Tax-Increment Financing (TIF)

The Village of Heyworth strives to offer a business and development friendly environment while addressing blight utilizing, in part, Tax-Increment Financing (TIF ) programs.
 
What is TIF?

Tax-increment financing or TIF essentially allows a municipality to form an area, referred to as a "TIF district", whereby the municipality can use new property taxes produced from the properties in the TIF district for the development or redevelopment of the area.  The funds or increment for this investment of development or redevelopment do not come from current revenues but rather from future property tax revenues above the "base" value, or the property tax values produced prior to the formation of the TIF.  The property taxes paid on this base amount continue to go to all of the taxing bodies as they always had, with the amount of this revenue declining only if the base declines or the tax rate goes down.  The growth of the value of the property over the base, referred to as the "increment" are paid to the Village into a special fund (the Special Tax Increment Allocation Fund)  to be utilized for TIF purposes.  The concept is that the Village, utilizing the TIF fund, will cause growth in property values within the TIF district through development or redevelopment.


What does the Village use TIF for?
 
The Village uses the increment produced in a TIF district for: improvements within the TIF area such as paving streets, water installations, and drainage; for expenses for economic development purposes including commercial development and residential subdivisions; and to address impacts with overlapping taxing bodies.
 

How does the Village utilize TIF for economic incentives?
 
The Village utilizes the increment produced in a TIF district to incentivize developers and businesses to develop and alleviate blight within the TIF district.  This is typically done by reimbursing a percentage of the real estate taxes or increment produced from the developer's or business's property from the previous tax year through a TIF Redevelopment Agreement/Contract.  The Village also tries to account for impacts the TIF may directly cause to overlapping taxing bodies, such as the School District and Fire/EMS.  Additionally, the Village utilizes the increment to pay for the administrative costs associated with TIF districts.
 
A typical TIF Redevelopment Agreement will entail the following distributions:

  1. Administration Costs - The Village first utilizes the increment produced from the property of a developer and/or business to pay for the administration costs of the TIF.
  2. Other Taxing Bodies - The Village may then utilize the remaining increment or "net" to reimburse capital cost incurred by other taxing bodies, such as the School District and Fire/EMS, for impacts caused by the TIF and only if there is a redevelopment agreement between the Village and that taxing body.  A typical redevelopment agreement with a taxing body will be for a percentage of the net increment remaining after payment of the TIF administration costs, and that percentage typically varies based on the zoning classification or use of property within the TIF district (i.e. commercial, residential, retirement facility, etc.).
  3. Developers - The Village may then enter into a redevelopment agreement with the developer of land to reimburse capital costs incurred by the developer utilizing the "net" remaining increment after payment for administration costs and other taxing bodies.  These costs are typically reimbursed annually on a percentage basis utilizing the remaining net increment for costs such as: land purchase; site preparation; legal and engineering; infrastructure later dedicated to the Village such as streets, water and sewer; advertising, and other such expenses authorized by the TIF Act and the redevelopment agreement.  To be eligible for reimbursement, costs by developers must be incurred after the TIF district is formed or after a predevelopment agreement is entered into with the Village.
  4. Businesses - The Village may then enter into a redevelopment agreement with a business utilizing the "net" increment remaining after distributions for administration costs, other taxing bodies, and developers.  These costs are typically reimbursed annually on a percentage basis utilizing the remaining net increment for costs such as: land purchase; site preparation; legal and engineering; advertising; and other such expenses authorized by the TIF Act and redevelopment agreement.  To be eligible for reimbursement, costs by businesses must be incurred after the TIF district is formed or after a predevelopment agreement is entered into with the Village.  Sales-tax or retail producing businesses may also be eligible for additional incentives through the Village's Business Development District (BDD) program.  Click here for more information on the Village's BDD Program.  

 How to apply for TIF with the Village?

TIF Agreements/Contracts
 
Pursuant to Section 5/11-74.4-4(b) of the TIF Act, the Village may enter into contracts with property owners, developers, tenants, overlapping taxing bodies, and other necessary or incidental to the implementation and furtherance of its redevelopment plan and project.  To apply for a TIF agreement with the Village, click here.


TIF Administration

The Village, in addition to Village staff, currently utilizes the services of Jacob & Klein, Ltd., and the Economic Development Group, to help administer its TIFs.