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CITY OF WAUKEGAN

DEPARTMENT OF PLANNING AND ZONING

TAX INCREMENT FINANCING

Tax increment financing is a City of Waukegan program developed pursuant to legislation of the State of Illinois that provides a governmental incentive to private developers or companies to stimulate new investment and job creation and/or retention. It is used in areas that are "blighted" or in danger of becoming blighted as defined in the state law that governs TIF. Tax increment financing works by giving economic incentives to a developer or a company to invest in an area. Property tax revenues are then generated as a result of the new investment and the incremental revenues are used to pay for the incentive.
In order for the City of Waukegan to offer TIF assistance to a developer or a company, the City has created various TIF redevelopment areas or districts based on the criteria required by the state statute as discussed below. The establishment of the TIF districts was a technical process that took approximately nine months to accomplish with the approval of City Council. Now that TIF districts are established, the City can pay eligible costs incurred by a developer or a company from the incremental property tax revenue captured in the TIF districts for up to 23 years. The annual increase in incremental property tax revenue generated within the TIF districts over the base amount of property taxes in the year the TIF districts were established can be used for eligible projects costs necessary to fully utilize property in the redevelopment area.
Tax increment financing does not increase property taxes to a rate higher than what they would be without the establishment of the TIF district. Tax increment is generated only because the developed property is assessed for its more productive use. When the project is completed, the City expects that the new development will have a positive economic impact on both the immediate area and the City as a whole by stimulating more development in the community, creating new jobs for Waukegan residents and increasing the City's tax base.

ELIGIBLE REDEVELOPMENT COSTS

Only certain costs are allowed to be reimbursed to a private developer or a company under the state legislation. Such eligible costs include costs of studies and surveys, costs associated with the acquisition of land (e.g., site preparation, environmental remediation, etc.), costs of rehabilitation or repair of existing public or private buildings, costs of construction of public works or improvements (e.g., streets, water, sewer, etc.), costs of job training and retraining programs, relocation costs, and certain financing costs. The most significant costs that are not eligible are the costs of new, private construction and the purchase of equipment.

INCREMENTAL PROPERTY TAX REVENUE

Incremental property tax revenue is derived from the increase in the equalized assessed valuation of real property within the TIF district over and above the equalized assessed valuation in effect at the time the TIF is established. Any such increase in equalized assessed valuation above the initial equalized assessed valuation is then multiplied, on an annual basis, by the aggregate tax rate resulting from the levy of real property taxes by all units of government having taxing power over that real property. The product of this calculation is the amount of incremental property tax revenues generated within the TIF district.

Tax increment financing does not generate revenue by increasing tax rates. (Tax rates may rise based on factors independent of tax increment financing due to increases in the levies of the different taxing districts.) Instead, it generates revenues by allowing the City to capture all property tax revenues that exceed the "base" equalized assessed valuation of the area before being designated for redevelopment. Property taxes are generally paid to many different taxing districts of which the City of Waukegan is just one. When a TIF district is created, instead of each of the taxing districts receiving their portion of the incremental property taxes, the incremental property tax revenue is deposited into a special tax allocation fund from which redevelopment project costs and principal and interest of obligations issued to finance the redevelopment are paid. Under tax increment financing, all overlapping taxing districts continue to receive real estate tax revenue based on the initial equalized assessed valuation.

Maps of the Tax Increment Financing Districts are available below in Adobe Acrobat Reader (PDF) format.

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