Downtown prepares for life without TIF
Promoters of downtown Springfield are looking toward the day when the area’s tax-increment financing district is scheduled to dissolve, leaving the city’s core without a dedicated funding source for projects aimed at improving livability and promoting economic development.
The TIF district is set to go away in 2016, which will be 35 years after downtown Springfield became one of the first areas in the state to take advantage of a law that allows public subsidies for private development as well as public infrastructure improvements.
Under the state’s TIF statute, increases in tax revenue that occur from the date of a TIF district’s creation must be spent within the district. In the case of downtown, the district that had an assessed value of less than $50 million when the TIF district was created now has an assessed value of more than $93 million, which has meant a pool of more than $79 million reserved for downtown during the past three decades.
The money has been spent for such things as saving a historic mansion from the wrecking ball and moving it downtown, purchasing property for a supermarket now under construction, updates to building facades, improvements to Horace Mann headquarters, nuisance bird eradication and helping the Salvation Army establish a homeless shelter.
“It’s certainly done a lot in terms of helping to improve and maintain the downtown,” said Mayor Mike Houston. “I think, if you look at it, it would have to be considered one of the most successful in the state of Illinois.”
But the money pot’s bottom has become visible as the sunset date nears, and there is no way for the TIF district, which was renewed in 1999, to be reauthorized based on what property was worth in 1981. Rather, a new TIF district with current property values as a starting point would have to be established, which would likely dramatically reduce the size of the money pot.
If every project approved for a TIF subsidy comes to fruition, the fund is already in the red, city officials say. That’s not necessarily a cause for concern, says Ward 5 Ald. Sam Cahnman, the only city elected official who lives downtown. In a use-it-or-lose it equation, Cahnman says, it’s better to have more projects than money when TIF districts reach sunset because leftover monies must be given to taxing districts that would otherwise be due the money if the TIF district had not existed. There are about $10 million worth of projects in the pipeline, he added.
“Some brand-new project, it would be hard to fathom how we could do it unless a project in the pipeline went south,” Cahnman said.
Ward 1 Ald. Frank Edwards wants the city council to vote on spending TIF money to repair the deteriorating granite façade on the PNC Bank building at the intersection of Fifth and Washington streets. The job is estimated to cost about $3 million, which Houston says would bust the TIF district.
Edwards said the building’s owners have contributed nearly $7 million to the TIF district over the years and so deserve consideration.
“If they don’t get the vote (approval), so be it,” Edwards said. “Let everyone have a fair shot.”
The city in 2010 gave $1.9 million to Horace Mann for improvements to its campus. The money came shortly after the company posted more than $45 million in profits for the first six months of that year.
How can the city say “yes” to Horace Mann and “no” to owners of the PNC building?
Houston, who was elected after the city approved Horace Mann’s request, said that the project approved in 2010 increased the value of the company’s property, which would lead to more tax revenue. While he hasn’t yet seen details of PNC’s project, Houston said that it appears to be more maintenance than enhancement.
Houston said that his administration has tightened up downtown TIF funding. Some projects already approved likely won’t come to fruition, he said, and he expects more requests for money as the TIF district’s end nears. In any case, Houston said that he believes downtown will still need help once TIF funding is gone.
“I think we are going to have to come up with a program to offer incentives to get people to invest in downtown,” the mayor said.
Victoria Ringer, executive director of Downtown Springfield, Inc., said that an extra sales tax downtown that would be used to improve and maintain the area is one option. She said that her group is expecting the results of a marketplace and demographic study within the next 30 days that will help pinpoint what market niches could be filled. The study is being funded with monies from the TIF district.
“What we’re hoping is, this will show us where to go in a non-TIF era,” Ringer said.
Contact Bruce Rushton at email@example.com.