A public hearing is scheduled for Monday August 12, 2013 in the council chambers at City Hall, 200 South Fourth Street in DeKalb. The creation of two new TIF Districts are the subject of the public hearing. It’s likely the only public hearing allowed on the proposal because one is the minimum required by law.
In other units of government of other communities such a public hearing provides citizens and interested parties ample opportunity to be heard, and ample opportunity to cross-examine witnesses. DeKalb, a Home Rule community, tries to limit comments to three minutes so they can give everyone a chance to talk. Perhaps the new mayor and council will bring about a change and advise all citizens and interested parties wanting to speak that they are subject to cross examination.
This hearing is the public’s only chance to get answers to questions, concerns and objections about the City of DeKalb’s TIF-funded redevelopment plans heard and answered as a matter of public record. But the opportunity for the community to have meaningful participation in the process used to determine how to and who will pay for its renewal may have already been lost.
After the public hearing is closed the city council can then entertain the enacting ordinance that commits the funding for the redevelopment plan and freezes the tax levy at its current level for the duration of the TIF District. The maximum life of a TIF District is 23 years.
Tax Increment Financing (TIF) provides a financial tool for cities, towns, and villages to address blighted property and conservation areas within their jurisdictions.
The municipality “self-finances” its redevelopment programs to pay for public improvements and/or economic development incentives with the increased property tax revenue (“tax increment”) captured between the “base” and the new EAV the improvements generate. Other taxing units help finance the TIF program, too.
But property tax is an ad valorem tax levied on an owner of real estate on the value of the property being taxed. The TIF District captures all taxes collected above the levy base established upon adoption of the ordinance. The captured TIF revenue can include increases generated by means other than increased property value. While property owners within a TIF District are levied and must pay tax increases for school construction debt bonds, for example, those collect funds may be captured and used by the TIF.
After adoption the municipality must provide the DeKalb County Clerk and Recorder with a legal description of the redevelopment project area, a map of the redevelopment project area, identification of the year that the county clerk shall use for determining the initial or base equalized assessed valuation, and a list of the parcel or tax identification numbers of all parcels within the redevelopment project area. 65 ILCS 5/11-74.4-4(a).
According to minutes of the June 28, 2013 Joint Review Board meeting received via a Freedom of Information Act request, Andrea Gorla, asst. superintendent of finance for CUSD #428 said it was difficult for the school district to support the redevelopment plans because TIF shifts the tax burden to properties outside of the TIF.
While an agreement reached to share surplus from the two proposed TIF Districts may help the school district benefit from the growth and improvements with the TIF prior to the 23 year expiration date the brokered deal did nothing to address the concerns expressed regarding shifting the tax burden to properties outside of the TIF.
Normally all taxing bodies must wait for the TIF to expire and the public’s investments in both public and private redevelopment projects within the TIF redevelopment area are fully repaid before sharing in the expanded tax base.
Gorla is District 428’s board appointed member of the TIF Joint Review Board (JRB). A JRB is required for every TIF district. 65 ILCS 5/11-74.4-5(b). The duties of the JRB are generally placed into three categories: review of proposed TIF districts; review of amendments proposed to existing TIF districts; and annual meetings to review existing TIF districts.
Members of the joint review board are selected by the governing body of each community college, local community unit school district, park district, library district, township, fire protection district, and county that have the authority to directly levy taxes on the property within the proposed TIF district at the time it is approved. 65 ILCS 5/11-74.4-5(b). The membership of the JRB also includes a representative of the municipality and a public member.
The public member of the JRB identified in the City of DeKalb’s response to a FOIA request is Sheela Prahlad who lists Vice President of Commercial Lending at National Bank and Trust Company as her job position on her Facebook page. According to minutes Prahlad was selected as public member at the June 28, 2013 meeting of the JRB. Apparently DeKalb has one JRB even though it has multiple TIF Districts.
In proposed TIF districts in which the redevelopment plans would result in displacement of 10 or more inhabited residential units or if the area contains 75 or more inhabited residential units, the public member must be a resident of the TIF district. If it is determined by a housing impact study or, if none is required by the TIF Act, then by some other reasonable data, that the majority of residential units within an existing or proposed TIF district are occupied by low-, very low-, or moderate-income households as determined by Chapter 3 of the Illinois Affordable Housing Act (310 ILCS 65/3) the public member must reside in a low-, very low-, or moderate-income household. Further, in any TIF district where no resident of low, very low, or moderate income is available to serve, this requirement will not apply. In such instances, the municipality is advised to accurately document the efforts it undertook to find a qualified public member.
The JRB for the proposed TIF Districts for Sycamore Road and the South Fourth Street redevelopment plans consists of Chair Rudy Espiritu, interim city manager; Andrea Gorla, DeKalb School District; Rob Galick, Kishwaukee College; Paul Miller, DeKalb County Government; Eric Johnson, DeKalb Township; Lisa Small, DeKalb Park District and Sheela Prahlad, public member. Jennifer Diedrich, City of DeKalb, is the official contact person for the TIF redevelopment plans.
Creative TIF boundaries can create transferable funds to exchange between projects in adjoining TIF Districts. Cherry picking properties for inclusion in the TIF is highly effective for maximizing captured revenue while providing wide leeway around the rules and intent of the TIF Act.
On December 22, 1986 the City of DeKalb adopted ordinances approving a TIF Redevelopment Plan and Project for an area designated as the Central Redevelopment Project Area. It was set to expire in December 2009.
Several amendments and plan modifications were made. Of particular note was the expansion of the Central TIF District to include the County Farm property. A revenue source was needed to fund infrastructure improvements needed to spur commercial development at Northland Plaza and the then new DeKalb Market Square. An almost surgical drawing of TIF boundaries allowed TIF to capture all increments above a zero-based property (the County Farm and the County Home properties were publicly owned paying no property taxes). Some of that property developed into the Target shopping center, Lowes Home Improvement and a large new construction residential subdivision.
According to minutes of a May 2007 economic development committee meeting of the DeKalb County Board then city manager, Mark Biernacki, approached DeKalb County to get their cooperation on an amendment extending the Central TIF District for another 12 years.
Biernacki told the committee about a new Downtown DeKalb Revitalization Plan that included improvements to city streets, landscapes and private practices. A new residential development to be in concert with the City’s Council “policy on denser development.” To begin smart growth in its downtown area the City needed to modify the main TIF District to generate the funds necessary to implement the improvements recommended by the Downtown Revitalization Plan and extend the expiration date by 12 years, or to 2021.
The City originally hoped to modify the Central Area TIF to shrink it to an area more centrally located in the downtown. But they found out that they couldn’t shrink the district because of the City had debt obligations that they were still paying on up until 2014 for projects on Sycamore Road and Barber Green Road. If they shrank the district they would not have TIF funds to retire debt that they had incurred. They also had a separate Intergovernmental Agreement with the School District to pay debt incurred for the remodeling of Clinton Rosette School.
In exchange for the City declaring the 50% surplus and returning those funds to each taxing district each taxing district was asked to write a letter to the City consenting to this action, according to public minutes. The money returned to the taxing bodies was done so “unencumbered” meaning it could be spent any way the receiving governmental unit desired.
Extending a 23-year TIF by 12 years required General Assembly approval. Both the House and the Senate overwhelmingly approved their versions of the DeKalb TIF Extension bill that became Public Act 95-0709 in Fall session of the 2007 General Assembly. For some unknown reason soon to be disgraced and convicted Governor Rod Blagojevich did not sign the approved bill until January 29, 2008. But according to public minutes Biernacki told the County economic development committee that in order for the extension to be considered by the General Assembly it needed to be consented to in writing by the taxing districts.
It is ironic that Blagojevich signed this pay to play bill not all that long before his arrest for attempting to sell the Senate seat vacated by the newly elected President Barack Obama.
Even if this all happens, there will be occasions where there is a project within this 12-year extension on a group of parcels or a block of land where the financial obligations within are so sizeable that the 12-year extension will not be long enough to retire the debt in that project. In those cases we will likely, prematurely, end the 12-year extension for that block, let’s say, and create a new project specific, 23-year TIF District for that block. With the approval of the downtown plan they have a lot of developer interest. One in particular where that will likely be the case. If this should happen, the increment on that block, that has been captured since 1986, when they did the original TIF, will come off. The incremental value that has occurred on that block would all go back to the taxing districts on a 100% basis.
Mr. Bockman said that this is a good thing for the County.
The Downtown Redevelopment Plan or more specifically the parking lot named after the late Mayor Frank Van Buer along with improvements made to 2nd Street, Locust Street and Third Street, the library and the Egyptian Theatre may have financial obligations so sizeable that the 12-year extension will not be long enough to retire the debt incurred. It would certainly strain the TIF cup to meet those obligations plus continue plans to provide ample TIF funds for the new DeKalb City Center vision with a renovated city hall, a cushion for any Murphy’s Law hiccups in the library expansion plans plus a DeKalb Public Library Park and plenty of riverwalk open green space to showcase the east entrance to NIU.
So perhaps another new project specific 23 year TIF District or two is needed to rob Peter TIF to pay Paul TIF. As long as the boundaries are surgically cut and adjoined and the properties carefully selected it’s pretty easy to establish a new project specific 23 year TIF District. The price dropped from 50% to 15% surplus in exchange for consent according to public minutes.
Many like Daily Chronicle columnist Jason Akst think that while TIF is indeed a complex financial instrument because it allows municipalities to finance the TIF project with TIF Revenue Bonds it’s a viable means for redevelopment. TIF Revenue Bonds require project plans to be far more vetted and scrutinized because the City’s liability is limited to revenue generated by the project which increases the risks and interest paid to the bond buyer.
But in DeKalb TIF projects are financed with General Obligation bonds placing the City and its taxpayers at risk should the project or the TIF District under perform.
That EPI firm seemed to suggest that DeKalb’s financial house was not in order and the city council could soon find itself in a quagmire similar to 2008 when they had to borrow $1.5 million to lay-off employees. EPI’s report did not jive with the rosy picture painted by outgoing mayor, Kris Povlsen, and aldermen Tom Teresinski and Brendon Gallagher. How scary was the EPI report? The fulfillment of a FOIA request for the final report was redacted.
Before creating any new TIF or any new debt the public deserves a crystal clear picture of the City’s finances.
In proposed TIF districts in which the redevelopment plans would result in displacement of 10 or more inhabited residential units or if the area contains 75 or more inhabited residential units, the public member must be a resident of the TIF district.
The recently added to the Comprehensive Plan with little fanfare DeKalb City Center TIF specific project will only displace 9 inhabited residential units.
Since 1986 the old central business district of DeKalb has been in a TIF District. Not much has changed in the area of economic vibrancy downtown. Other than some actual neighborhood renewal on Pond/Fisk Avenue early in the program the residential center of the city remains pretty much unchanged. City Barbs filed a FOIA request that shows $12.5 million of public investment in the downtown in FY2012. Private investment undertaken: $7,163. Perhaps the Downtown Visionaries might pool together to form an investment trust to buy the TIF Revenue Bonds needed to finance the downtown of their dreams. Because the risk is higher so is the dividend… if it works.
But instead the TIF train is on the fast track. How fast the track? The interim city manager is proposing it.
The boundaries of the proposed new TIFs appear surgically cut and properties selected to finance the DeKalb City Center and left over debt from Van Buer Plaza. The boundaries for the new South Fourth Street plan excludes residential units and doesn’t generate enough captured TIF to do much of any project. The potential for revenue is far greater at the former Small Furniture plus the old veterinary place on Sycamore Road. Could one of the new TIF Districts have been selected for cash capital the other for political capital?
TIF certainly is complicated but DeKalb needs renewal. That much is simple. How to and who will pay for that renewal must be figured out. The manipulation must stop.
Here’s a bright idea! Follow the rules and their intent. Be upfront and transparent. Engage the public. Regard all residents as stakeholders.
Start with the Comprehensive Plan. If the City doesn’t want a developer to bring their plans piecemeal then don’t update the Comprehensive Plan with pieces or pet projects. Do it right. Be inclusive.
Inclusive would include revising the draconian ordinance designed to limit the very public participation the TIF Interested Parties Registry were intended to encourage.
What is an Interested Party Registry, you ask?
The municipality is required to create an interested parties registry. 65 ILCS 5/11-74.4-4.2. The interested parties registry serves as a listing of all persons or entities that desire to register notices and other information respecting the TIF. The registry should be created by ordinance or resolution concurrent with the ordinance or resolution calling for the feasibility study. These ordinances/resolutions may be combined in to a single ordinance or resolution.
The municipality must also adopt reasonable rules and prescribe the forms or other documents necessary for persons or entities to be pla ced on the registry. It is advisable that these rules be set forth in the ordinance. Section 11-74.4-4.2 of the TIF Act provides that, at a minimum, the rules shall provide for a renewable period of registration of not less than three years and notification to the registered organizations and individuals by mail at the address provided upon registration prior to termination of registration. In the alternative, the municipality may decide to have the registration remain valid for the term of the TIF. The rules must be structured so that they do not prohibit or interfere with the ability to receive information to which the registrants are entitled under the TIF Act, including all required notices.
In response to a FOIA request asking for the list of all people on DeKalb’s Interested Party Registry (IPR) there is, so far, only one name on the list. A commander with the American Legion on South Fourth Street.
Proper use of the IPR might equalize opportunity for residents and businesses in a TIF District. It might bring more ideas to the table. It might provide a better idea.
Remove the draconian requirements to be on the IRP and put in online.
Every city council member since 1986 should be embarrassed for not taking IRP application forms out to their constituents and inviting their participation. If not on the list chew them out. Except for Bob Snow and Bill Finucane. They’re the new kids on the block. Hopefully they’ll change things up a bit.
Shouldn’t the Big Plans wait for the new city manager, yet unhired, to see if s/he has better ideas?
Speeding trains are aided by empty public hearings. Written objections, concerns and questions must be heard at a public hearing. Those that cannot attend in person should send their comments to Jennifer Diedrich at the City of DeKalb and/or their mayor and aldermen.
|Mayor John Rey||David Jacobson, First Ward||Bill Finucane, Second Ward||Kristen Lash, Third Ward|
|Bob Snow, Fourth Ward||Ron Naylor, Fifth Ward||Dave Baker, Sixth Ward||Monica O’Leary, Seventh Ward|
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