TIF district help cities attract new business

Tax increment financing (TIF) districts have become one of the most popular economic development tools employed by cities trying to attract new development.

Area city administrators and planners say TIF districts are necessary to renew downtowns and attract jobs, especially as more and more communities jump on the TIF bandwagon.

According to TIF guidelines, existing property taxes would continue to be distributed to the same taxing bodies, while all new property tax revenues in the TIF district would be diverted to a TIF fund for improvements within the district.

TIF districts put little burden on taxpayers, at the same time offering incentives to developers such as freezing their property taxes for a certain amount of time, Moline city administrator Dale Iman said.

``You're not taking tax dollars someone else is paying to do the improvement,'' he said. ``They are new tax dollars that wouldn't be generated without TIF, and the developers themselves are paying them.''

Another attractive aspect of TIF districts is their ability to create ``leapfrog'' development, Mr. Iman said. TIF fund revenues can be used for things like new water lines, streets, parking and other improvements, which in turn attract more development, he said.

Moline has two TIF districts -- one encompassing most of downtown and another near the old Trinity Hospital complex on 7th Street. The city is considering setting up another near the intersection of John Deere Road and 38th Street, Mr. Iman said.

Greg Champagne, Rock Island's community and economic development director, said TIFs probably are the number one economic incentive tool used in the country.

``One reason is because TIF revenues can be used very flexibly,'' for anything from loans and feasibility studies to site selection and infrastructure, he said.

Sometimes it seems nothing gets built outside a TIF district; that's not true in Rock Island, Mr. Champagne said. All the southwest Rock Island development -- including the large Barjan and Steel Warehouse projects -- are outside TIF districts.

However, cities do use other economic incentives such as enterprise zones to lure businesses and rehabilitate blighted areas, Mr. Champagne and Mr. Iman said.

In an enterprise zone, sales tax on construction materials are rebated and low-interest revolving loan funds are available for new development.

Kathleen Field Orr, a Chicago-area attorney specializing in TIFs, said the state and federal government have been eroding the number of economic incentives cities can offer, leaving TIF districts as the best remaining option.

``The only one viable incentive that doesn't take money out of your city's pockets is TIF,'' she said. ``Every other economic incentive reduces your income level.''

The drawback to TIFs, she said, is that the newly generated property taxes don't go for taxpayer relief, but instead to the developers. However, that's the price cities must pay to attract new development and jobs, she added.

``In order to be competitive in economic development, you TIF anything possible,'' she said. ``Is that good? Absolutely not. But it is the only way possible to get economic development. The problem is, it asks the local taxpayers the least able to afford it to bear the brunt of attracting new industry.''

Staff writer Tory Brecht can be reached at 786-6441, Ext. 271, or by e-mail at toryb@qconline.com.