‘Without TIF, I don't think our downtown would be where it is’

ROCHELLE — At its April 10 meeting, the Rochelle City Council unanimously approved a tax increment financing (TIF) agreement with Breakthru Beverage for the development of its new location at Illinois Route 251 and Flagg Road.

The developer requested a TIF redevelopment agreement with the city to close “their potential funding gap” and to assist with property redevelopment including, but not limited to, a new loading dock on the south side of the facility, site/infrastructure improvements and façade and landscaping improvements. The agreement consists of reimbursement of $700,000 of $1.7 million of TIF-eligible expenses and 85 percent of the increment created by the site redevelopment.

City Manager Jeff Fiegenschuh and Community Development Director Michelle Pease spoke with the News-Leader on April 17 about the benefits of TIF agreements with developers, the city’s history of using them and developments that have come as a result of them. 

When a city TIF district is created, a baseline of the property value within is set and any new increment goes into TIF fund, which can be used to pay developers that make agreements with the city. Investment by developers raises the value of the properties, creating increment.

“That money comes from those increments of those properties and it's almost like the property owner paying themselves back,” Pease said. “It's not money that we've taken from a general fund. It's money that is incrementally captured from that development. We have four agreements we’ve made within our downtown TIF district and two in our northern gateway TIF district.”

The city has made TIF development agreements in the past with Kennay Farms Distilling, Salt 251, Seldal Properties for its downtown property, Benny’s Corner Market, Breakthru Beverage and Errett Warehousing for the teardown of the old printing building on the south side across from the golf course.

Fiegenschuh called Kennay Farms Distilling’s TIF agreement a good example of how a TIF works. The business purchased land from the city to build its Rick House building. Due to being city-owned, that property didn’t generate property taxes before it was purchased.

“The whole point of it is to redevelop the TIF district to increase property values,” Fiegenschuh said. “When the Kennays came to us, most of what they created was increment. There was no real property value there at all because it was mostly city property. All we do is rebate their property tax back to them. A TIF agreement is simply rebating the developer's property taxes or a portion thereof back to the developer.”

The equalized assessed values of city TIF districts increased between 2021 and 2022. The Lighthouse Pointe (Walmart-area) TIF district increased $6.6 million to $7.1 million, the downtown southern TIF increased from $12.05 million to $13.37 million and the northern gateway TIF increased from $7.195 million to $7.74 million.

Business owners that agree to TIF redevelopment agreements have to meet TIF-eligible expenses set by state statute including property acquisition, property redevelopment, reduction of blight and interest on loans. The agreements spell out the responsibilities and roles of both the developer and the city. The city reimburses the developers once they’ve paid all of their project costs and property taxes.

“One thing that's pretty unique and beneficial to everyone is when a TIF agreement is put forward, it isn't just here's your money, go do your project,” Pease said. “They're required to do certain things on a timeline. With the Seldal Properties building on Lincoln Highway downtown at the former site of Moore's Hardware, that property sat vacant for many years and it's improved greatly. Those spots will be filled up because they have curb appeal.”

The city established its TIF district on the north side of town in 2018 to help with the demolition and eventual future development of the Hickory Grove property. City officials opted to make the area larger because they saw the need for more redevelopment to the north and east, Fiegenschuh said. Pease said she would like to see future TIF redevelopment agreements at both Hickory Grove’s site and at the Rochelle Commons (May Mart) to increase the area’s value.

Both Fiegenschuh and Pease are satisfied with how the city has used TIF in recent years. 

“I think the TIF district in our downtown has been a very valuable tool in getting our downtown back to life,” Pease said. “It's helped finance those gaps that developers have. I think without that TIF, I don't think our downtown would be where it is.”

Fiegenschuh said the city will continue to work on bringing more development and growing the community. 

“The whole point of a TIF district is to increase the overall property values, if they're done correctly,” Fiegenschuh said. “I think we've done every one of them correctly. Our goal is to redevelop blighted properties and turn property over time into useful, tax-generating vehicles that benefit all of the taxing districts.”