The following information is a cursory view of Economic Development Incentives that are available to municipalities in the State of Illinois. All incentives are, foremost, at the discretion of the municipality. Municipalities should have policies in place that describe when and under what circumstances they will award incentives. Incentives should always be granted for the public good and should only be granted to make the project work. Communities should assure that, “but for” the incentive the project is not financially possible. Many times this will mean that the community reviews the pro forma of the developer to determine the level of the incentive. The community should evaluate the amount of the incentive in proportion to the financial risk of the developer.
Tax Increment Financing—65ILCS, 5/11-74.4.1 et.seq.
TIF is perhaps the best-known incentive available to communities in Illinois. When a community institutes a TIF district it freezes the existing Equalized Assessed Valuation for all taxing districts for the next twenty-three years or until the TIF dissolved. Any increase in the EAV and its resulting property tax are applied toward development of the district.
Communities can use the increment to support a myriad of economic development activities; the most common is for the development of infrastructure. In addition, TIF can write down the purchase of the land, pay for preparation of the land (including grading for drainage and demolition), and pay for the following and other costs: partial interest costs, rehabilitiaion and lease hold improvement costs, relocation costs, and landscaping, etc.
Business District—65-ILCS 5/11-74.3-1
A Business District can be established for a particular site or series of parcels. The municipality then implements an additional sales or hotel motel tax to a maximum of 1%. The proceeds from this new sales tax are applied to costs of the development of the site. Eligible costs are similar to that of TIF.
Sales Tax Revenue Sharing
Municipalities may enter into agreement to share or rebate any portion of any retailer’s occupation tax that is generated by the development for a finite period of years. The municipality must make findings related to the property and in general the abatement should serve a public purpose as creating development in adjacent areas or creating or retaining jobs, enhancing the tax base of the municipality.
Property Tax Abatement--35ILCS 200/18-165
The community can provide a maximum of $4 million dollars in tax property tax abatement within a ten-year period for commercial and industrial development. The municipality may be joined by other taxing bodies in providing this abatement. Normally there is an agreement based on all or part of the property taxes being rebated over a number of years.
Special Services Area or Special Assessment
An area is created where a special assessment is placed against property to finance certain public improvements or services. This incentive has become popular in recent years to incent the development of housing. In this case the developer requests that public infrastructure (in the past, mostly financed by the developer) be financed by the community. The community publicly finances this infrastructure at a tax-exempt rate and applies an assessment to the property. These bonds incent development by removing the costs of infrastructure.
Enterprise Zones
The Illinois Enterprise Zone Act creates a specific area jointly designated by the State and local government that allows various tax incentives and other benefits to stimulate economic activity and neighborhood revitalization.
The following are among the incentives that are available in an enterprise zone: Investment Tax Credit, construction material sales tax deduction, machinery and equipment sales tax exemption, utility tax exemption, jobs tax credit, tax abatement income tax deduction for financial institutions on loans for development in enterprise zone, corporate contribution deduction.
Revolving Loan Fund
The municipality subsidizes private loans through a revolving loan fund.
General Municipal Assistance
The municipality may provide a number of incentives for economic development in the general course of doing business. They may reduce or eliminate fees that apply toward development. They may work with the developer to minimize the time taken to process development.
State Incentives
Both the State and Urban Counties provide for Community Development Block Grant Funds or the CDAP program for the State. (See the Department of Commerce and Community Affairs Web site)
The Department of Commerce and Economic Opportunity administers the EDGE Tax to reduce the cost of doing business in Illinois when compared with similar costs in other states allowing for tax credits.
The Environmental Protection State has a Brownfield clean up program that offers a variety of incentives.
The Illinois Department of Transportation is administers funds for roads to support economic development.
The Illinois Development Finance Authority provides Industrial Revenue Bonds.
The State of Illinois Web site provides access to all departments and their programs.
Beth Ruyle and Associates
