The Tiff Over Tax Increment Financing in St. Charles

TIFs in the Orchard Farm School District are said to expire in 2014. This could mean more money from the businesses in the TIFs to fund the school.

Author: Rachel Hanne

By the 2014-2015 school year, Orchard Farm School District expects increased tax revenue that could solve its financial issues. Nadine Boon, economic development director in St. Charles told the Suburban Journals in 2009 that the additional revenue could make Orchard Farm the richest district in St. Charles County. That is if the TIFs in the area expire at the originally set time.

TIF stands for Tax Increment Financing. The purpose of TIF is for companies in a specific area to use money that would go to property taxes for developmental projects; such as re-building a business or replacing old buildings. During the time period of the TIF, schools, libraries and community colleges do not get the funds from taxes.

“Every business in these TIF projects pays their taxes,” says Orchard Farm School Districts Superintendent, Dr. Dan Dozier.  “They pay real estate taxes, they pay property taxes…What happens is that the personal property taxes still come to the school district, however the real estate taxes that they pay are diverted from coming to the school and [are used for] paying off bonds used to develop and pay off what they built.”

The location in the Orchard Farm School District that has the TIF is the Fountain Lakes Business Park and Elm Point Business Park off of Interstate 370 and Elm Street.

“When people drive through this area, they really don’t know what is in a TIF, and what is not,” Dozier said. “So they see all this business and commercial development, and they think the district is in good financial status, because we’ve got Coca-Cola and other big businesses in that area.”

He also explained that another issue was that people misunderstand how the TIF works.

“It is confusing to people because they don’t understand the tax structure. They think that businesses in the TIF aren’t paying taxes but they really are. They’re just not making it to us.”

While TIFs divert funds from the school district in the short term, they can benefit the district in the long term because they encourage new business growth, which will eventually provide tax revenue.

“If done properly,TIFs can spur economic development in a community,” Treasurer of the Board of Education, Mr. Robert Sweany explained. “It is bad because we are not getting the revenue until the TIF expires. Also, they seem to put one community against another as they compete for development in their communities.”

The Fountain Lakes TIF is supposed to end on March 30, 2014. The Elm Point Project expired in 2011.

However, the Elm Point TIF is divided into two different projects. One being the Elm Point Project and a smaller one called the Lime Lagoon project. The Lime Lagoon project ends in 2019. The taxes that would be going to fund the school are now being used to pay the debt that was incurred to create the entire development.

“As long as there’s debt occurring on both sides of this project, it’s still going to pay off the Lime Lagoon piece,” Dozier said.

Fountain Lakes wishes to add five more years to the TIF to extend it to 2020, which will continue to cost the district money.

The school’s main sources of income come from local property taxes, real estate taxes and personal property taxes.

If the city of St. Charles extends the Fountain Lakes TIF, it could cost the district at least $1.2 million a year, which would end up being about $6 million, according to Dozier.

“So with this stage in the game, with the state being unable to fund education as well, then it goes back to the burden of the local tax payer,” Dozier said. “If they extend the TIF, and the state can’t fund because of their tax struggles, then the only place where schools continue to grow is with an increase of the local tax rate.”

If the TIFs are extended, Orchard Farm would have no choice but to ask for an increase in the tax rate.

“The economy stopped growing, and with all these TIF projects, this is when we have to eventually ask the local tax payer,” Dozier said. “I think it’s safe to say that the public opinion is opposing the TIF. They think that we have done our end of the bargain and have kept our promise. Our planning process all along has been based off their plan.”

However, Sweany states that the Orchard Farm Board of Education and other schools are trying to regulate spending to help keep funding stable to the best of their ability. If the both TIFs expire at their originally decided time, the school will make $2.4 million more every year.


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Leann Starr October 26, 2012 at 07:48 PM
Tax Increment Financing (TIF) gives developers a pass on taxes for 15 years or so. Some corporations move stores from city to city to enjoy this tax dodge. Here's how it works: The landowner claims an area is blighted. This satisfies the TIF laws that were created to rehabilitate inner-city commercial and industrial areas. Farmland and prime real estate can be declared "blighted". Then a TIF Commission is formed which includes officials from the public schools, libraries, and fire districts that will be underfunded by the TIF. The commission makes a recommendation but doesn't make the final decision. The TIF Commission can be overuled by a city council. If so, the developer gets to take a pass on paying their fair share of taxes till the bonds are paid off. If your cousin lost his job he would get no such tax relief. In fact, he might even face foreclosure if he fails to pay the taxes on what is likely his biggest investment. Our children may experience cuts to their school programs. When the schools get desperate for money, property taxes can be raised to make up the shortfall. Small business owners and residents help pay for a new mall or industrial park when they pay their fair share of taxes. Developers should fully fund the projects from which they will profit. TIFs allow them to skip paying taxes for years. More & more communities are saying "no" to TIFs when they figure out that there is no real advantage to anyone but the developer.
Rachel Hanne November 09, 2012 at 09:56 PM
I totally agree with you! As does most of the community, I am sure.


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