Mt. Zion's Gustin and Nelson Tax Increment Financing District
Retail Space now available! Contact S.A. Lewis Development at 217-864-5056
New commercial strip mall under development on Lot 1.
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Today’s Class - TIF District 101
There has been a number of recent news articles and plenty of coffee conversation about the TIF district here in Mt. Zion. This month’s article will explain what a TIF district is and why we have a TIF district.
A TIF district is a continuous area of land that a government entity (the Village in this case) has shown to be economically depressed. Economic depression means the area is not attracting development (residential, retail, commercial or industrial) on its own. Once a potential TIF area has been identified and studies performed to support the claim that the area is economically depressed, it is necessary to get the approval of each taxing body affected by the proposed TIF area. The reason the taxing bodies need to approve the proposed TIF district is because those taxing bodies will be giving up the incremental tax revenue they would have gotten had there not been a TIF area. Once those taxing bodies have agreed to the TIF and the legal paperwork that goes with it, a TIF Amendment is presented to both the Illinois House of Representatives and the Illinois Senate for approval of the TIF legislation. Once approved by these two bodies, the TIF becomes official and can exist for a set time period.
For lots in the TIF area, the tax dollar amount that the taxing bodies were receiving on an annual basis continues to go to those taxing bodies however, any incremental (increase in) tax dollars due to an increase in the tax rate or an increase in the value of the property (based on land valuation or development of that land) goes to the TIF fund, which is maintained by the Village of Mt. Zion.
As an example (very simplified) assume we start with an empty lot in the new TIF area that has a value of $3000. Its current EAV (Equalized Assessed Value) is one-third of that amount or $1000. (Taxes are calculated on the EAV number.) There is a business building being built on the property (for $150,000) that will come on the tax rolls in 2010. Typically in the Mt. Zion area property values seem to increase about 4% per year, in this example (for simplicity) the typical 4% increase is not taken into account. In 2009 the assessed value of the property goes up by 10% due to general improvements in the TIF area. Let’s also assume that the total tax rate on the property is 1% so the taxing bodies currently get $10 ($1000 EAV x 0.01) in real estate taxes.
|
Year |
Property Value |
EAV Value (1/3 of Property) |
Tax Rate |
Tax Bill |
Amount To Taxing Body |
Amount to TIF Fund |
|
2007 |
$3,000 |
$1,000 |
0.0100 |
$10.00 |
$10.00 |
$0.00 |
|
TIF District Enacted |
||||||
|
2008 |
$3,000 |
$1,000 |
0.0100 |
$10.00 |
$10.00 |
$0.00 |
|
Property Value Goes Up 10% |
||||||
|
2009 |
$3,300 |
$1,100 |
0.0100 |
$11.00 |
$10.00 |
$1.00 |
|
Building Built On Lot (Value $150,000) |
||||||
|
2010 |
$153,300 |
$51,100 |
0.0100 |
$511.00 |
$10.00 |
$501.00 |
|
Tax Rate Increases from 1% to 1.1% |
||||||
|
2011 |
$153,300 |
$51,100 |
0.0110 |
$562.10 |
$10.00 |
$552.10 |
As you can see from this simplified example over an ideal four years, the taxing body continues to collect the original $10 that they had been receiving but due to a value increase, improvements on the lot (a new building), and a tax rate increase the amount of money collected for the TIF fund goes from $0 per year to $552.10 and over the four year example the TIF fund has collected $1,054.10. So how will that TIF Fund money be used?
The dollars in the TIF fund are to be used to encourage economic development only within the TIF area (can’t be used outside that TIF area). The TIF board can allocate TIF funds to:
- Help developers purchase and combine lots (part of the problem with the MT. Zion TIF is that there are a number of narrow/deep lots but too narrow to develop a street front business so they need to be combined to attract businesses),
- assist in developing infrastructure (such as streets, sewers, water mains, parking lots, etc),
- assist with landscaping
- assist with the demolition of dilapidated or non-conforming structures
- assist in the remodeling of existing buildings (to improve economic value)
- assist with engineering plan development
- etc.
TIF funds cannot be used to construct new buildings (public or private).
If at the end of the authorized TIF time period there are any dollars left over in the TIF fund then those dollars are returned to the taxing bodies from which they were obtained.
In 2008, Mt. Zion completed the steps necessary to extend the current TIF district for an additional 12 years and to expand that TIF district in size to include additional peripheral areas to the original area. The original land was part of the Gustin and Nelson TIF district that was created in 1986. The original TIF plan that described what could be done with the original Gustin and Nelson TIF district had the best of intentions, however it turned out to be too limited and dated, hence in 2008 a new TIF Plan was developed that included greater opportunities for the use of TIF funds in the TIF area.
So that brings us to the current day TIF District that is composed of the original TIF area and a newer TIF area. The total land size is 104 acres. For the original TIF area the tax dollars to the taxing districts is still frozen at the dollar amounts of 1986, for the newer TIF area the tax dollars to the taxing districts are frozen at the dollar amounts of 2008.
The older TIF area is to the west of Ashland Estates and run to and along Route 121. One developer owns much of the land in the older TIF area although there are still a number of lots owned by other individuals that make up the original TIF area. The newer areas to the TIF district are mostly composed of single owner lots. When it was decided to extend the TIF district for another 12 years, that developer started making plans on uses for his property under the more lenient terms of the new TIF plan. His planning process included trips to Florida to visit a number of developments to gather ideas on what might be the best use of his funds for the TIF area. After several years of planning those plans were presented to the Village along with a request for TIF funds to assist in the development. Up to this date (of this note) Steve Lewis is the only developer to approach the Village with a plan for the use of a large acreage of land. Only one other developer has approached the Village with an idea for a single lot. So if you are a developer or would like to become a developer there are plenty of land units available, just be cautious of the current asking price (cha-ching).
Now ideally you would like to wake up every day and decide how best to use or invest your money for that day. Unfortunately some uses of money require long term commitments or agreements and the same applies to the tax dollars and TIF dollars held for your benefit by the Village. After much discussion the Village Board decided to go with the plans and concepts provided by local developer Steve Lewis.
At this time, the plans for the Lewis development include a divided four lane road heading back toward (but not connecting with) Ashland Estates. (You can see the construction of that road now). On either side of the new road, near the Route 121 entrance will be a mini-mall structure with several businesses in each. Also at this time, pending final agreements with the developer and the Village we are looking at a general restaurant, a pizza pub, and maybe a bar with food. Discussions are also being held with a nationally known restaurant.
At the end of four lane road (pending approval by the Village Board) will be a new Village Hall with an attached convention center (seating for 700, dividable into 3 rooms). The convention center should not be confused with the civic center concept that was discussed 10 years ago. The primary purpose of the convention center is to pull temporary visitors into the TIF area to help support, develop clients for the businesses that will be locating there and along Route 121 and to provide convention opportunities to the southeast area of Macon County. I will add that all structures or infrastructures that will become the property of the Village are built at prevailing wage rates.
The convention center is the heart of the TIF area at this time. Most of the agreements that we are working on, require that the convention center be built or these agreements are a no-go. The Village is in discussions with a group to handle the rental and catering services for the convention center. This group has also provided a list of activity based dinners or events (trivia nights, theatre nights, etc.) that they will handle that should keep you entertained frequently throughout the year. The convention center has been the focus of discussions by the Village Board primarily because it is not a “guaranteed” success. Projections show that this operation may be somewhat profitable for the Village at the end of the first year and very profitable by the third year of operation, but if not, is the Village Board willing to shift tax dollars until it becomes profitable? The Board’s thought process at this time is that it will be of benefit to the community to make the convention center happen so that it brings in other businesses into the TIF area for residents to enjoy. This appears to be one of the keys for Economic Development in Mt. Zion.
Continuing on with our description of the TIF area, just prior to the proposed Village Hall the road will split with a north and south branch. The north branch may include an assisted living facility or multiple smaller housing units geared toward the 50+ generation. The immediate south section is scheduled to have a retail complex consisting of multiple buildings with small retail stores on the ground level and rental apartment facilities on the second floor. Then further to the south would be condominium units.
So there is the oversight class called TIF -101. We have discussed the concept behind a TIF, we have demonstrated how funding for the TIF district is achieved. We have discussed the possible financial benefits that a TIF fund can bring to the area especially if development takes place but we have not gone into details about the benefits the community will enjoy from improved/closer retail opportunities and the benefits to the taxing districts immediately and when the TIF is dissolved in 2020. Finally we have shared some of the concepts and tenant genres that are being considered. There are other items in the work that we are not yet ready to discuss until agreements are finalized. But last of all a special thanks to the taxing districts that make up the Gustin and Nelson TIF District, without their original consent and willingness to extend the TIF another 12 years, none of this potential would be occurring today.
