The op-ed piece, originally published in the Northwest Herald, is published here with the permission of author Steve Stanek:
McHenry’s Steve Stanek’s Take on Tax Increment Financing Districts
The Huntley Outlet Center was supposed to send a flow of tax dollars to local governments but it now stands empty – and as a symbol of “economic development” failure.
Such failures dot the area. Two other big ones: the shuttered Harvard Motorola plant and the flailing McHenry Riverwalk. These and many other “economic development” projects have underperformed or stopped performing altogether.
This county was settled in the 1830s and grew for 150 years without “economic development” to lure or keep businesses. Then, in the 1980s and 1990s, came “economic development” corporations and local “economic development” departments. “Economic development” is a euphemism for corporate welfare.
Tax increment financing may be the most abused “economic development tool.” The Huntley and McHenry projects were TIFs. City and village governments create TIFs, which freeze property tax distributions in designated areas. As property values in the areas rise and development occurs, property tax collections also rise. But the increase in collections – the “increment” – does not go to schools, libraries, parks, etc. It goes to TIF projects, forcing all other property taxpayers to pay more to cover their share and the share that does not come from TIF districts. This is one reason McHenry County has some of the nation’s highest property tax burdens.
Sometimes TIFs fail so badly they need bailing out.
Last year, the Northwest Herald reported McHenry’s TIF fund “is already in the hole about $750,000 for projects paid for using general fund dollars, Deputy City Administrator Bill Hobson said. For the first time this year, the assessed value of taxable property in the TIF district fell below the amount that existed in 2002 when the TIF district was created.”
State Rep. Allen Skillicorn, R-East Dundee, whose district includes part of McHenry County, recently announced he wants big changes to the state’s TIF law.
“The original purpose of these TIF districts was to help rebuild blighted properties and provide economic stimulus,” Skillicorn said in his announcement. “Unfortunately, in many cases, TIF districts have become a misused form of underperforming corporate welfare that ultimately adds more and more costs to taxpayers.”
Skillicorn is pushing House Bill 3720, to allow surplus TIF district funds (if any) to go to public schools. His news release notes, “Public schools frequently bear the unintended consequence of TIF districts, which put more pressure on local property taxpayers.”
He also is writing a bill “to prevent municipalities from luring businesses from other Illinois communities by offering businesses TIF funds.” He notes this practice “often leads to higher taxes for the TIF-impacted community in addition to the loss of economic activity for the community the business has left.”
And he has filed House Bill 361 to require property tax bills to list TIF districts and the amount of tax money they receive.
“Taxpayers have a right to know exactly how much they are contributing to TIF districts,” Skillicorn said. “They also shouldn’t have to worry about losing businesses and jobs in their community because a TIF is being used to lure businesses away.”
Skillicorn is right on every point. Corporate welfare backers have political clout and no doubt will oppose the bills. But it’s good a local lawmaker is highlighting the ways TIF has been twisted from its purpose and trying to fix a law that often rewards the politically connected at the expense of everyone else.