What Types of Areas are Eligible to Become TIF Districts?

The first step in establishing a TIF district is determining whether it is eligible under the guidelines set forth by State law. In general, the State law allows a municipality to create a TIF if the area is either blighted or in danger of becoming blighted. This second type of TIF is often referred to as a "conservation TIF."

How Does the City Determine If An Area Is Blighted?

To determine whether a suggested TIF area complies with the State law, the City generally hires a private consultant to perform a survey of the area. The consultant does a visual survey of the neighborhood to determine the condition of buildings and the amount of vacant land, researches the number of building permits that have been issued for the neighborhood in recent years, and checks to see whether the value of properties within the TIF has grown or shrunk. There is rarely any public participation in the process.

What If There's Already Development Taking Place Without the TIF?

The idea behind TIFs is that little or no new development or growth would take place in the area without the use of the TIF. This is sometimes called the "but for" test - no growth would happen but for the TIF. If it was strongly enforced, this could be a powerful tool for limiting the use of TIF to only those areas that truly needed a tool such as TIF. Unfortunately, the State law does not provide us with a good set of rules for determining whether or not development would take place without the TIF. This has opened the door to widespread abuse of TIFs in some areas. Still, in neighborhoods where an unwanted TIF is on the drawing board, it can be helpful to cite evidence of development that is already taking place without the aid of public subsidies, or show how property taxes in the area are already on the rise.

The 13 Factors for Determining "Blight"

The consultant evaluates the proposed redevelopment area based on 13 factors defined in the State law. If the area meets at least five of these criteria, it is considered blighted. If half the buildings in the area are more than 35 years old, and the TIF meets at least three of the State eligibility factors, then it is considered to be a conservation area. The factors must be present "to a meaningful extent" and must be "reasonably distributed throughout the area" in order to qualify.

Deterioration:

Substantial repairs must be made to building features such as windows, doors, gutters, porches, and the exterior façade. This also applies to streets, alleys, sidewalks, and parking lots.

Inadequate Utilities:

Buildings lack adequate sewers, water mains, gas, telephone, or electrical services.

Obsolescence:

Buildings can no longer be used for their original use (such as a factory that can no longer accommodate modern technologies).

Dilapidated Buildings:

Major structural repairs must be made to the buildings in the area, or they need to be torn down.

Building Code Violations:

Buildings do not meet safety and fire codes, or don't comply with zoning laws.

Illegal Use of Structures:

Buildings are used for illegal purposes (this does not include zoning violations).

Vacant Buildings:

An excessive number of buildings are vacant or "underutilized."

Lack of Ventilation, Light, or Sanitary Facilities:

Buildings lack windows or air circulation, garbage storage is inadequate, or buildings lack hot water or bathrooms.

Overcrowding of Structures:

One or more buildings are crowded onto a piece of land that is too small in size. This includes buildings that don't have adequate off-street parking or have inadequate loading docks.

Undesirable Land Use:

The types of activities on the land are not compatible with each other (such as heavy industrial next to residential uses).

Environmental Clean-Up:

Sites within the TIF require the clean-up of hazardous waste or the removal of underground storage tanks.

Lack of Community Planning:

The area has been adversely affected by development that took place without the benefit of a community plan, or contrary to an existing community plan.

Stagnant or Shrinking Property Values:

Property values ("equalized assessed value") has declined for three of the last five calendar years, or property values in the proposed TIF area has grown slower than the rest of the municipality in three of the last five calendar years, or property values have grown slower than the Consumer Price Index (the inflation rate) for three of the last five calendar years.

How Do Consultants Determine Whether Vacant Land is Blighted?

The State Law specifies a slightly different set of eligibility factors if the entire proposed TIF area is vacant. An area is eligible to become a TIF if it meets at least two of the following criteria:

Presence of Parcels That Are Awkward To Develop

In some cases, parcels available for development are too small, too large, or too awkwardly shaped to attract a buyer, or parcels do not have adequate alleys or streets to provide access to the properties. This problem has been faced in redeveloping the Stockyards area and Cabrini Green.

Diversity of Ownership:

In many cases, several parties own small sections of a large piece of vacant land. This often makes it difficult for a developer to acquire enough land to construct a larger project, and stands in the way of potential development.

Deterioration of Structures Adjacent to the Vacant Land:

The law specifies that blighted areas surrounding a piece of vacant land contribute to the lack of development on the unoccupied parcel.

Environmental Cleanup:

Same as above.

Stagnant or Shrinking Property Values:

Same as above.

Special Factors:

In some special cases, only one factor is necessary to qualify a piece of vacant land as blighted, such as: abandoned railroad yards, unused quarries or mines, chronic flooding, or illegal dumping.

Why Are There So Many TIFs In Areas That Aren't Really Blighted?

The fact is that State law does not establish very specific rules for which areas can be considered eligible for a TIF. The law only says that the above factors must be "present to a reasonable extent," but does not define what that means. This back-room process leaves plenty of room for consultants and the City to manipulate the boundaries of a TIF to make sure it qualifies even if the area would never meet a common sense definition of "blight." The end result is that many neighborhoods have become TIFs that otherwise would never have qualified.