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Posted on: March 10, 2021

Tax Increment Financing and the Prospect Pointe/Muir Park Lexington Homes Development


Tax Increment Financing (TIF) is an economic development tool used by municipalities to assist the improvement of blighted or challenged areas of development or redevelopment.  TIF enables cities and villages to utilize public investment to assist developers with extraneous costs/risks of economically difficult improvement projects.   These costs and risks may prevent development and private investment from occurring.  Without tax increment financing assistance, development in certain areas may not be economically feasible.  Additionally, TIF provides the opportunity for cities and villages to fund needed public infrastructure improvements which are not otherwise possible because of financial restraints and competing needs and priorities.

Presently, the City is considering a tax increment financing district to assist Lexington Homes with the redevelopment of the former 5-acre Jolly Fun House Academy School, into a 69-unit townhome development.  This proposed TIF District would assist Lexington Homes with extraneous development costs related to a deep well and water supply, fire suppression and storm water management for the site.  The tax increment financing district being considered would also provide for the rehabilitation of Muir Park and storm water management improvements to the neighborhood north of the Jolly Fun House Academy property, specifically, the Drake Avenue/Eleanor Drive, and Drake Terrace/Drake Avenue areas.   Sidewalks and ditch improvements are also planned for Drake Terrace, Oak Avenue to Elmhurst Road, and the east side of Elmhurst Road, city limit to Hintz Road.

Eligibility Factors Necessary for TIF District Designation

Illinois TIF law recognizes prerequisite conditions that must be satisfied for an area to qualify as a TIF district.  Eligibility factors vary on whether the district to be considered is improved land, vacant land or an industrial park conservation area.  For the proposed Prospect Pointe/Muir Park designation, the eligibility test is for “Improved Land-Conservation Area.”

For this finding, over 50 per cent of buildings within the area must be 35 years or older, and three or more eligibility factors from the following list must be present to a meaningful extent and reasonably distributed throughout the area:

  • Dilapidation
  • Obsolescence
  • Deterioration 
  • Presence of structures below minimum code standards
  • Illegal use of structures
  • Excessive vacancy
  • Lack of ventilation, light or sanitary facilities
  • Inadequate utilities
  • Excessive land coverage and overcrowding of structures and community facilities
  • Deleterious land use or layout
  • Environmental clean-up
  • Lack of community planning
  • Lack of growth in EAV

The proposed Prospect Pointe/Muir Park TIF District encompasses approximately 28 acres (5 acres former Jolly Fun House Academy, 5 acres Muir Park, 18 acres of properties primarily along drake Terrace and Drake Avenue.  In summary, the proposed area exhibits the presence of prerequisite criteria for eligibility as a TIF Conservation area: an improved area in which at least 50 per cent of the structures are 35 years of age or older.    Other TIF Conservation Area qualifying factors have been identified as: inadequate utilities; lack of community planning: and, lagging equalized assessed values (EAV).


The areas outside of the vacant Jolly Fun House Academy and Muir Park properties have been surgically included within the proposed TIF boundary to enable the City to provide neighborhood storm water management improvements and sidewalks.   The growth in property values of these properties as represented by equalized assessed values, has lagged behind the growth in the consumer price index (inflation) in three of the last five years.


How TIFs Work

TIFs freeze the existing equalized assessed valuation for a designated area and collect all tax revenues above that rate (the increment) due to increased property valuations for use in the TIF.  Individual taxing bodies within the City of Prospect Heights, such as the School, Library, Park and Fire Districts, and other taxing districts such as Cook County, Harper College, Wheeling Township and others get their usual share of the money at the frozen rate.  The new revenue, or increment, can be used for eligible expenses such as development infrastructure costs, other public improvements within the District, interest expenses, and compensatory payments to school or other taxing districts.


Establishment of a TIF does not reduce property tax revenues available to other taxing governments.  These governments continue to collect property taxes at the base value throughout the life of the TIF.  Upon the expiration of the TIF, property taxes continue to be distributed to the school, park, library and fire districts, county, community college and other governments in the same manner as if the TIF did not exist.


TIF opponents often cite the opportunity cost of the lost revenue if the TIF did not exist.   However, but for the TIF’s financial assistance provided to the developer for eligible costs, the development would not occur.  The central purpose of TIF is to stimulate development that would not have occurred “but for” the presence of TIF.   Essentially, TIFs represent a return-on-investment model for the community as the improvement of blighted areas, which would otherwise not occur without TIF investment, provides new revenue to all taxing bodies.  Once a TIF District is dissolved, the tax base of all affected governments is increased


Establishment of a TIF District

As referenced, Illinois TIF law provides requirements for an area to qualify as a TIF district, including identifying the boundaries of the district and the physical and economic deficiencies to be addressed.  The City Council evaluates a TIF Eligibility Report and Redevelopment Plan.   This document addresses the TIF eligibility findings of the area studied and how the area is to be redeveloped and what improvements will be undertaken.  If the Council determines the Eligibility Report and Redevelopment Plan to be valid, legislative actions establishing an interested persons’ registry, a joint review board and a public hearing date are established.  These actions provide for further review of the TIF proposal.  


The joint review board is made up of representatives from local taxing bodies and must review a plan for the redevelopment of the TIF area.  The joint review board is tasked with making an advisory recommendation to the City Council.   A public hearing is held where residents and other interested parties can express their thoughts on the subject.  The City Council weighs the information presented and acts upon an ordinance designating the area as a tax increment financing district.


The ultimate consideration of the City Council in determining the adoption of a TIF district is whether private investment would occur without financial incentive.  In order to designate that area as a TIF district, the answer to the question must be “No.”  But for the incentive provided by TIF, development would not occur in the designated area.


Eligible Redevelopment Costs for TIF Funding

Illinois law authorizes the use of TIF funds to support these and other types of projects:

  • Property acquisition
  • Construction of public works or improvements
  • Financing costs, including interest
  • Studies, surveys, and plans
  • Professional services, such as architectural, engineering, legal, property marketing, and financial planning
  • Demolition and site reparation
  • A budget for the life of the TIF district, including the total TIF-eligible costs of the plan
  • Payments to schools or other taxing districts

Term of a Tax Increment Financing District

The term of a tax increment financing district is twenty-three years.  Common inquiries ask if this term can be reduced.   While a reduction of the term of the TIF is possible if adequate incremental tax revenues are available to meet TIF obligations and fulfill the redevelopment plan, please remember the incremental revenue generated from new development may not be available until years have passed of the term of a TIF.  However, if all financial obligations of the TIF are met, the City Council may vote to dissolve the TIF District at an earlier time.

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