First Woodstock Tax Increment Financing District Analyzed

From Seneca Township and School District 200 resident Susan Handelsman:

1997 Woodstock TIF 1 Data about Diecast Site

By historical records available, it seems that:

  1. By 1998, the Diecast site was cleaned up at Allied Signal’s expense, and the clean +-14-acre parcel was owned by taxpayers of Woodstock.
  2. Woodstock deeded the property (a valuable asset) to a developer for $500,000, but paid (Hummel Group) in excess of $500,000 in cash payments in addition to $2.5 million borrowed 2002 for Diecast site remediation, land obtainment, et cetera.
  3. Woodstock borrowed over $2.5 million to spend building out that site. The bonds were backed by full faith and credit of Woodstock taxing authority, in case of TIF failure. Bonds were refinanced in 2010 and additional debt may have been added.
  4. There were 10 townhouses built, and 49 buildable lots created, which are estimated to have generated roughly $1.26 million property tax income to date. This amount may not be enough to cover interest alone on the bond debt to date, and legal, fees, and compliance on TIF aspect of bond issuance and land ownership transfer, plus additional cash payments to developers mentioned in TIF reports.
  5. The money obtained by TIF in order to pay off Diecast site debt ($880,000 still owed) was generated largely by taxation at higher rates on normal inflationary EAV of existing properties included in original “frozen” TIF EAV.
  6. The current annuity value of the ‘taxable EAV’ created on Diecast site is a significant negative value compared to the cost of its creation.

Chicago Tribune Articles 1997 &1998 About Diecast Site Demolition Costs, Who Paid For it??

Apparently, the Diecast site was cleaned up at Allied Signal’s expense, and then Woodstock taxpayers owned the remediated land at some price (back taxes and delinquent utilities bills+?).


“Attending the meeting with Clifton and Bianchi were representatives of Allied-Signal Corp., former owner of the factory, which is underwriting the $600,000 demolition, and Stanley Komperda, who will oversee the work for the Illinois Environmental Protection Agency.

Site preparation will begin March 3, with demolition to take place about a month later, city officials said. Work hours will run from 7 a.m. to 6 p.m. weekdays. The project will take five to six months.

After the plant is demolished, Woodstock will advertise for developers to present plans for the site.”

“As for residents’ concerns about possible site contamination, Allied-Signal’s project manager, Tim Metcalf said, “Since we sold (the factory) in the late ’80s, we have removed the asbestos . . . and basically done a general cleanup” over the last few years.

Ground water treatment also has continued, Metcalf said, a fact confirmed by Komperda, who said the ground water is “much improved since 1985.”

Monday’s meeting marked the first step in a five-year renovation of the factory’s 10-acre site, among the most valuable in the city.”

The city reacquired the building and the 10 acres it stands on in 1991 through a foreclosure of $56,000 in delinquent water and sewer bills, according to public works director John Isbell.

“Both proposals call for extensive residential development in the northern portion of the 14-acre triangle. Broadacre’s plan contains 122 units, ranging from two-bedroom “row houses” to 48 condominiums. Construction costs, which would be privately financed, would run to $14.8 million, with the city underwriting $4.2 million in infrastructure improvements.

The city’s expenses in both proposals would be funded with tax-increment-financing bonds, which would be retired as the individual units are sold.”

Woodstock Bonds for TIF 1

Woodstock issued Bonds in 2002 which were guaranteed by Woodstock taxpayers’ full faith and credit in case TIF cannot pay. At last TIF 1 report, $880,000 of this debt is still outstanding. TIF report also indicates “original issue debt $2,575,000”.

Series E Bonds totaled $2.1 Million debt. Series E was all for TIF related to Diecast site development subsidies.

Purpose of Series 2002E Bonds was stated as “…to finance and refinance prior debt for real estate acquisition and to finance certain demolition work and the acquisition, construction, and installation of land acquisition, environmental remediation, , and infrastructure improvements, including water, sewer. Utilities, storm sewer and drainage (including land acquisition, rights in real estate., demolition and other related facilities, improvements and costs). See the caption “PLAN of FINANCING- The 2002E Project Downtown Tax Increment Financing Redevelopment Project”. “

Illinois Comptroller TIF Reports 2010-2017

TIF reports filed in 1997 through 2009 are not available online, so cannot verify details from that period.

We do know that ownership of the land deemed in the 1997 Tribune article as “among the most valuable in the city.”, was transferred from taxpayers of Woodstock to private interests, with funds exceeding an assumed purchase price paid back to developer by TIF in subsequent years.

Apparently TIF 2002E Bonds were refinanced in 2010 with Series C Bonds $1,475,000. But more debt was added somewhere along the line;

From 2010 TIF Report:   “TIF Debt Service Combined Series E & G Amount of original Issue $ 2,575,000; Amount Designated $3,542,433.”

This seems to indicate that the cost of purchasing, building- out, and giving away the cleaned-up Diecast acreage to a developer costs TIF taxpayers funds a total of $3,542,433 including interest, plus the value of the free land gift.

 (THE ONLY G BONDS SEEM TO HAVE BEEN issued in 2002 FOR A SALT STORAGE SHED? This was not stated as a TIF 1 project in 2002 Official Statement. Was this debt placed into TIF 1)?

McHenry County Clerk & Treasurer Property Tax Databases

We may look for TIF property tax revenues from any development on the former Diecast site on County Treasurer site. It is complicated because PIN numbers have changed several times, with ‘parent’ and ‘child’ parcels lacking older info on Treasurer website or Athena.

Presently, PIN 13-05-340-001 through -010 represent the Townhouses at Woodstock Station. They are assessed 2017 at around $80,000 EAV each.  At 11.7% tax rate, that produced revenue around $9400 each, or $94000 last year. 49 lots assessed at ~$5500 each is another $270,000 EAV generating $32000 tax.

These parcels only began paying substantive property taxes in 2007. 10 years of roughly $126,000 per year tax revenue equals $1.26 million total revenue so far from Diecast site development.

New EAV (but not taxable EAV, until TIF dies after extension if any) created: $1.07 million

Tax rates (% of EAV) of TIF for known years:         2007: 7.81%; 2008: 7.96%; 2009: 8.14%; 2010: 8.77%; 2011: 9.92%; 2012:  11.54%; 2013: 12.91%; 2014: 13.69%; 2015: 13.57%; 2016: 12.62%; 2017: 11.70%

(EAV is 1/3 of full fair market value, so 1/3 of the tax rates above equal the tax rate on full fair market property values.)


To put the value of that Diecast site revenue stream into perspective, one may compare it to the purchase price of an annuity which produces a 100-year revenue stream of $126,000 annually: such an annuity would cost $3.8 million today at current rates (3.3%). But Woodstock taxpayers paid over $2.5 million in 1998 dollars (not counting interest, fees, and free acreage of lands gifted). The present value of $2.5 million from 20 years ago is $4.8 million.

To present-value both calculations in 1998 dollars: the present value in 1998 of $126,000 annuity beginning in 20 years forward (using 3.3% interest rate) was $2 million. Woodstock taxpayers paid at least $3 million of present value at that time for that implied asset.

Susan Handelsman

TIF 1 said to create more revenue? Sale tax revenue?  It is a very small number compared to the millions at stake in additional school costs, and diverted property tax revenues. (Annual household income multiplied by BLS mean percentage of HH income spent on sales-taxable merch.: $60,000 x .23= $13,800. Unlikely ALL of that would be spent in Woodstock, but let’s say it all is. 2% sales tax on $13,800 is $276. There were 10 new households created in Diecast development. That would be $2760 per year.)

The alternative: no TIF, land ownership retained, no $2.5 million borrowed, millions in property tax revenue generated by existing properties would have flowed to taxing bodies, thus lowering the tax burden and tax rate for the past 20 years, and TIF-related expenses would not have been incurred. Woodstock would have had the chance to gain TAXABLE EAV on that site. TIF tax revenue would not have been generated, which in Diecast’s case may not have been enough to cover interest &expenses to date on the debt taken out to subsidize Diecast site developers.

To put the COSTS of TIF 1 Diecast site development into perspective, we have to consider other costs. Woodstock Diecast site ‘investment’ of taxpayer dollars cost $2.5 million+land value. Woodstock taxpayers ‘guaranteed’ the bond debt with full faith and credit.  Diecast site development has NOT generated enough income to cover that bond debt, so other taxpayer money is being used to pay it.

The ‘other taxpayer money’ is TIF tax money generated by normal inflation on existing properties included in the TIF. Over the past 20 years, that money would have gone to taxing bodies but-for the TIF.

Woodstock taxpayers were deprived of millions of such inflation-generated property tax dollars which they had to ‘replace’ to make taxing bodies whole, in order for an amount equal to those tax dollars to be diverted to TIF. (At least until 2007 when Diecast site tax revenue started; bonds were issued years earlier and interest accumulated on that debt).

(To Illustrate this point: TIF 2 will start with $30 million 2017 EAV ‘frozen’. 2018 assessments are already posted: Up 6.2%! That means TIF 2 will get over $200,000 of ‘inflation’ increment tax revenue (nothing to do with development) in its first year. That is money which without TIF 2 would have flowed directly to schools and other taxing bodies. Now it will need to be ‘replaced’ by taxpayers. That means a $200,000 tax hike for TIF 2, the first of its 35-year legal lifespan. More to follow).

Woodstock taxpayers were deprived of receiving the price of valuable real estate, for which their tax dollars had paid.

And Woodstock taxpayers were deprived of the opportunity value of the land itself, which might have attracted development which would have contributed on its own to schools and other taxing bodies.

Woodstock taxpayers had to pay 100% of all costs of schooling all new TIF student enrollment. The annual TAXPAYER cost per student is now $9000 per year (levy divided by enrollment).

Woodstock and McHenry County taxpayers needed to pay for ALL inflationary increased costs of ALL Countywide social service provision: schools, police, fire&rescue, MCC, MCCD, County, Library, Townships; because that original 1997 TIF EAV is Frozen for 35 years and the only way to get more money from those frozen-EAV properties—whether they have been built-up or not—is to raise tax RATES. Except—the problem is, by law, the money cannot come from non-taxable TIF EAV taxpayers’ payments, so it has to come from OTHER taxpayers. When tax rates rose, taxpayers had to pay more, AND TIF collected more as a windfall profit.

Woodstock non-TIF-development taxpayers were responsible for ALL the $150 million+ debt built up by Woodstock school District 200, and Woodstock’s share of huge MCCD debt, as well as unfunded pension debts of teachers, administrators, politicians, police, fire&rescue personnel, that come due and payable over the 35 years legal lifespan of the TIF.  Remember: only TAXABLE EAV can be encumbered to pay such public debts.

This explains why certain TIF properties’ values rose while most Woodstock homeowners got annihilated during the crash.  Exemption from public debt and tax liability is supportive of property value.

But taxes need to be paid by someone, and that someone is the ‘loser class’ in the TIF computation. The cost of actual taxes can be quantified, and the soft cost of the property tax RISK due to debt can also be quantified (insurance actuaries do it all the time to price premiums).


Diecast site environmental remediation was NOT a function of TIF 1. Costs of Diecast site developer-buildout, land ownership rights costs, and other expenses of value to a new owner/developer were a function of TIF 1 and these costs can be quantified as far in excess of any value created for taxpayers.

Woodstock 1997 TIF 1 caused property tax rates to increase. Tax rate is levy divided by taxable EAV. Because ‘taxable’ EAV is always limited due to TIF, inflationary levy increases create an ever-increasing burden on a smaller pool of taxable property.

Woodstock has inflicted a tax rate exceeding 4% for many years:  4% of fair market value is MORE THAN 3 TIMES WHAT ALMOST ALL OTHER AMERICANS PAY IN PROPERTY TAXES. This property tax money is stripped from household income discretionary spending, it is denied to college or retirement savings. It is a tangible effect on the economy of a region, and Woodstock TIFs have and will cause this property tax rate to rise. *** TIF-included properties like the Diecast site lots will suffer less; they will be exempted from public taxes and debt as others will be forced to pay for their social service provision and prior public debt encumbrances on their behalf.

Due to 4% Woodstock property tax rates, home values in Woodstock annually decline relative to homes all across America and all over Illinois. *  TIF 2 will lock this current tax rate in as a low**, and ensure the rate rises for at least another generation. That equates to children’s lost college funds and elderly retirement without dignity. The correlation between high property tax rates and downward pressure on home values can be explained, for one reason, by inability of average buyers to qualify for mortgages.

When a home is for sale, chances are the buyer will need a mortgage. If a median income household cannot qualify for a mortgage on a median value home, fewer potential buyers exist for that home, and prices must drop to make a monthly mortgage payment affordable for such buyers.

Because of Woodstock’s abnormally high property tax rates, this has been the case for many years here. A property tax rate 2% higher than Chicago translates to the same impact as a mortgage interest rate 2% higher… except worse, because while mortgage interest rates on a loan usually remain constant, high property tax rates tend to breed higher property tax rates.

Developers are greatly affected by property tax rates. They need to produce a certain ‘Cap Rate’ which is a percentage reflecting return-on- investment. Because real estate in a 4% property tax rate area costs 2%-3% more per year to own than everywhere else, developers do not want to build in Woodstock unless given monetary gifts to do so. They need to get total project costs down to a number where the project can be built and flipped at an industry-standard Cap Rate. Enterprise Zone would have given developers over 12% of project cost. That apparently isn’t enough for them. What should be of great concern to Woodstock taxpayers is that the easiest -most-profitable projects to fill-and-bill in a TIF are low income housing rental developments

(schools understand this, thus formally objecting to Woodstock TIF 2 at JRB. D200 Schools WILL run out of money when enough non-TIF residents/businesses are ploughed under. No new contributory EAV in sight-why should there be? At least homes converted back to farmland can’t be taxed at obscene rates needed to support Woodstock TIFs).

Now that inflation is finally making home values rise here, because foreclosed homes can be bought by REITs and rented out at over 10% return-on-investment, and costs of new construction keep rising making existing properties worth more, Woodstock is rushing to put in the new huge TIF to capture all that inflationary-generated tax increment revenueTaxpayers will never get a chance to find out whether developers would have built here anyway in the Enterprise Zone.

**TIF 2 Effects:

 For the next 1-2 years, inflation will catch up with assessments and may lower Woodstock tax rates slightly if taxing bodies keep levies flat. After that, rates will need to rise, and sharply, to address $150,000,000 million of deferred bond debt from Woodstock D200 schools coming due.  Ironically, this $150,000,000 debt represents tax money borrowed to build schools for new Woodstock residents…and now all new Woodstock residents will be in TIF wherein they are sheltered from any liability or taxes to pay for the cost of schools which were built to educate their children.

Academic Sources

***“Between 1980 and 1984, the researchers found that municipalities that would later adopt TIF had a mean EAV growth rate nearly equal to those municipalities that later did not adopt TIF. However, between 1992 and 1995, TIF adopters grew slower than non-adopters (4.96% v. 7.38%). Dye and Merriman found no evidence that sample selection bias explained the slow growth rate of TIF adopters. Even after controlling for variety of municipal characteristics, TIF adopters grew 0.79% per year less than non TIF-adopters. Property values in non-TIF areas of the municipalities reviewed grew 1.31% per year less than for non-TIF adopters.63

Dye and Merriman concluded that their findings suggest that TIF trades off higher growth rates in the TIF district for slower growth elsewhere in the municipality. The larger the share of the municipality’s EAV is in TIF districts, the slower the growth is in the areas outside the TIF districts. So, targeted areas gain from TIF at the expense of non-targeted areas. In sum, Dye and Merriman argue that “… the simplest explanation for our results is that TIF adoption causes depressed assessed value growth rates.””

Richard F. Dye and David F. Merriman. “The Effects of Tax Increment Financing on Economic Development,” Working Paper #75, James H. Kuklinski, editor. Lincoln Land Institute. September 1999, p. 6, pp. 24-25.

***“The second study also extends the analysis to all 102 Illinois counties, which results in a much larger sample of municipalities (see Table 2). The TIF-base EAV (B) is unavailable, so we look at growth in available EAV. The simple means from the larger sample again suggest a negative effect of TIF on growth in property values. When we use this all-county sample to estimate the impact of TIF in a multivariate regression with statistical controls for other growth determinants and for TIF selection, there is a significantly negative impact of TIF adoption on growth in overall available (non-TIF) property values. This revives the earlier hypothesis that TIF adoption actually reduces property values in the larger community. When we run separate regressions for available EAV growth by type of land use for the all-county sample, we see more evidence of a zero or negative impact of TIF on property value growth. Again, there is a significant “cannibalization” of commercial EAV outside the TIF district from commercial development within the TIF district.”

*SMALL HOMES, PUBLIC SCHOOLS, AND PROPERTY TAX CAPITALIZATION  Ryan M. Gallagher:  Department of Economics, Northeastern Illinois University,  Chicago, IL, USA  Haydar Kurban Department of Economics, Howard University,  Washington, DC, USA  Joseph J. Persky:  Department of Economics, University of Illinois  Chicago, Chicago, IL, USA CES 13-04  March, 2013

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