Shorewood gets refresher, history of TIF districts
Village has used tool to attract quality developments
Shorewood — A crash course in tax incremental financing for new members of the School and Village boards gives a good look into the use of the development tool within the village.
Gathered last week around a long table in a Shorewood High School classroom, the two boards dove into the history of tax incremental financing in Shorewood and the potential impacts on school and municipal budgets.
The typical tax incremental financing (or TIF, for short) arrangement is relatively simple: in order to spur development, or redevelopment, a municipality like Shorewood kicks in to jump start a project within a tax incremental financing district; the increase in property taxes as a result of the new development is used to repay the municipality's up-front investment. The arrangement continues until the district expires — under state law a district can only remain in effect for 27 years — or the village's investment is repaid, whichever comes first.
The obvious upshot is that more, and potentially more ambitious developments occur than what would have without taxpayer assistance; the downside is that while the districts are repaying the municipal investments, the new tax revenue goes toward that repayment and not the local municipality, school district, county and other taxing jurisdictions.
Mike Harrigan, adviser with pubic finance firm Ehlers, stressed the importance of the "but, for" test, a crucial clause of TIF law which says municipalities must prove that, but for their investment, the projects would not happen.
"The fact is that there's no loss to the underlying taxing jurisdictions," Harrigan said. "The project wouldn't have happened — there's nothing to lose, in essence."
According to Harrigan's presentation, nearly 1,800 TIDs have been created since tax incremental financing law was approved by the state Legislature. Nearly 700 of those districts have since closed, and about 1,100 are still active today. Statewide, about 69 percent of municipalities have used TIF to spur developments.
Shorewood made its first foray into TIF in 1996 with the creation of a district which spans nearly the entire village-bound lengths of Oakland Avenue and Capitol Drive and encompasses nearly every commercial building in the village. That district, set to expire in 2022, includes notable projects like the Metro condo building, Cornerstone Apartments/North Shore Bistro/Wine Thief building, and Capitol Drive and Oakland Avenue improvements, and is projected to have increased property values by about $35 million.
Shorewood's second TID, a success in more ways than one, generated about $19 million of new value on a $1 million property with the construction of 37 condos on Edgewood Avenue and paid back the village's investment in nine years.
TID three, which covers the former Pig N' Whistle site and some riverfront property on the village's west end, is currently in the red by about $4 million, since the value of demolished properties within the district are counted against the district's value. Two projects are pending, a senior assisted living development as well as a senior apartments projects, both of which will likely require some level of TIF investment, Village President Guy Johnson said.
The last Shorewood TID was created in 2011 to facilitate the LightHorse apartment and Walgreens building on Oakland Avenue.
Officials are mulling the possibility of a new TID to spur redevelopment of the area including the old Walgreens, vacant bookstore, and Pick 'n Save site.
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