What is a TIF?
TIF stands for Tax Increment Financing. With this development tool, financially strapped local governments can make the improvements they need, like new roads or sewers, and provide incentives to attract new businesses or help existing businesses stay and expand. And TIF does this without tapping into general municipal revenues or raising taxes.
According to the Illinois Tax Increment Association, TIF calls for local taxing bodies to make a joint investment in the development or redevelopment of an area , with the intent that any short term gains be reinvested and leveraged so that all the taxing bodies will receive larger financial gains in the future. The funds for this investment do not come from current revenues, but from future tax revenues, not otherwise expected to occur. These new revenues are generated by increased public and private investment in identified, underperforming, areas.
When a TIF redevelopment project area (often called a TIF district) is created, the value of the property in the area is established as the “base” amount. The property taxes paid on this base amount continue to go to the various taxing bodies as they always had, with the amount of this revenue declining only if the base declines (something that the TIF is expected to keep from happening) or the tax rate goes down. It is the growth of the value of the property over the base that generates the tax increment. This increment is collected into a special fund (the Special Tax Increment Allocation Fund) for use by the municipality to make additional investments in the TIF project area. This reinvestment generates additional growth in property value, which results in even more revenue growth for reinvestment.
In this way the TIF redevelopment project creates a vital cycle, increasing development and redevelopment in the area, such that when the TIF project ends — and Illinois law allows a TIF project to exist for a period of up to 23 years — all of the taxing bodies benefit from the new growth.
TIF Central Business District (CBD)
One of Sterling's TIF Districts is located in the heart of the city- the Central Business District. This TIF District was created in order to demolish blighted buildings and rebuild the downtown area. The revenues for this TIF District are primarily from incremental property taxes and incremental sales taxes. Thanks to the establishment of the CBD TIF District, the values of downtown properties have grown.
To find out more information on the CBD TIF District, please take a look at the City's Budget Document or a PowerPoint Presentation on Sterling's TIF Districts.
Another TIF District in Sterling is the Lincolnway-Lynn TIF District. This TIF District was established to demolish empty retail buildings and create a new site for the current Kohls and PetSmart businesses.
To find out more information on the Lincolnway-Lynn TIF District, please take a look at the City's Budget Document or a PowerPoint Presentation on Sterling's TIF Districts.
TIF Rock River
The Rock River TIF District was established after the closure of Sterling Steel and Wire in order to revitalize the area. This TIF has been used to assist with new business attraction and environmental cleanup. Revenues for the Rock River TIF rely on both incremental property taxes, primarily for bond repayment, and intergovernmental funding, such as grants, for financing improvement projects to the TIF district.
To find out more information on the Rock River TIF District, please take a look at the City's Budget Document or a PowerPoint Presentation on Sterling's TIF Districts.