Gov. George Ryan signed Illinois' TIF reform legislation on August 11, 1999, bringing an end to years of hard work by groups around the State that were interested in making the TIF program more fair and accountable. The legislation - S.B. 1032, sponsored by Sen. Christine Radogno, and H.B. 306, sponsored by Rep. David Leitch - was the product of effective advocacy by many organizations, especially the Statewide Housing Action Coalition, the South Cooperative Organization for Public Education (SCOPE) and the Leadership Council for Metropolitan Open Communities. The new law makes important improvements to the TIF program in areas such as public participation and affordable housing, and limits abuses in the establishment of TIFs and use of TIF funds. Still, there remains room to improve the State law in a future session of the General Assembly. For information on possible future legislative reforms, see the NCBG fact sheet, "State Legislative and Local Policy Reform". Page 127.

The 1999 legislation contains about 75 different reform provisions - some major, some minor.

The following list summarizes the most important changes affecting Chicago:

Accountability and Public Participation Reforms

Overview: Individuals affected by a proposed or passed TIF are given more information about activities earlier in the process, though the legislation stops short of establishing a true community-centered planning process for TIF establishment or implementation.

Interested Parties Registry: " Establishes a mailing list for residents, businesses, and organizations within the TIF district that informs them of key developments within the TIF. (For more information, see the NCBG fact sheet, "The Interested Parties Registry," p. 136.)

Clarifies When A Full Public Process is Needed: The full public hearing and Joint Review Board process (which in Chicago requires approval by the Community Development Commission, the City Council Finance Committee, the full City Council, and in some cases the Chicago Plan Commission) is now required if: " Additional parcels of land are added to the TIF. " There is a substantial change in land use in the TIF. " The types of development planned for the TIF changes significantly. " The total project budget increases by more than 5 percent (after inflation is taken into account). " Additional line items are added to the project budget. " The number of low income households to be displaced in the TIF increases.

Earlier Warning of a Proposed TIF: " Municipalities now must pass an ordinance or resolution authorizing the start of the eligibility study. This must be made public and contain the proposed boundaries of the TIF, a general description of the TIF and its purposes, and who to contact for more information.

Expanded Joint Review Board: " Requires annual meetings of the Joint Review Board, which includes representatives of each taxing district affected by the TIF. " Previously, the JRB was only supposed to review whether an area was eligible to become a TIF. Now, the board's role is expanded to include a review of how well the TIF redevelopment plan meets the objectives of the State law. " If the JRB votes to disapprove the TIF, at least 60 percent of the City Council must vote to approve the TIF in order for it to pass. (Chicago's JRB has never voted against a TIF.) " In TIFs that qualify for the Housing Impact Study (see below), the public member of the JRB must be a resident of the TIF district in question. If the majority of the residents in the TIF are low-income, then the JRB representative must also be low-income. (For more information, see the NCBG fact sheet, "The Joint Review Board," p. 148.)

Annual Public Reporting: " Each municipality must now submit annual reports to the State Comptroller's office detailing such information as expenditures from each TIF fund, public and private investment for TIF-funded projects, and the activities of the Joint Review Board.

Housing Reforms

Overview: In TIFs where a substantial number of residents are affected, the municipality must conduct a "housing impact study" and provide resources to relocate residents. For new affordable housing construction, developers are able to use more TIF money and have more flexibility over how those funds are spent.

Housing Impact Study: The City must conduct a housing impact study if: " At least 75 occupied residential units are located within the TIF; or " The TIF plans to remove 10 or more occupied residential units. This study must contain information about: " The physical characteristics of residential properties that will be affected. " Whether those properties are occupied. " The racial and ethnic breakdown of the inhabitants of those properties (as of the last census). If residents will be displaced because of the TIF, the City must: " Provide money to help the occupants relocate to a new home. " Identify available, affordable replacement housing for the people who were displaced.

Additional Public Meeting in TIFs Where Residents Are Affected: " In TIFs that are eligible for the Housing Impact Study, the municipality must have an additional public hearing about affect of the proposed redevelopment plan on residents. This meeting must be held at least 21 days before the adoption of the ordinance that sets the time and place of the final public hearing on the TIF.

Expanded Ability To Use TIF Funds for Affordable Housing Development: " With other TIF-funded developments, TIF dollars were not allowed to be used to pay for the "bricks and mortar" cost of new construction. The new law makes an exception for affordable housing projects, allowing up to 50 percent of the bricks and mortar costs to be paid for with TIF funds. In addition, up to 75 percent of the interest costs of financing affordable housing development may be paid for with TIF dollars. Previously, only 30 percent of those costs could be paid for with TIF funds. (For more information, see the NCBG fact sheet, "TIFs and Housing," p. 33.)

New Uses of TIF Funds

Overview: TIF dollars may now be used to pay for day care and "welfare-to-work" programs.

Day Care: " TIF funds may now be used for the costs of day care services for low-income individuals employed by companies within the TIF, including the cost of operating day care centers.

Welfare to Work: " In addition to the costs of job training already permitted by the TIF law, the cost of "welfare-to-work" programs of businesses located within the TIF are now also eligible.

Limitations on the Use of TIF Funds

Overview: Municipalities have less opportunity to spend TIF dollars in ways that have been deemed to be abusive in the past, such as constructing golf courses, town halls or convention centers; reimbursing themselves for excessive administrative costs; or stealing businesses from other nearby towns.

Prohibits the Use of TIF Funds for "Retail Raiding": " TIF funds cannot be used to pay for a new retail project that is relocating into a TIF district while closing a similar facility in another town within 10 miles of the TIF, except in cases where the relocation is "beyond the control" of the company. This provision is intended to prevent the use of TIF funds to "pirate" or steal stores from other municipalities.

Limits the Use of TIF Funds for New Municipal Buildings: " TIF funds may no longer be used to construct new municipal facilities such as office space, storage, or conference facilities, unless the new facility replaces an existing public building that is slated to be demolished. In cases where a building is included in a redevelopment plan that passed prior to the adoption of the TIF law, these new limitations do not apply.

Prohibits the Use of TIF Funds to Build Golf Courses: " TIF funds may no longer be used to build golf courses on vacant land.

Limitation on Municipalities' Ability To Pay Themselves For Administrative Costs: " Under the new law, municipalities are still able to reimburse themselves for legitimate costs of administering a TIF (such as consultants, attorneys, staff time, studies, etc.), but cannot bill other costs (such as police service or generation operation and administrative costs that would have occurred even if the TIF was not in place) to the TIF fund.

Schools

Overview: The new law reimburses school districts for the costs associated with an influx of students caused by new TIF-funded residential development, and makes it somewhat easier for municipalities to spend TIF dollars on capital improvements to schools and other public facilities.

School Districts May Be Compensated For New Housing Developed Within Their Boundaries: In cases where a TIF funds new residential housing, the municipality is obligated to reimburse the school district for some of the increased costs the district must assume. In other words, the TIF has to help pay for the enrollment increase it creates.

The formula for this reimbursement is: (# of new pupils living in development) x (district's per-capita tuition cost) - (additional State Aid) These payments are capped at between 17 and 40 percent of the value of the increment generated by the project, depending on the type of district, the amount of state aid, and the per-capita tuition cost of the district.

In Chicago, there are additional restrictions: 1. No increased costs will be reimbursed unless the district shows that each of the schools affected by the TIF-subsidized housing projects is at or over its student capacity. 2. The amount reimbursed must be reduced by (1) the value of any property donated to the school district by either the developer or (2) the value of any improvements made to the school by the municipality.

Allows Municipalities To Spend TIF Dollars on Publicly Owned Properties Just Outside A TIF: " If a school, park, or other eligible public facility is directly adjacent to the TIF (or separated from the TIF only by a public street), then TIF dollars can be spent for improvements to those facilities. (For more information, see the NCBG fact sheet, "TIFs and Schools," p. 73.)

Eligibility

Overview: The new law makes some clarifications to the eligibility standards for TIF districts. Outside of Chicago, there is a more significant change that limits the ability to create a TIF on vacant farm land.

" Adds a new factor for conservation area TIFs that specifies that the area may be eligible if the Equalized Assessed Value (EAV) for the TIF has either (a) declined; or (b) grown at a slower rate than the rest of the municipality; or (c) growing more slowly than the rate of inflation for at least three of the last five years. " Requires that the eligibility factors be present "to a meaningful extent" and are "reasonably distributed" throughout the TIF. " Removes "age" and "depreciation of physical maintenance" from the list of factors that make an area eligible for a TIF, and combines "excessive land coverage" with "overcrowding of structures and community facilities" into one item.

(For more information, see the NCBG fact sheet, "What Areas Are Eligible for TIF?", p. 23.)