The City of Wood Dale has established one Tax Increment Financing (TIF) District, Thorndale Corridor TIF, and is currently proposing a second TIF District, Wood Dale Road TIF, to encourage redevelopment.
What is TIF?
TIF is a locally-controlled economic development tool that generates funds to pay for redevelopment from the increase in property value caused by redevelopment. The TIF district will allow the City to implement existing plans, facilitate the development of vacant and underutilized properties, construct and improve public infrastructure, and improve the image and accessibility of the district. TIF is not an entitlement, but rather, it allows applicants to be reimbursed for certain eligible project costs for improvements within the TIF district in order to encourage development that would not have occurred “but for” the TIF district. Property owners, tenants and public taxing bodies can apply for TIF assistance.
What if my property is located within a TIF District?
If your property is located within an existing TIF district, which is illustrated below, then you are eligible for TIF funding. Unlike a special service area, TIF does not increase your property tax rate. See the applicable Redevelopment Plan below for specifics about the goals for each district.
What types of projects can TIF funds support?
TIF funding can be used to assist both public and private projects on a per project basis. Eligible costs include:
- Costs of professional services, including legal, consulting, engineering fees, etc.
- The costs of marketing sites
- Property assembly costs, including acquisition of land, demolition of buildings, site preparation, and site improvements
- Costs of rehabilitation, reconstruction, or repair or remodeling of existing buildings, fixtures and leasehold improvements
- Costs of the construction of public works or improvements;
- Costs of job training and retraining projects, including the costs of “welfare to work” programs implemented by businesses located within the RPA
- Relocation costs
- Costs of job training, retraining, advanced vocational education or career education
- Interest costs incurred by a developer related to the construction, renovation or rehabilitation of a redevelopment project (up to 30% of interest costs)
What is the application process?TIF is a reimbursement tool for improvements to property located within a TIF district. To qualify for TIF reimbursement, expenditures must be eligible under the TIF law and the Redevelopment Plan. An application must be completed and submitted to the Wood Dale Community Development Department along with the required supporting materials. An incomplete application may be rejected by the City, if any of the required information is not submitted.
For projects that are driven by private sector developers or business owners, providing public TIF funding should be considered an extraordinary intervention in the largely privately-driven real estate market. Accordingly, such interventions are worthy of underwriting and evaluation by the City to understand the project’s need for assistance and the public benefits of the project. Any agreement to financially support a private project must be structured carefully to provide the City with reasonable protections and assurances regarding outcomes.
Requests for TIF assistance may be reviewed in one or more of the following ways:
- Project Feasibility Review – Before getting too far into detailed financial and legal work, some level of market and/or other higher-level feasibility testing may be warranted. Assuming the project passes this initial test, further research and analyses may be needed.
- Public Benefit Analysis – This analysis is crucial because an inability to obtain private financing does not necessarily mean a project warrants TIF funding. The core question here is: “What benefits is the City receiving that warrants an extraordinary intervention?” Public benefits can include bringing a contaminated site back into productive use, employment growth, and tax base growth, among others.
- Examination of Eligible/Extraordinary Costs – State law only allows municipalities to use TIF funds to reimburse developers for certain types of costs. A close inspection of the project budget is required to ensure that the City is reimbursing for legally allowed costs.
- Gap Analysis – Assuming a project is providing sufficient public benefits to potentially warrant TIF funding, a detailed review of the project’s financials often occurs. The review includes examinations of projected revenues, costs, absorption pace, financing structure, and of other key elements relating to how much TIF assistance the project needs to achieve a market-level return for the developer. By subjecting the project’s financial projections to close scrutiny, the City also demonstrates to taxpayers and other taxing bodies that they are careful stewards of these funds and seek to only use TIF when the project, to the extent needed, requires assistance.
- TIF Revenue Projections – In addition to validating the need for assistance, the City will also assess whether there will be sufficient revenues generated to provide the required assistance. Revenue projections are to be based on market-validated comparable assessments and absorption levels.
- Balancing Risk and Structuring Deals – Once the level of assistance has been negotiated based on the work conducted above, the form, timing and terms of that assistance must be negotiated. For example, in this process, cities often introduce “go dark” provisions; if a project stops operating within a certain period of time, the TIF payments can be stopped and prior payments can be recaptured.
Upon application approval, the Applicant will enter into a legally binding contract, called a redevelopment agreement (“RDA”), with the City that outlines timelines, compliance and other pertinent issues. After completion of the project, the Applicant may be required to provide construction cost verification and satisfy other compliance requirements of the RDA to receive reimbursement. Applicants may choose to work with professionals, such as a lawyer, architect/designer, engineer, TIF consultant and possibly others, to assist with the process of making an application for TIF assistance and negotiating an RDA.