Cost to Taxpayers of FRG TIF

Chicago Reader’s Ben Joravsky’s take on Chicago Tax Increment Financing Districts:

“As you know, TIFs are, in effect, a surcharge added to your property tax.

“The proceeds are used to pay for pretty much anything the mayor wants.”

He adds this in an earlier article:

“To compensate for that lost revenue, the schools, parks, county, etc are forced to raise their tax rates. As a result, TIFs raise everyone’s property taxes.”

Now Fox River Grove is following in the footsteps of Crystal Lake, McHenry, Huntley, Marengo, Woodstock, etc., and putting much of Downtown in a TIF District.

The Crystal Lake High School Board just approved the move on a 6-1 vote (Rosemary Kurtz voting”No”).

Woodstock’s Susan Handlesman has quantified the cost to taxpayers. You can read her analysis below:

Here’s the dollar amount this 300 unit development will require in subsidies from CL D155 taxpayers:

FRG mastheadThere are 6,600 enrollment, and the levy is $71 million.

Therefore, the school is taking annual property tax of $10,560 per student.

Census data indicates there are 2.8 persons per household and 22% are school aged. If 1/3 of those are in grades 9-12, then each new household is projected to produce .20 high school students per household.

.20 x $10,560 = $2,112.

300 new housing units x $2,112= $633,600 annually.

TIFs last 24 years, and every year the cost will rise with inflation**.

To the extent that other residential properties are included in the TIF footprint, these will add to the tax burden of non-TIF property tax payers, as inflation increases the costs of social service provision to these households as well.

Furthermore, school is only one part of the property tax bill, and high school is only a part of the school tax portion.

If we include grade school costs of TIF-produced students as the other 2/3 of .60 students-per-household created:

(2.8 persons-per-household) x (.22 school-aged) x (.66 grade K-8) x ($10,560 per student*)= $4224 per student annually

*(cost per grade school may/should be less than HS)

300 x $4,224 = $1,267,200

Adding the annual per-student school costs for K-8 and 9-12 we get $1.9 million.

Crystal Lake [that is District 155] property taxpayers will be paying $1.9 million the first year, and that amount will be rising with inflation, for benefit of the TIF private businesses’ profit and the politicians who will control the TIF cash flow for the next 30 years.

But $1.9 million only covers the new apartment complex.

Whatever other land or buildings are in the TIF footprint will also see inflationary assessment increases’ taxes diverted to the TIF insiders’ lock-box.

And school taxes are around 2/3 of the property tax bill.

Of course all the other taxes which property taxpayers pay for County and public services: MCC, MCCD, McHenry County, fire&rescue, library…these will all need to be paid on behalf of and for the benefit of the TIF households, by other taxpayers.

We can estimate the dollar amount of that as $950,000 annually and rising with inflation for the next 30 years.

Grand total cost to property taxpayers of this TIF: $2.85 million per year

$2.85 million per year (first year) for the new apartment complex, plus $9500 per other new household per year, plus inflationary** costs of existing households’ property tax burden.

**school inflationary costs are rising well in excess of CPI due to employee compensation and benefit contracts.


Cost to Taxpayers of FRG TIF — 16 Comments

  1. Someone should bring it to the attention of the fools that keep using this Ponzi scheme.

  2. Remember the property tax per student is not the cost to educate a student.

    The cost to educate a student is higher due to other tax revenues per student.

    For instance state tax revenues pay for the annual State contribution to the TRS pension fund.

    TRS is the pension fund for teacher and administrator pensions, plus some IEA and IFT union leaders employed not by public school districts or the government but by unions.

    The CHSD 155 school board does not represent the taxpayers.

    If they did, they would present an analysis such as Susan’s to the taxpayers on the school district website.

    Nobody in Illinois government represents the taxpayers.

    If they did, they would include the real cost to educate a student, including the state contribution to the TRS pension fund.

    Instead we have a government that minimizes true costs to taxpayers.

    State law should be changed,requiring the true costs of TIFs to be presented to taxpayers at least two weeks before a vote to approve a TIF.

    The true costs would be reflected in some sort of analysys such as what Susan presented.

    TIFs are always presented by the government as a diversion of tax revenue.

    TIFs are never presented by the government as a tax hike for some.

    That is the Illinois TIF taxpayer scam.

  3. More/higher taxes and tax schemes such as TIF zones will
    only serve to drive more people out of Illinois.

    And as of this date, it’s working very well.

  4. Mark I agree.
    I wanted to present the easily quantifiable property taxpayer cost to subsidize TIF profiteers.

    If I had to guess, I would estimate true cost of subsidy at 150% of quantifiable cost.

    And, that does not include lost opportunity cost of land development allowed to occur organically…with developers who will reap profits riskng their own money rather than public funds.

  5. The above is not how I would analyze the Cost to D-3 and D-155.

    The expected incremental enrollment is driven by a study that almost all municipalities use in some manner which has a chart titled:

    “Table of Estimated Ultimate Population Per Dwelling Unit”.

    It estimates the impact of new construction on enrollment.

    In this case, we have 240 1BR and 60 2BR apartments.

    According to the chart, D-3 would expect to see 8.4 additional students and D-155 would see 3.0 or 11.4 in total.

    The number is fairly low in this case because 1 BR apartments generate virtually no incremental K-12 students.

    Since the marginal cost of a pupil is $0, and with each district being able to absorb this low impact (especially in a declining enrollment environment), the actual incremental expense to these districts should be $0.

    As far as revenue is concerned, D-3 currently receives General State Aid at the rate of $1,575/pupil prior to proration by the State.

    Over the longterm, D-3 would receive an incremental $13,230/pupil annually in GSA assuming today’s rules. And D-155 would receive $5,577 annually given their rate of $1,859/pupil.

    As far as their levy goes, as long as the County Clerk certifies the TIF property’s “base” EAV at their current values, their operating levy will continue along its same trajectory.

    Bottom line, the financial impact to each district is negligible.

    The only impact would be more accurately characterized as an opportunity cost.

    That is, the incremental property tax revenue generated by the 300 apartments over the base is not recognized by the districts, but is used instead to pay for some of the development costs of the project.

  6. By the logic above, schools should be able to absorb unlimited new enrollment, as well as operate based upon 30 years forward of zero inflation on current taxable assessed value.

    TIFs should cover the entire geography, and the financial impact over the next 30 years will be negligible.

    That’s your argument?

  7. Susan, have you ever taken a Managerial Cost Accounting course?

    The principle of marginal cost applies to the concept of the incremental cost necessary to produce 1 more unit (or educate 1 more student).

    Marginal Cost operates as a step function since every factory (or school) has its manufacturing or operational limits.

    In this case, we are not talking about adding something like 250 students to D-3, but only an estimated 8.4.

    Which is clearly within D-3’s ability to absorb within their current operating structure.

    So, the current marginal cost is $0.

    Stated another way: If a new student enrolled in D-3, the district would not suddenly incur an additional $10,000 of expense nor would they suddenly reduce operating expenses by $10,000 if a student were to move out of the district.

  8. Not sure about this particular development but apartment buildings are typically viewed by most school districts as costing the district more to educate a child than revenue generated.

  9. Coffey appears to be some kind of a nitwit.

    You go, girl to Susan!!

  10. Mark, I’m not aware of any study that shows that, for suburban districts, students from apartments “costing the district more to educate than revenue generated”.

    I’m assuming that belief is based on the assumption that those students are low income and/or are English Language Learners.

    I might make the argument that the exact opposite is true.

    Given that districts receive incremental revenue from many different sources for things like Title I (Low Income), General State Aid has a Poverty Grant component based on the low income enrollment totals, Bilingual Education reimbursement from the State, Federal National School Lunch Program, etc.

    So, on a net basis, I wouldn’t be surprised to see the reverse.

  11. There are no marginal enrollment which school board doesn’t use to justify hiking levies.

    In Woodstock D200 with flat enrollment they have steadily raised employee to pupil ratios for a decade.

    Spending increases in every category including transportation.

    State and federal grant money is a separate issue, irrelevant to the levy per student.

    At what point of additional enrollment would you argue that those households producing the students should be charged the costs of their education?

    How many get free ride…

    The first five, ten. thirty free, then after that the others should start paying tax?

    How does your logic apply to fire protection?

    Existing taxpayers have funded a little spare capacity buffer, so the next housing units built should get free fire protection?

    What happens when spare capacity is used up?

    Then charge the next households based upon the bad luck of their timing?

  12. Talk to school districts.

    They groan when they hear a proposed apartment complex.

  13. Susan, I feel as though we’re having two unrelated discussions.

    I am not sure how we landed on D200 issues.

    I’ll stick with the TIF issue.

    The people that would occupy these proposed apartments are, indeed, paying property taxes with their monthly rent payments.

    Nobody is getting a “free ride”.

    It just happens that the village has decided that the increment over the base is not distributed to any of the other taxing bodies (i.e. schools, fire, parks, etc.).

    The village keeps the incremental revenue to fund TIF district improvements.

    I am not a fan of TIFs at all, and I’m not sure how this development passes a “but for” test.

    The argument isn’t an issue of incremental costs, but the prospect of lost future revenues.

    And, given pending legislation to redistribute state aid away from suburban districts and push pension costs onto all districts, suburban districts are going to need to have as much flexibility as possible to operate in a more restricted financial environment.

  14. Renters pay rent.

    They do NOT pay property taxes.

    Owners pay property taxes.

    This is why you are a nitwit.

    Take your politically correct social justice claptrap somewhere else.

    We ain’t buying it.

  15. You are right I failed to articulate my point properly.

    Also, I just did research on multifamily housing that suggests .20 students-per-household, so the school tax burden on non-TIF taxpayers will theoretically be 1/3 of what I estimated above, as a function of only 60 new students.

    But the non-school portion of social cost provision to be borne by non-TIF taxpayers for benefit of TIF developers and related politicians is going to be the same as described, because average population-per- apartment is similar to general population stated in US Census (and each human will receive ‘free’ provision of fire&rescue, library, access to MCC and MCCD and County services).

    We understand where TIF money goes, and who controls its disposition.

    Who should be obligated to subsidize the diversion of this tax revenue into those hands, who should be recipients of the tax revenue (and debt burden) diversion, and who should have the power to DECIDE who gets to be the winners and loser?

    (Because, as we all know, conventional means of funding a multifamily housing project are widely available as a TIF alternative).

    I bring up D200 as example because I know their budget numbers very well.

    My assumption is that CL schools follow similar spending patterns.

    My assertion is this:

    when a taxpayer society creates excess production capacity, paying years of taxes and incurring debt obligations which affect the value of their own property, they are not compelled to ‘give it away’ because it can be deemed incremental.

    That applies to schools in this situation, because TIF properties will not pay a nickel to schools for all the new costs engendered by their attendance.

    Look up your school’s annual OEPP (operating expense per pupil).

    D200 goes up up up.

    OEPP is a metric which is reported on every school in the state and can be used to compare apples to apples.

    Adding Pupils (denominator) should theoretically decrease the dollar amount of OEPP.

    This community built schools and kept them operational, and there is spare capacity.

    Should that capacity be given away to free-riders, and if so, WHICH free-riders?

    Just because 60 more kids may not create the critical mass to hire one more teacher, bus-driver, lunch-lady, speech pathologist, administrator, physiologist, counselor, sports coach, bi-linguist, custodian, or other personnel, does not mean there are no incremental costs.

    Consider the costs of having built the buildings, and operation.

    As you know, local funding (property taxes) is argued as needed by school boards, so whatever state and federal funding obtained per student is spent and still more is demanded.

    The levy on taxpayers divided by the number of students reflects equitable distribution of the money being taken in from local sources…but if the money is taken in from one group but being spent on non-taxed groups, this cost-figure-per-student quantifies the amount of this annual inequity.

    Debt has been incurred by taxpayers in order to have the ‘spare capacity’ available by new students.

    In the TIF, properties will not be liable for any of the debt, nor any of the debt building up as a function of unfunded pensions and benefit promises to public employees.

    The same principal applies to all the social service provisions which must be paid for somehow.

    It isn’t logical to decide that one free rider can get free services, and be exempt from debt encumbrances, simply based upon the fortunate timing to fit into spare excess capacity existing at the time (formerly paid for by current residents).

    The logic breaks down when you try to figure out the precise number of new ‘free riders’ before you have to start charging tax again to increase capacity again after ‘spare’ capacity has now been filled up.

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