TIF and Abatement Reform

The Problem:

The state is on the hook for the $5.40 levy for school districts. Abatements and TIF are absorbing a greater percentage of the general fund every year as the utilization of these tools increases.

Every time the state general fund is utilized in a manner like this adds one more hurdle in any future attempt at cutting income taxes.

Lawmakers should consider tightening the rules around TIF and abatement utilization. While these economic development tools may have justifiable uses, they also have a great potential for abuse. TIF and abatements increase the property tax burdens on many property owners. The state backfills the school $5.40 levy, but the supplemental levy calculation is done using only the properties without abated property taxes or those outside of TIF districts. This means that the total property value considered is less than the whole, increasing the property tax burden on property owners by reducing the total property value used to calculate the school tax rate per the school funding formula.

Further, because the state is on the hook for the $5.40 levy for school districts, abatements and TIF are absorbing a greater percentage of the general fund every year as the utilization of these tools increases. Particularly egregious is the utilization of never-ending TIF districts, which the state will backfill into perpetuity based on the year these TIF districts were established. These TIF districts must be forced to roll back onto the books at some point, otherwise the increment will increase exponentially with time, along with the state’s burden of backfilling the $5.40 levy. Every time the state general fund is utilized in a manner like this adds one more hurdle in any future attempt at cutting income taxes.

The Solution:

Lawmakers should tighten the rules around TIF and abatement utilization.

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