UPDATED 12:25 p.m. | District 87’s superintendent delivered a pointed message to Bloomington aldermen Tuesday night: Think twice before using property taxes to lure economic development.
The Bloomington City Council is considering new guidelines for how and when to use tax increment financing (TIF), a common but controversial tool used by municipalities to redevelop struggling areas. The city has two active TIF districts, with two others proposed.
District 87 Superintendent Barry Reilly spoke Tuesday in favor of narrower guidelines for using TIF. Instead of looking to TIF, Reilly urged the city to consider other incentives to lure private development, such as shorter-term property tax breaks or sales tax breaks.
"It’s not that we believe TIFs are not the answer on select occasions, but more and more, we’re feeling that there isn’t an appetite to go less for the largest taxing body (District 87), especially at a time when state dollars are tough to come by, our assessed values are flat and sometimes go down … and we’re really working hard to do right by what we have.”
A designated TIF district diverts any new taxes generated by an increase in property values back into redevelopment of the area, usually for 23 years. Municipal leaders say TIF provides incentives to land big projects without taking money out of their current budget. Critics say TIF districts can needlessly erode the tax base, hurting school districts, and sometimes lack transparency.
Reilly asked aldermen to find ways for District 87 to benefit from TIF districts before the 23-year TIF expiration date. Indeed, TIF districts occasionally generate more “increment” revenue than is needed. That surplus is typically distributed to the taxing bodies, although Reilly argued Tuesday that hasn’t happened for District 87 in recent history.
TIFs are “not always the answer,” Reilly said.
“The idea that we are not hurt—we being District 87—by a TIF because it will still be receiving the same amount of revenue as before the TIF is simply wrong,” said Reilly. “To the extent that the District 87’s levy goes to the developer, it’s not going to the students.”
Aldermen seemed to welcome Reilly’s comments and vowed to get more District 87 feedback on the proposed TIF guidelines.
The discussion comes as the Bloomington City Council works to set up a TIF district for the Washington Street corridor east of downtown. That stretch of Washington Street has struggled in recent years, with the eyesore-turned-vacant lot at the Coachman site and Chase closing its bank branch. The city is also considering a new TIF district for the former Electrolux property on Main Street between Walnut and Chestnut streets, north of downtown.
Kathleen Field Orr, who represents the city on TIF issues, told aldermen the proposed TIF guidelines were a good step toward reducing friction between the city and District 87.
Orr urged aldermen to adhere to two principles: “Never TIF an inch more than you need” and never incentivize without proof the project wouldn’t happen without it. Orr noted that the two new TIF districts being considered are much smaller (13 acres and 8 acres, respectively) than the “massive” 54-block Downtown Bloomington TIF district in effect between 1986 and 2009.
Speaking Wednesday on GLT's Sound Ideas, Mayor Tari Renner said the city can structure future TIFs to lessen the impact on taxing bodies like District 87. But Renner said the city shouldn't go too far in promising relief to District 87, because economic development is the city's role.
"What you see depends on where you sit. And we are responsible for economic development. We do want strong schools. We are all in the same boat. We want to use TIF as a last resort, but there are times when we have to use TIF," Renner said.
Renner said there have been "abuses of TIF in Bloomington," pointing to the 54-block downtown TIF district. He said the city has increased transparency, including how TIF money is distributed, by putting more information about the incentives on its website.
“TIF in some cities in the past has been abused. We acknowledge that,” Interim City Manager Steve Rasmussen said Tuesday. “But we’re dedicated as a staff to make sure that doesn’t happen in this city, because it is a powerful tool that can be used in economic development. As we know, we have some economic development challenges ahead of us.”
The Bloomington City Council delayed a possible vote on the TIF guidelines until June. One reason is that several aldermen wanted to look at the implications of including Project Labor Agreement (PLA) language in the final draft. That's an agreement between a municipality or developer and the local trades that all construction hiring on TIF-related projects be done through local hiring halls.
That “hire local” issue resonated with Alderman Scott Black.
“That’s important to me as much as it’s important to me to make sure the school district’s voice is being heard,” Black said.
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