Sterling to improve Northland Mall, surrounding areas with creation of TIF district

STERLING – Sterling is moving toward creating a tax increment financing district to support the redevelopment of Northland Mall and its surrounding area.

Sterling City Manager Scott Schumard told the Sterling City Council on Monday about results of a TIF district eligibility study conducted by SB Friedman Development Advisors.

“The report mostly covers what SB Friedman did to establish that the area is eligible to become a TIF district by meeting a minimum of the five criteria that are required by the state,” Schumard said. “Once that’s put on file for 30 days, SB Friedman will send out mailers to the properties that are affected by this, which is essentially Northland Mall, the area where Jeff’s Automotive is, and the empty former Holiday Inn parking lot.”

SB Friedman’s report concluded that the Greater Northland Mall Redevelopment Project Area qualifies as a “conservation area” under the Illinois Tax Increment Allocation Redevelopment Act. According to the report, 100% of the primary structures within the proposed RPA are at least 35 years old, and five of the 13 eligibility factors are present to a meaningful extent throughout the three parcels:

1. Lack of growth in equalized assessed value
2. Deterioration
3. Excessive vacancy
4. Inadequate utilities
5. Presence of structures below minimum code standards

The city contracted with SB Friedman on May 6, 2024, to conduct the study and create a redevelopment plan and project document. The owner of Northland Mall is reimbursing the city for the study, as provided for in the agreement for reimbursement with Sterling Investments LLC.

TIF districts are tools used by local governments to encourage economic development in underperforming areas. These districts dedicate tax revenues generated within for improvements to encourage new economic development and job creation, according to the Illinois Department of Commerce and Economic Opportunity.

How it works:

• Local governments appoint certain areas as TIF districts.
• The value of properties within the TIF district is frozen and set as a base value.
• As those properties' values begin to increase as a result of new development or improvements within the TIF district, the increase in property tax is collected and placed into a special fund to pay for those improvements. Only the new property taxes generated by the incremental increase in the value of these properties after the TIF is established are available for investment in the TIF, according to the Illinois Tax Increment Association.

Schumard said that in Illinois, TIF funds can be used to pay for things such as rehabilitation work and engineering as well as architectural fees, but they cannot be used for new construction. If Sterling’s TIF district is approved, the three businesses within it can submit requests for qualifying redevelopment work to their properties. The city hopes those improvements will make the area more attractive for new retailers and developers.

The estimated cost for eligible redevelopment projects in SB Friedman’s plan is $40 million. This is the maximum amount that can be spent using tax revenue generated by the proposed TIF district, not including things such as interest or other financing fees.

These are the estimated TIF-eligible redevelopment project costs shared in SB Friedman’s report:

• Administration and professional service costs: $2 million
• Site marketing costs: $800,000
• Property assembly and site preparation costs: $6 million
• Costs of building rehabilitation: $6 million
• Costs of construction of public works or improvements: $19 million
• Costs of construction of affordable housing: $1 million
• Costs of job training or retraining (businesses): $800,000
• Financing costs: $800,000
• Taxing district capital costs: $800,000
• Relocation costs: $800,000
• Payments in lieu of taxes: $800,000
• Costs of job training: $400,000
• Interest costs (developer or property owner): $800,000

The projected estimates for each item are not fixed and can be adjusted by the city as needed due to changed redevelopment costs and needs.

The City Council on Monday approved a motion to place the Greater Northland Mall Redevelopment Project Area Tax Increment Financing District Eligibility Report and Redevelopment Plan and Project on file with the city clerk’s office for public review and inspection. Once on file, SB Friedman will draft a notice and adoption schedule for the TIF district, which will be put before the City Council for approval this spring.