What is TIF?

Illinois law allows units of local government to designate areas within their jurisdiction as Tax Increment Financing (TIF) districts. These districts dedicate additional property tax revenues generated within the TIF for improvements within the district to encourage new economic development and job creation.  Funds may be used for costs associated with the development or redevelopment of property within the TIF, allowing areas with underperforming  Equalized Assessed Value (EAV) growth to again become viable, and allowing these areas to compete with vacant land at the edge of urban areas. TIF helps local governments attract private development and new businesses using local resources that do not depend upon an increase in taxes or the reduction of other services. To do this, local taxing bodies create a TIF redevelopment project area, or TIF district, whereby the EAV of the property in the area is "frozen" at its current rate. Property taxes collected on properties included in the TIF district at the time of its designation continue to be distributed to the school districts and all other affected taxing districts in the same manner as if the district did not exist. Establishment of a TIF does not reduce property tax revenues available to the overlapping taxing bodies. 

A tax increment is the difference between the amount of property tax revenue generated before TIF district designation and the amount of property tax revenue generated after TIF designation. Only property taxes generated by the incremental increase in the EAV of these properties after that time are available for use in the TIF district by a municipality.

How is a TIF District Created?

In order to establish a TIF district, a local government must find that development or redevelopment of the area would not occur “but for” the creation and use of TIF. Illinois law specifies a number of requirements that must be satisfied for an area to qualify as a TIF district, beginning with identifying the district and the physical and economic deficiencies that need to be cured. Specifically, state law requires that the proposed area must meet one or more of three conditions:

1. ) Blighted conditions; 2.) Conservation conditions; and, 3.) Industrial park conservation conditions.

If one or more of these conditions is identified, municipal officials and a Joint Review Board, made up of representatives from affected local taxing bodies, must review a plan for the redevelopment of the TIF area. A public hearing must be held where residents and other interested parties can express their thoughts on the subject. If the plan for redevelopment is approved by the Joint Review Board, the municipality may adopt the plan by a majority vote of the corporate authorities. If the Joint Review Board rejects the plan for redevelopment, the municipality may proceed but the plan must be approved by a three-fifths vote of the corporate authorities. Finally, the mayor or village president will sign the ordinance into law. No state or federal approval is required for creation.

Joint Review Board (JRB)

Annually, the Joint Review Board (JRB) for each Tax Increment Financing District (TIF) must meet to discuss the annual report filed with the State of Illinois. A JRB is initially established when a new TIF is under consideration and the JRB makes a recommendation to the Village Board. The JRB is composed of certain taxing districts affected by the TIF, including representatives from school districts, county, township, and the Village.