DeKalb officials mull city’s TIF history as discussions on 4th Street development continue

DeKALB – The DeKalb City Council last week discussed an intergovernmental agreement that, if approved, allows for 50/50 cost-sharing in the South Fourth Street Tax Increment Financing Redevelopment Plan and Project.

A TIF district is an economic development tool used to spur new activity in a defined area. Collected property taxes in the outlined geographic area are pooled over time and often used to repair blighted buildings or fund new development.

City Manager Bill Nicklas said council discussion was necessary. The city already has one existing TIF district in its downtown. Officials have said a new TIF along Fourth Street would boost needed economic development in the area.

“It has a lot to do with expectations that have been established by our previous TIF processes, the creation of new TIFs and also by the fact that we have our current TIF 3, an intergovernmental agreement that establishes revenue sharing, among other things,” Nicklas said.

The practice of forming intergovernmental agreements in relation to TIF is nothing new in DeKalb city government. In 2007, the city worked out a deal to extend the life of TIF 1 through 2022 by forming a 50/50 cost-sharing arrangement with neighboring taxing bodies.

“Times were getting a little tough,” Nicklas said. “It was just before the crash, basically, but the economy was slowing.”

In 2018, the city established what’s known as TIF 3 which covers the downtown corridor along Lincoln Highway. The city’s past practices for tax increment financing have come under public scrutiny before. Findings released in 2020 from a forensic audit showed the city of DeKalb had used about $7.9 million in TIF money between 2008 and 2018 to offset employee salaries, and lacked sufficient record-keeping required under the Illinois TIF Act.

In the years since and with the creation of the city’s downtown TIF in February 2019, officials have taken steps to more strictly regulate its TIF spending and disbursement to neighboring taxing bodies such as the DeKalb Park District and DeKalb School District 428. The city also uses TIF funds to issue grants to local businesses for DeKalb’s Architectural Improvement Program, meant to help aid local business owners in revamping their buildings.

Nicklas said the intergovernmental agreement created in 2019 for TIF 3 was a way of evening the playing field.

“By closing the TIF 1 one early and that increment at the time was over $7 million, that went a long way toward reimbursing the other taxing bodies for what they had lost and that was distributed proportionately,” Nicklas said. “There was to be a surplus-ing of sales tax. Because originally the TIF 1 was both a property tax and a sales tax TIF. The sales tax TIF had gone away by state statute, but the city was still accruing it for whatever reason. The Department of Revenue was not stopping it from accruing, so that was a bit of money that then basically closed the books on the $8 million shortfall. That led to a new arrangement. TIF 3 was to have a surplus agreement in it involving all the taxing bodies for the first couple of years.”

Fourth Ward Alderman Greg Perkins acknowledged that DeKalb’s history with TIF is “spotty.”

“The [Joint Review Board] exists because of that spotty history,” Perkins said. “I’m sure they view any of our efforts in that way with a degree of skepticism. Compliments to you [Nicklas] for helping to appease that skepticism and at the same time, convincing them of the need for this TIF in that area.”

If approved, the South Fourth Street TIF District is estimated to generate $5.7 million in revenue by the time it ends in 2048, city documents show.

The proposed TIF 4 district could run along South Fourth Street, from Taylor Street to Interstate 88.

A vote on the intergovernmental agreement related to the South Fourth Street TIF redevelopment plan and project is expected at the City Council’s Nov. 25 meeting.