Illinois Tax Increment Association

Creating a TIF

Illinois law specifies a number of requirements that must be satisfied for an area to qualify for Tax Increment Financing, beginning with identifying the project area and the physical and economic deficiencies that need to be cured. These deficiencies are often called the “blighting requirements”.

In addition to meeting the blighting requirements called for under the TIF Act, the municipality must also demonstrate that these conditions will not be addressed without some local action. What is often called the “but for test”, calls for the municipality to show that ‘but for’ the public investment provided through the TIF, effective redevelopment or development will not occur.

Along with meeting these requirements, the municipality must also prepare a plan laying out the actions that the municipality intends to take to improve the area, and a budget for the TIF district that includes the total TIF-eligible costs. Municipal officials and a Joint Review Board, made up of representatives from local taxing bodies, must review the plan for the redevelopment of the TIF area, allowing the various taxing bodies to provide their input and opinion on the matter to the municipal authorities. Following this, a public hearing must be held so that residents and other interested parties can express their thoughts on the subject.

Once these steps are completed, the proposal to establish the TIF district and engage in Tax Increment Financing must pass through the same process as any other ordinance proposed by the municipality, receiving approval by the municipal legislative body. If approved by the municipal governing body, the mayor or village president may sign the ordinance into law. As the establishment of the TIF is a municipal function, no State or Federal approval is required.

TIF is a process, not a panacea, that requires careful monitoring. When used properly, TIF is a fulcrum for positive redevelopment that creates a win-win for all parties; not, as some think, just a subsidy for developers.