TIF & Schools

The Daily Register has reprinted a recent article by the AP’s Zachary Colman.

LA SALLE, Ill. (AP) — One of the most popular rooms at LaSalle’s Dimmick Elementary School is the library-turned-computer-lab-turned-classroom. Children jostle for elbow room and can’t use the library at all when class is in session.

Down the hall, the school counselor and speech pathologist share an office that used to be a janitor’s closet. The gymnasium serves as storage space for school files and records.

Supt. Ryan Linnig blames the tight quarters at least partly on an economic development tool that shifts local tax money to developers. He estimates Dimmick has lost out on more than $405,000 since 1994 — $75,000 of it last year— through a state-created program for local communities called tax increment financing, or TIF.

Annual TIF Reporting

One part of the article needs to be cleared up. Colman reports that an Illinois representative has introduced legislation to require annual TIF reports be sent to the state comptroller, yet the Illinois Tax Increment Association lists deadlines for sending TIF annual reports and audits to the comptroller and to the other, overlapping tax districts before the joint review board meetings take place.

By the way, I’ve looked at several years’ worth of DeKalb’s Joint Review Board meeting minutes in the past. They were a joke. They looked to me like somebody hastily put together the bare minimum just for my FOIA request.

District 428 & “Making Whole”

What is not a joke is the situation between TIF, schools and the state.

Being a critic of local TIF spending, I was invited awhile back to a meeting of other critics along with city and local officials who explained the “make whole” agreement. The city likes to say that it makes District 428 whole but that is only part of the story. The State of Illinois also makes up money lost to the TIF. Here is the most concise explanation I’ve found for how the “making whole” happens:

In Illinois, school districts continue to receive all the tax revenue they were entitled to before creation of a TIF District. Although schools usually lose General State Aid when assessed valuations increase, the incremental growth in property values within a TIF District is excluded from the property tax base when the State of Illinois calculates the amount of aid it awards to a school district. Therefore, the “poorer” a school district is, the more it stands to gain from having a TIF District.

DeKalb officials and Financial Advisory Board members are now trying to establish whether the state “make whole” money can be used for capital improvements or must be used for operations only. Considering the size and number of TIF districts overlapping our school district, an ops-only encumbrance would probably constitute a significant limitation.

In fact, if memory serves, an older “make whole” agreement between city and schools included giving the school district TIF money for capital improvements. I believe this changed, at least in the case of the 2008 amendment of our largest district, TIF 1, when the city promised to declare a surplus of 50% of the increment and return it to the participating taxing bodies.

I have requested documents to find out how much District 428 is getting of the surplus funds and how it is spending them. If you’d like to begin calculations, take a look at page 20 of the City of DeKalb’s FY2012 budget. DeKalb itself anticipates $670,000 as its share of new revenues from the second annual surplus in the coming fiscal year.

TIF, Schools & the Big Picture

How much TIFs drive up the state’s share for school funding appears to be unknown, but Illinois’ own budgetary dire straits will probably ensure it will be calculated and evaluated at some point.

The City of Chicago alone has 165 active TIF districts.

During the aforementioned meeting with the school and city administrators, gaining understanding of the mechanism behind the state’s “make whole” led to my belief that we should be wary of remaining dependent on these subsidies to make up the difference. With the governor’s recent threat to cut municipalities’ shares of the state income tax, I am now doubly convinced neither the city nor the school district should continue to count on state money for much longer.

At another time I will tackle TIF surpluses and budgeting issues.

Bonus links:

Oak Park schools’ tiff with TIF

Ben Joravsky’s TIF-related open letter to the new Chicago Public Schools superintendent