Proposed new TIF district would cover area of lower-valued properties

Proposed new district would cover area of lower-valued properties

By DREW ZIMMERMAN - dzimmerman@shawmedia.com Published: Wednesday, Oct. 11, 2017 11:36 p.m. CDT
Construction workers make progress renovating the former Moxie building July 27 in DeKalb. The building will be the new home of Sundog IT. Tax increment financing funds are helping pay for the project. — Matthew Apgar / Daily Chronicle

DeKALB – Since their creation, the city of DeKalb’s two tax increment financing districts have generated more than $200 million in revenue for the city.

The money has helped fund essential projects such as road maintenance, redevelopment proposals such as the Cornerstone apartment and retail project, and critical new infrastructure such as water main replacement. But with both TIF districts set to expire in the next few years, the city’s staff is encouraging the creation of a new district to focus on properties that are worth even less than they were 30 years ago.

Preliminary plans for a new district were presented in September during a special City Council Committee of the Whole meeting to discuss TIF district phaseout options.

The proposed district will run along Lincoln Highway from Pearl Street to Seventh Street and will stretch as far south as Franklin Street and as far north as Pine Street. The DeKalb Iron and Metal Co. at 900 Oak St. also will be within the district’s boundaries.

DeKalb Community Development Director Jo Ellen Charlton said the proposed area largely will be composed of properties that are worth less today than they were when the current districts first were formed decades ago.

“My impression of any objections they might have would be if we were to make a request to extend the existing districts because that would have an impact on their ability to capture the ‘new growth’ in their levy calculations for those properties that have increased significantly in value since the district was initiated,” Charlton said.

Tax increment financing creates large sums of money for city government to spend by diverting property tax payments away from other local governments. School districts, which rely most heavily on property taxes to fund their operations, feel the effect of the lost revenue most acutely.

Such districts freeze the amount of revenue taxing bodies receive from property for a set period, usually
23 years. As the value of the property increases with time, the corresponding increase in property tax is diverted to a special fund to be spent by the city on improvements.

The city’s two TIF districts will generate up to $13.5 million in revenue from now until they expire in December 2018 and December 2021.

Projects requiring a portion of these remaining funds already are under consideration, such as a Science, Technology, Engineering, Art and Math Learning Center, which requested a
$4 million TIF contribution toward its estimated $13 million construction cost. DeKalb Mayor Jerry Smith also has suggested the construction of a new city hall to replace the current municipal building at 200 S. Fourth St., which dates to the 1960s.

Vacant property on Lincoln Highway between Pearl Street and First National Bank is included in the district. Shodeen has requested tax increment financing assistance to redevelop the property in the past, but the developer’s plans have been shot down because of a lack of available parking. The second phases of the Cornerstone and Plaza DeKalb projects developed by John Pappas also will require TIF funds in fiscal 2018. The city has committed a total of about $5 million for those two projects.

Outside of projects meant to stimulate economic development, the city spent $1 million in TIF funds this fiscal year on street maintenance within the two districts. Money also goes to capital improvements for buildings including the Egyptian Theatre and Barb City Manor.

During September’s meeting, DeKalb Economic Development Planner Jason Michnick proposed two alternatives to allow the city to get the most bang out of the remaining TIF bucks: prioritizing current projects and programs and investigating policy changes to increase available funding.

“We would still look at prioritizing opportunities and revising incentive and financial policies if we were to move forward with a new TIF district,” Michnick said.

Although state legislators could be asked to vote to extend the life of the TIF districts, city staff members determined that would be impractical and could deprive DeKalb School District 428 of funds it needs to repay $108 million in bonds used to build the new DeKalb High School and Cortland and Malta elementary school buildings, possibly resulting in property tax rate increases.

“I think [District 428 officials understand] that creating small districts with these properties instead of larger districts that have experienced growth would have little or no impact on them in the short term,” Charlton said.

District 428 Superintendent Jamie Craven said that in the talks he’s had with the city staff, the district should come out OK with the new district.

“We’ve been in some preliminary discussions talking about the current TIF districts being retired and the proposal for a new TIF district,” Craven said. “We know we’ll be positively impacted as the old TIFs are retired, and we see new [equalized assessed value] coming on the rolls.”

Moving forward, the next steps would be to complete an eligibility study, which will determine whether enough of the properties within the proposed boundaries meet state guidelines for qualifying for TIF, and a redevelopment plan, which will provide direction as to what projects the community expects to accomplish with the TIF money. These studies are estimated to take four to six months, Charlton said.