment benefits for city residents. This paper, by measuring building permit activity, finds no support for the claim that TIF designation acts as a catalyst for private investment—beyond what would have occurred otherwise—in the physical structure of local neighborhoods.”
There is no cost information available anywhere on the proposed Lakewood IL Route 176 / IL Route 47 TIF.
1. How much tax revenue does the TIF area generate today.
2. How much tax revenue does the Sportsplex portion of the TIF area generate today.
3. Exactly what TIF subsidy is Sportsplex asking for, and what is the estimated cost of that subsidy.
4. More specifically regarding (3) above, is Sportsplex asking to extend utilities to the area and have that funded by TIF revenues? What utilities? What is the estimated cost to taxpayers in TIF money?
5. How much Tax revenue is the Sportsplex estimated to generate in each of the next 23 years (lifespan of the TIF).
6. We would be looking for actual dollars for the above answers, not EAV. If they want to also give EAV great.
In this above example, taxpayers are financing developers.
Developers usually have to pay to extend utilities to their development.
So how can a taxpayer evaluate a TIF and TIF project (Sportsplex) if the taxpayer doesn’t even have basic estimated costs.
The taxpayers are providing the ultimate to developers, in the form of free money.
It’s not even an interest free loan.
It’s free money.
Once your money is gone, you can’t get it back.
You can only hope and pray that future tax revenues will exceed the free money you gave away.
Where’s the present value (PV) calculation of that?
Well you can’t do a present value calculation because you don’t have basic tax revenue information.
You can’t do a present value calculation using EAV, or if you could it’s not too easy since farmland for instance is taxed at a different rate than residential and commercial / industrial.
How is the sportsplex even classified, as commercial?
You need real dollars.
And the Sportsplex is a 501c3, so apparently non profit sportsplexes can generate tax revenue?
How can an individual taxpayer justify spending time to save a few bucks off their individual tax bill, compared to the developers and to lesser extent taxing districts who stand to gain far more than an individual taxpayer.
And those that stand to gain a lot are not sharing data they have.
Or they better have the data to make a business plan, that would be a scary if they are just winging it.
Also I would guess this sportsplex is aimed at your youth travel players and adults who participate in tournaments.
How familiar is the public with analyzing that business model?
Where are large youth sports tournaments held?
There are several options already.
They of course would be a bit different, that goes without saying, they are not all carbon copies of each other.
Talk to any kid or parent of a kid on a travel team or tournament team and they can tell you about the options; ditto for adults on tournament teams.
Here are some of the options.
No doubt some are missing.
Woodside Sports Complex in Mauston WI & Wisconsin Dells WI, Cooperstown NY, Elizabethtown Sports Park in Elizabeth KY, Grand Sports Park in Westfield IN, Elgin Sports Park, Clifty Park and Lincoln Park in Columbus IN, Evansville Sports Complex in Evansville IN, Artvan Sports Complex in Rockford MI, Bailey Park and Brown Stadium in Battle Creek MI, Randall Island Park in Manhattan, Connecticut Sportsplex in North Branford CT.
So if you the taxpayer are on the hook to extend utilities in exchange for increased tax revenues which will supposedly lower your tax burden in the future, you should at least see a business plan and do some present value calculations.
Where’s the numbers?
Another few questions:
1. Will the taxpayers who are obligated to pay these costs for benefit of these developers receive any tax income in the future, or will income all belong to Lakewood?
If there is taxable EAV, will taxes accrue to Lakewood while children of tif are sent to a school district currently not in Lakewood(so no tax burden on Lakewood taxpayers)?
2. What is happening to the neighbors directly adjacent to this property? Will they be adversely affected by this project?
3. Is the County prepared to extend these funding benefits to developers in the case of a Countywide frozen EAV?
If, as Lakewood states, “no one will develop without tif money”, we must assume that tifs will spring up all over McHenry County.
Public schools will have to be funded for the next 35 years* of inflation from taxes only on 2014 existing property and existing 2014 EAV budget. (Taxpayers will continue to pay much higher taxes, but that higher portion goes directly to developers).
County may issue bonds over and above PTELL caps.
All taxpayers will be responsible to pay for principal and interest on The infrastructure building bonds.
As taxing districts raise their levies to whatever extent the law allows, and issue whatever bond debt is not limited by PTELL, taxes will rise. Will our property values rise?
I believe not, because our tax rates are too high relative to the rest of America.
In D200, our tax rate is above 4% of total property value. Average tax rate on homes in America is now 1.4%.
So if tax levies rise but home values stagnate or fall, tax RATES raise.
And tifs are paid the tax RATE applied to their incremental EAV.
So tifs are rewarded by our rising tax RATES.
*(About tif duration, I have read that tifs in Chicago can and do last 35 years. They are allowed a 12 year extension at the end.)
Keep in mind, when comparing property taxes to other states, it’s the overall tax burden that is most important, that being the overall mix of all taxes (property, income, sales, etc.).
And it’s not just taxes but fees also.
Illinois is not a low tax comparison to any State on any front that I can discover!
Gas tax rate, sales tax rates, and even income tax (not being graduated) compares at least on par if not worse.
Property taxes are a much more significant portion of the typical American’s income, because it is a percentage, always rising, on a number which is usually higher than a person’s salary.
(Does a person with a $100,000 home make a $100,000/year salary?)
When property tax rates are approaching income tax rates (as they are here, mine being above 4%), property taxes are the most significant portion of household budget.