Evanston’s Joint Review Board will meet to discuss the creation of a tax increment financing district in the 5th Ward next Thursday — a change that would divert future property tax revenue increases toward development. 

In tax increment financing districts, or TIF districts, property tax revenues above a certain baseline are reallocated for public works or economic development improvements in the area. When a TIF district is installed, the existing tax rate becomes the baseline. Property tax revenue above this rate is reserved for development projects.

“Taxes are frozen for the city and the schools at today’s tax rate,” said former 7th Ward aldermanic candidate Mary Rosinski. 

As the tax rate increases, all additional revenue will go directly into the TIF fund where it can be spent at the discretion of the municipality and private developers, she said.

This leaves other areas, particularly schools, underfunded, she added.

“The residents have to make up the difference with higher taxes,” Rosinski said.

The city currently has four active TIF districts: Howard and Ridge, West Evanston, Dempster Dodge and Chicago Main. In 2019, total TIF revenue across the four districts yielded over $4.3 million.

The proposed Five-Fifths TIF district would cover multiple areas to the east and west of Green Bay Road. These areas exist between Clark Street to the south and Payne Street and Leonard Place to the north, according to a report by financial services firm Kane, McKenna and Associates, Inc. The Lorraine H. Morton Civic Center would also fall within TIF boundaries, making it fair game for “adaptive reuse or redevelopment,” according to the report.

At a May 10 City Council meeting, Economic Development Manager Paul Zalmezak said the creation of a TIF district will help the city build new, affordable housing and renovate existing buildings. If passed, the Five-Fifths TIF district will last for 23 years. A public hearing will take place next month.

Some residents are concerned about the lack of community discussion surrounding the move.

Rosinski said the public needs to be fully involved before discussions begin. She said TIFs are one of the most complicated financial tools, and the city should hold numerous town halls to help residents understand the potential impacts.

Former mayoral candidate Sebastian Nalls said most people in the community don’t understand what a TIF district is.

Nalls argued that the 5th Ward doesn’t need a TIF district, because there are better alternatives to create more affordable housing, such as establishing a community land trust. He said TIFs can stunt the growth of the area it’s meant to improve. 

Community discussion is particularly important, Nalls added, because TIF districts typically exist for around 20 to 30 years.

“You are capping the amount of tax revenue you’re getting from a general area, and that can end up being negative in the long run,” Nalls said. “It is definitely important that residents understand what a TIF district is, what the potential impacts (are and what) the pros and cons of it are.”

What makes a successful TIF district is different for municipalities and residents, said University of Illinois at Chicago Prof. Rachel Weber. For municipalities, an effective TIF district would generate a sufficient amount of property tax revenue within its lifetime to pay off initial development expenses, she said.

Weber said TIF districts are often used to convert underutilized property into more dense types of development. In other words, revenue from TIF districts could be used to turn vacant lots into multi-story apartments, she said.

“TIF districts are designated in areas that the municipality and the development community want to see redeveloped as something else,” Weber said. 

There are some concerns, Weber said, that the use of TIF hurts overlapping jurisdictions such as schools, because they can’t apply their tax rates to the incremental revenues that are generated within the district.

“A lot of the authority rests with the municipality,” Weber said. “They decide what you use it for.”

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Twitter: @maryranyang

Related Stories: 

— City Council to consider tax increment financing in the 5th Ward

— City will pursue eligibility study for new 5th Ward TIF district

— Evanston to receive roughly $1 million with the closing of downtown TIF district