Part 2 – Reasons for Opposing the Lakewood TIF District

This is part two of bond analyst Steve Willson’s reasons for opposing the Lakewood Tax Increment Financing District.

My second objection: the MISUSE of TIFs — how they are abused in practice.

Steve Wilson

Steve Wilson

TIFs are supposed to be used only in blighted areas, and only where there is strong evidence that no development will occur unless there is a TIF.

They were meant for areas like the south side of Chicago.

The reasons for these supposedly high statutory barriers are (1) to keep politics out of the process and (2) to keep municipalities from — pardon my French — screwing all the other local governments out of their property taxes.

The area designated by the Village Board for the TIF district consists of virgin land at 47 & 176 and the Crystal Woods golf course.

Is this area blighted?

Absolutely not.

But the Board designated this area as “blighted”, which was good enough for their lawyer.

Cathy Tryon and Mike Skala watch Mike Tryon sink a putt at the Crystal Woods Golf Club.

Cathy Tryon and Mike Skala watch Mike Tryon sink a putt at the Crystal Woods Golf Club.

This sleazy act violates the purpose and spirit of the law.

It is an abuse.

Trustee Gene Furey explained the rationale behind the TIF District.

Trustee Gene Furey explained the rationale behind the TIF District.

And is this area likely to remain undeveloped for 23 years?

Absolutely not.

Gene Furey himself said so in public.

So what did the Board do?

They hired a sham consultant to say the district met the law’s requirements.

I asked the Board three questions about this consultant:

  1. How many TIF districts has the consultant REVIEWED?
  2. How many TIF districts has the consultant APPROVED?
  3. Does the consultant have any evidence the approved TIFs resulted in development that wouldn’t have occurred anyway?

The Board didn’t know the answers to any of these questions.

They didn’t want to know.

Again, they failed in their fiduciary obligation to the public.

And the answers were:

  1. 50
  2. 50 and,
  3. “No”

In other words, the consultant has reviewed 50 proposed TIF projects, approved all 50, and has never done any work to determine if the districts actually met the law’s requirements.

Statistically, even if 90% of all proposed TIFs were effective, the odds that this consultant would find 50 out of 50 good ones is 0.5%.

Given the strong evidence that TIFs don’t actually work, the odds of 50 out of 50 are actually smaller than one in a trillion.

And if the Board is wrong, if development would occur in several years without a $130 million TIF ($66 million amortized over 23 years with interest), then the local school district will miss out on as much as $100 million in property taxes.

If development would have occurred in five years, then the school district would miss out on 18 years of taxes.

If development would have occurred in ten years, then the school district would miss out on 13 years of taxes.

The Village Board doesn’t care.

This beggar-thy-neighbor attitude is horrendous public policy.

= = = = =
The Lakewood Village Board meets at RedTail Golf Club Tuesday

  • at 6:45 for a budget hearing
  • at 7 for a regular meeting, the most important item, seemingly, approval of the budget.

I’d link to the proposed budget, but I can’t find it online.


Part 2 – Reasons for Opposing the Lakewood TIF District — 2 Comments

  1. It is important that Lakewood taxpayers understand that this will not be a moneymaker for them personally, it will raise their overall property taxes, for 35 years.

    As the property tax money from tif development is routed to developers through the discretion of Lakewood city manager, the funds needed to pay for school, fire and rescue, all road and County services, MCCD, MCC, and pensions (funded or unfunded) will be the responsibility of taxpayers outside the tif.

    While Lakewood homeowners may find they do not have as sharp a rise in Lakewood Village taxes over the next 35 years of inflation (because of tif sales tax revenue), any municipal tax savings will be dwarfed by the increase in taxes from all other taxing bodies required to subsidize property tax tif revenues (which do not go to the Village of Lakewood, the money is given to developers).

    (Important consideration: the sales tax revenue may have occurred anyway, without strings attached, but for the tif.)

    What percentage of a Lakewood property tax bill is attributed to the Village of Lakewood, less than 10%?

    If the other 90% of a tax bill rises 10%, any perceived ‘benefit’ to Lakewood taxpayers is demolished.

    Hidden costs include the unfunded pension liability and unfunded mandate obligations which accompany new enrollment in schools, new hiring needs by police, fire, roads, and county service departments.
    Taxpayers may assume they are protected by PTELL and statutory borrowing caps.

    Taxpayers would be incorrect, there exist many loopholes which local taxing bodies have become adept at accessing, most damaging of which is borrowing ability.

    Fire and safety and building bonds can be issued and debt maintained at levels outside caps, for example.

    Lakewood taxpayers will want to determine the impact of high borrowing leeway in CL D47&D155, if those schools decide to make use of it.

    There are many more traditional financial mechanisms available to fund sewer and water and streets in a new development, but Lakewood managers chose tif.

    In the consultant’s report, the vast land area encompassed by the tif is predicted to produce $34 new EAV.

    This would create a $4 million annual cash flow property tax to Lakewood managers’ favored developers over the next 35 years.

    The money is not, by law, supposed to create a zero-municipal tax scenario for Lakewood Village taxpayers, it is supposed to be spent within the tif geography.

    It appears this tif is being pitched as a profit center to Lakewood taxpayers.

    This tif is NOT a profit center to Lakewood taxpayers, their individual property tax bills will rise in every category other than possibly municipal tax, all in order to subsidize this tif.

    And the shame is, the sales tax revenue could be had WITHOUT a tif.

  2. Crystal Lake TIF money in the Virginia Street TIF has been disbursed by the City Council. I remember one restaurant location getting two new signs. The enterprises have gone under.

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