Our previous post discussed the Chicago Inspector General’s Report “Recommendations for Improving the SSA Establishment Process” dated June 4, 2012 (the “IG Report”). The IG Report focused on SSA #46, a south side SSA that overlapped three TIF Districts. As a result of the overlap, the SSA tax rate levy on properties within the SSA was approximately 30% higher than anticipated, angering SSA taxpayers. Ultimately, the City Council terminated SSA #46.
The IG Report offered suggestions to streamline the SSA process and improve coordination with the City’s Department of Housing and Economic Development for greater transparency and more accurate projections of the impact of the SSA tax. Another possibility, however, is the ability of the SSA sponsor agency to coordinate with the City so that money attributable to the SSA tax that would otherwise be deposited in the TIF District Special Tax Allocation Fund (STAF) be paid to the SSA for SSA funded improvements. Section 65 ILCS 5/11-74.4-3(q) of the Illinois TIF Statute allows a municipality to either retain tax increment generated by an SSA tax and use that increment for SSA projects or transfer that increment to the TIF District’s STAF.
This is not the first time that the Inspector General’s Office has examined the relationship between TIF and SSA. Earlier in 2012, the Inspector General’s Office published “Analysis of Special Service Area Taxes and Tax Increment Financing Funds.” In this Report, the Inspector General’s Office concluded that TIF Districts receive an unintended benefit when an SSA overlaps a TIF. If an SSA tax is levied on property within a TIF District, it is not only extended on the Base Equalized Assessed Value (EAV) of property within the TIF District to meet the SSA tax levy, but it is also levied on the incremental EAV of the property within the TIF District. SSA taxes generated on the base EAV are paid to the SSA. Normally, SSA taxes generated on the incremental EAV are paid into the TIF District’s STAF. However, the City has the authority to pay SSA tax generated on the incremental EAV to the SSA instead.
Encouraging coordination between the City and the SSA sponsor agencies by making them aware of this provision of Illinois TIF law is another way to improve the City’s SSA process.