Tax Increment Financing

    TIF Grant Overview

    The City of Vandalia established a Tax Increment Financing District (TIF) in October of 1999. The purpose of the District is to promote commercial and industrial development by removing those factors which have prevented development.

    - What is a TIF district? -

    TIF stands for Tax Increment Financing. It is a way to pay for improvements to vacant and underused land in the City, so that it becomes productive again. The City of Vandalia has set up a TIF district to help develop blighted areas, build and repair roads and infrastructure, clean up polluted land and put vacant properties back to work for the people of Vandalia. By returning formerly vacant properties to the tax rolls, the City creates new sources of revenue within the TIF district, generating the funds needed to make necessary improvements without raising taxes in the community. The City's investments in these areas are repaid through improved, productive properties that become new, permanent revenue generators.

    - Why do we need TIF districts? -

    In the 1960s and 1970s, the federal and state governments - including Illinois - began cutting back economic development programs that cities could use to revitalize communities. TIF districts are one of the few remaining tools that local governments can use to attract new business, invest in infrastructure improvements and rebuild blighted areas. TIF districts are a popular and effective redevelopment tool, used in 44 states across the country and in over 250 Illinois cities.

    How TIF Works

    Equalized Assessed Value (EAV) is the County Assessor's way of assigning similar taxes to similar structures and spreading the property tax burden equitably among properties. EAV can also be a useful tool for determining the relative strengths and weaknesses of similar properties in different areas. TIF-eligible areas have EAVs which are lower than comparable areas in the City because of all the qualifying physical characteristics. Therefore, they are contributing less to the City's tax base than similar land uses.

    Once an area is declared a TIF, the amount of tax the TIF area generates is set as a "baseline." The taxing entities within the City which generally receive portions of property tax revenue generated in the area continue to receive that set amount during the life of the TIF. Schools, parks and other agencies continue to receive the same amount of revenue, so there is no loss of revenue to those local taxing bodies. As vacant and dilapidated properties developed with TIF assistance return to productive and appropriate uses, the value (EAV) of those properties increases. This creates an incremental increase in the revenue generated within the TIF District. The "increment" created between the "baseline" and the new EAV is captured and used solely for improvements within the TIF district. This increment can be used as a source of revenue to pay back bonds issued to pay "upfront" costs, or can be used on a "pay-as-you-go" basis for individual projects. As vacant and dilapidated properties developed with TIF assistance return to productive and appropriate uses, the value (EAV) of those properties increases. This creates an incremental increase in the revenue generated within the TIF District. The "increment" created between the "baseline" and the new EAV is captured and used solely for improvements within the TIF district. This increment can be used as a source of revenue to pay back bonds issued to pay "upfront" costs, or can be used on a "pay-as-you-go" basis for individual projects. The maximum life of a TIF district is 23 years. As the TIF expires and the City's investments in the redevelopment projects within the designated TIF are paid back, property tax revenues are again shared by all the different taxing entities. Those taxing entities realize a budget windfall, receiving the higher revenues based on much higher EAVs which would not have been possible without the TIF.

    Tax Increment Financing Application
    Tax Increment Financing District Map
    - Definitions -

    Industrial Projects:
    - Those projects where the primary use of the land and building(s) is of a manufacturing, assembly, wholesale or warehouse/distribution nature.

    Commercial Projects:
    - Those projects where the primary use of the land and building(s) is of a retail or of a commercial nature.

    Expansion:
    - Construction of any part of a building that results in an increase in any exterior dimension of an existing building and has at least one wall or floor in common with an existing building.

    Rehabilitation:
    - The improvement of any part of an existing building that does not result in an increase in any exterior dimension of the building.

    New Construction:
    - The improvement of any tract of land or site with a building where the interior space is encased by exterior walls, none of which are common along any plane or otherwise shared with an existing building.