A Look at the Central Area TIF Funds


Yesterday there was a lot of news coverage about Chicago’s forecast inability to finish its planned Tax Increment Financing (TIF) projects now that property tax revenues are down.

Coincidentally, I’ve been peering at DeKalb TIF funds recently, looking for the same kind of trouble.

Fund 63 is the DeKalb TIF fund that pays for development and development services in the Central Area AKA Downtown TIF or TIF 1. Fund 225 is the fund for TIF debt service. We’ll look at both of them today.

FY2012 numbers are estimates and those for FY2013, of course, are projections. The rest are actual and taken from city budgets available online (except in the case of FY2006, for which I used the CAFR because the budget numbers weren’t adding up).

TIF Fund 63 Budgets

[table id=61 /]

“Property taxes” are the increment captured each year. The increment is the portion above a baseline amount set when a TIF is established/renewed. The district enjoyed nice annual incremental increases through FY2010, and furthermore must have benefited from district expansion via the 2008 amendment. Since then, however, this source shows signs of deflating due to declining property values.

The property tax increment is the backbone of the TIF, but it is not the only revenue source. Sales taxes, investment income and bond proceeds also go into this fund. The * marks the years when notable amounts of bond proceeds bumped up total revenues significantly.

Annual deficits in this fund merely reflect the use of the borrowed money. As you can see, the borrowed money is now nearly gone.

One of the main, ongoing, unavoidable expense of Fund 63 is an annual transfer to Fund 225 to cover debt service expenses. Let’s look at that next.

TIF Debt Service Fund 225

[table id=62 /]

Revenues for this debt service fund come from the Central Area TIF and, up to now, some income from investing the fund balance. Since the fund balance has been run down to zero, the full annual amount owed will now need to come from TIF Fund 63. The last couple years of Fund 225 expenses give you an idea of how much will need to be transferred — that is, unless more borrowing is planned.

Fun(d) Things to Come

The City of DeKalb is predicting that the property tax increment will drop another 5% before recovering in FY2015 (PDF p. 24). If so, we’re looking at new property tax revenues captured by the TIF of about $6.2 million.

Not only are property values foundering, but this TIF district will take another hit when sales taxes are phased out of annual TIF takes. These sales taxes currently make up more than $1 million in revenues for this fund. Bottom line is: the $6.2 million in property tax revenues, plus whatever we have left as a beginning fund balance, will be the only resources available as of FY2014.

Out of the $6.2 million in new revenues for FY2014, $1.4 million will go to debt service and $3.4 million in property and sales tax declared surpluses and other returns. That leaves $1.2 million for projects and pledged giveaways such as the new $130,000 yearly allowance to National Bank & Trust.

That’s not a lot of wiggle room, especially in this time of economic uncertainty. No wonder they were musing about making the Shodeen property its own TIF — and no wonder the $500,000 Shodeen development incentive is coming out of TIF 2!

We need to talk about TIF 2, too, which we’ll do another time.