ROCHELLE — The City of Rochelle has four tax increment financing (TIF) districts that it uses to create funds that can be used to incentivize new development and improvement by current business owners.

TIF districts are funded by incremental growth in the values of property within them. When growth is seen in a TIF district, taxing bodies receive whatever amount they did before that growth, and the rest goes into the TIF district for the funding of economic development, infrastructure improvement and anything that's deemed a TIF-eligible expense.

“For example, Hickory Grove was a public building that didn't pay property taxes before it was demolished, so the increment was zero,” Rochelle City Manager Jeff Fiegenschuh said. “We created a TIF there so if someone bought the property and built a building, all of that additional value goes into the TIF district. If there was a privately-owned house there valued at $100 and change occurred, all of the taxing bodies would get their money from that $100 value but the difference in value after improvements would go into the TIF district.”

The City of Rochelle’s four TIF districts are as follows: the Downtown & Southern Gateway TIF District, the Northern Gateway TIF District, the Lighthouse Pointe TIF District, and the recently-established Eastern Gateway TIF District.

The city comes to development agreements with business owners and developers to establish how much funding they will receive. Agreements then go before the city council for approval. TIF-eligible expenses include construction, buildout and infrastructure. It can't be used for a new building. If a business wanted to expand the square footage of its current building, that would be a TIF-eligible expense. It can be used for surveys or assessments.

Fiegenschuh said TIF funding and development agreements are used to bridge the funding gaps that developers and business owners have for projects that will increase property values and future increment in TIF districts. 

“TIF is really there as a backstop,” Fiegenschuh said. “It's supposed to be a funding gap closer. We require that businesses show us what their funding gap is. We don’t just give TIF dollars out because someone asks for them. There has to be a need and the project has to be in need of TIF funding to make it happen. In my 7.5 years with the TIF agreements we've negotiated that have been approved by the city council, they've always been reimbursable. They do the project and bring in their receipts and we inspect them to make sure they're eligible expenses and we make sure they pay their property taxes every December and we cut them a check for what we've negotiated. We've also never funded more than 50 percent of a project.”

Projects that have received TIF funding in the city’s Northern Gateway TIF District have included  Breakthru Beverage (building renovation) and Benny's Corner Market (infrastructure work). In its Downtown & Southern Gateway TIF District, projects receiving TIF funding have included the Kennay Farms Distilling Rick House (infrastructure, property acquisition and demolition), the renovated Seldal properties on Lincoln Highway at the former Moore's Hardware site, wall improvements done at The End Zone, the teardown of the old printing building across from the golf course on South 7th Street, and Luna (renovations). 

The Lighthouse Pointe TIF was used to put in the road and infrastructure in for Walmart. The city took out a bond and used those funds to put in all of the infrastructure and uses TIF dollars generated by the growth in value to service the debt. The Walmart developer did not receive any TIF funding and was incentivized by the city putting the infrastructure in. The city is currently raising money to pay off those bonds and the TIF will be eliminated when that happens.

The city has not seen any development deals yet in its recently-established Eastern Gateway TIF District. That TIF district was established to see development of the former site of Sullivan’s Foods and also includes farm land from Caron Road to Dement Road.

“We've had several conversations with different developers interested in the Sullivan's space,” City Community Development Director Michelle Pease said. “Conversations are being had with the current property owners to see what could come out of that space because they have the TIF funding tool to provide incentives.”

The city’s highest-performing TIF Districts recently that have seen the most growth are the Downtown & Southern Gateway TIF and Northern Gateway TIF.

“I think our TIF districts have all been successful and we've done multiple development agreements since I've been here,” Fiegenschuh said. “The downtown TIF has grown the most and we're proud of it. The Kennay Farms Distilling Rick House, Benny's Corner Market and Breakthru Beverage would not have happened without TIF funding. I think we've utilized it to the best of our ability. I think the core of TIF has clearly worked very well for us.”

The City of Rochelle will be hosting an informative session on Tuesday, May 6 from 6-7 p.m. at City Hall on incentives available to small businesses, including TIF, a facade grant program Lee-Ogle Enterprise Zone benefits, the Downtown Historic District, and Flagg Township’s business loan program.

Fiegenschuh and Pease they want to make sure every business in Rochelle knows what’s available to it and the right questions to ask so they all have an equal opportunity at funding.

“That doesn't always mean there is money available,” Fiegenschuh said. “Sometimes you have to wait for the money to come in. We want to make sure people know what questions to ask and to have those conversations so we can assist them if we can. Some people know the right questions to ask and some are unaware of TIF. We want all of our businesses and residents to understand the programs available.”

The city currently has a detailed application on its website for TIF funding for projects. Pease said she is considering streamlining its process with applications to make a fillable online document to start the process to discuss and negotiate a development deal and make sure that expenses are TIF-eligible.

Fiegenschuh said potential changes to the city’s TIF rules are also under consideration, such as making sure buildings do not remain vacant after TIF-funded improvements. 

The city manager said TIF-funded projects need to result in increased increment within the district to ensure the TIF survives financially.

“We try to look at projects to ensure that they bring increment and make TIF districts grow in funds,” Fiegenschuh said. “The whole point of a TIF is to bring values up. If you're funding projects that don't bring up value over time that's a disservice to the TIF long-term. The amount of money available is based on each project individually because a project could make more funding available in the future to reimburse them.”

The city manager thanked Pease and her team for their work on managing the TIF districts in the past and said he looks for more success from them in the future. Pease said she believes TIF is “hugely valuable” as a tool.

“It's just another way for us to be able to help with gaps in financing and have a project come to fruition,” Pease said. “I think our mayor, city council and city manager have been very supportive of things like this. It's a nice way for us to be able to attract businesses and offer incentives to make things happen.”