How TIF Can Transform Industrial Spaces & a City.
Tax-Increment Financing is a tool that communities and developers use to help defray the cost of development projects in districts that are designated as needing government assistance. Successful TIF projects replace vacant industrial spaces and blighted areas with new, vibrant developments filled with people that live, work or shop there. The Alton Center Business Park, east of downtown Alton, Illinois, is an example of how this type of public-private financing can remake a community.
Tax-increment financing taps into the future property tax revenue that a new development will generate and uses it to help support getting it built in the first place. For example, a vacant, decrepit building may only be worth $800,000, generating around $18,000 in property taxes. However, if it was redeveloped into a $6 million building, it would generate $138,000 in tax revenue.
In a tax-increment financing district, that extra $120,000 in revenue gets captured for a period of time, usually 25 years or less, and those future revenues get used to pay for bonds that are issued as special financing to help defray the cost of the development. The community doesn’t lose any revenue, since without the financing the project wouldn’t get built and the taxes pay for the bonds. However, it gains the revenue from the building in the long run once the financing expires. In the short term, it gains revenue as property values increase and as the TIF development spurs additional development to take advantage of the area’s new vibrancy.
Redeveloping Alton Center Business Park
At the beginning of 2000, the city of Alton, Illinois, had a 153-acre problem. Located just east of the community’s downtown, the site was formerly occupied by Owens-Illinois, a major glass maker. Over the years, the industrial space had fallen into disuse and was both blighted and contaminated.
For the first time in the history of the city, Alton granted $6 million in TIF financing to Clark Properties to get the redevelopment project started. While the tax-increment funds were only about one-third of the cost of the first phase of the redevelopment project, they were an important part of the funding pool. Additional funding came from the Southwestern Illinois Development Authority, which provided $7.45 million in bonds and an additional $500,000 loan. Clark Properties contributed $4.5 million of its own capital, as well.
The first phase of the project involved cleaning up the site and knocking down 12 buildings. In addition, Clark Properties fully developed 26 acres with utilities, infrastructure and extensive landscaping. When the first phase of the project was finished, the blighted site had been turned into 450,000 of fully restored industrial space in a modern business park.
After closing on the purchase in Fall 2000, Clark Properties welcomed its first tenant in Spring 2001. Since then, the industrial space has grown to employ 600 people, and has capacity to hold a total of 2,000 jobs. Tenants at the center include call centers and manufacturing concerns, and an additional $8 million has been spent on tenant improvements. Alton Center Business Park is still a work in progress, too. It still has around 75 acres for further expansion.
TIF funds made the redevelopment of Alton Center Business Park a possibility. Thanks to this unique type of financing, Alton enjoys hundreds of new jobs, and the neighborhood has an attractive, clean addition, instead of a blighted environmental hazard. If your company would like to learn more about how TIF financing can help it complete new developments, Clark Properties has a team of professionals that are experience in the process and already connected to the appropriate government agencies.