The Camiros Approach To Tax Increment Financing

Tax increment financing (TIF) is a technique that many communities use to promote economic development. While there are a number of technical requirements for establishing a tax increment financing district, the main objective is to take a project from the drawing board to completion in order to eliminate blight and enhance the economic strength of the community.

Tax Increment Financing as a Tool for Revitalization

Tax increment financing has proven to be an important tool in the process of renewing and revitalizing communities. There are many parties to this effort, each with a particular role and concerns. Because there is an inherent tension in a process that diverts the potential resources of local tax districts to produce a long-term economic benefit for all, tax increment financing plans should endeavor to meet both the technical requirements, and the spirit, of the tax increment financing legislation.

Camiros brings the planning perspective to all of our tax increment financing projects as well as technical skills to evaluate whether or not an area meets the eligibility requirements for designation as a blighted area or a conservation area, whether buildings are dilapidated or deteriorated, and the extent to which lack of community planning or obsolescence contributes to the lack of private investment in an area. More importantly, however, Camiros can help to create a redevelopment plan that goes further than simply including the element required by state statute. A redevelopment plan must not only be consistent with the community's comprehensive planning policies, but should also articulate how the proposed tax increment project will address other local development objectives.

Financial Projections

Two critical components in creating a viable tax increment financing district are 1) the ability to project the tax increment that can be expected to be available to finance eligible project costs and 2) the ability to assess the financial impact of the project on affected tax districts. Over the years, Camiros has been involved in many economic development projects ranging from market studies to site specific development feasibility assignments and has developed particular expertise in fiscal impact analysis, which assesses the relative service costs and revenues associated with a particular development project. (NOTE: The assessment of the financial impact of the proposed redevelopment project is a required component in Illinois tax increment redevelopment plans.)

Projecting the incremental tax revenues available to finance a redevelopment project involves many variables, including assessed valuation and tax rates over time. Reasonable assumptions must be made at each step along the way and many questions answered. For example, must eligible project costs be funded up front - through bonds or other means - for private investment to occur, or can public improvements be financed on a "pay-as-you-go" basis once initial redevelopment in the areas begins? Our economic development experience, in general, and our tax increment financing experience, in particular, provides the background needed to help clients develop an appropriate financing plan for each project.

Tax Increment Clients

Camiros believes that the areas proposed for designation must truly meet the criteria for designation. In fact, there have been instances where we recommended against the establishment of tax increment financing districts as we did not believe that the eligibility requirements were met. For this reason we have established credibility among municipalities, school districts and developers in determining early in the development process when the use of tax increment financing is appropriate.

Tax increment clients include municipalities who have sought to stimulate revitalization of industrial areas and residential neighborhoods through the designation of a tax increment financing district. In these instances, efforts have focused as much on ensuring that a sufficiently detailed redevelopment plan was in place to guide future land use decisions, as on establishing the eligibility of the area for designation. In these types of assignments, our land planning skills allow us to create redevelopment plans that are realistic and achievable. Our extensive experience with public participation enhances our ability to bring diverse groups of stakeholders (property owners, community and business groups, tax districts and the local municipality) together to ensure that the redevelopment plan has the sufficient support to sustain the effort over the allowable life of the tax increment financing district.

Camiros has also been called by school districts and others opposed to designation of tax increment financing district by the municipality. We have provided an independent evaluation as to whether the proposed district meets the eligibility for designation. Camiros Principals have appeared as expert witnesses and have also been involved in modifying proposed redevelopment plans to help the parties involved avoid litigation. While tax increment district opposition is a small portion of our tax increment financing work, the perspective we have gained has given us a sensitivity that is helpful in creating viable tax increment financing districts.

In many of our tax increment assignments, Camiros has been retained by private developers involved in specific projects. Typically, the developer and municipality have agreed that a particular project is desirable and in the best interests of the community. They look to tax increment financing to close the financing gap that frequently exists when extraordinary costs are associated with the redevelopment effort. Examples of such extraordinary costs include environmental contamination - common in many industrial areas - demolition, provision of public utilities in areas that developed without them, or land assembly costs in areas involving multiple property owners.

Sketch of plan element from a Camiros TIF redevelopment plan.