Letter: Time to shy away from TIF projects
To the Editor:
The city of Saint Charles uses tax money to aid certain private business projects that the city designates as TIF – or tax increment financing – projects. Some of this aid has been used to pay $2 million to developer Shodeen for worthless covenants; to pay $12.4 million for land that is being given free to the First Street developer; and to pay, to date, $16.1 million for infrastructure and improvements for the private First Street project.
TIF projects will generate increased property taxes, but those increased taxes will be used to pay off TIF bonds that fund the aid. This is in contrast to unaided developments like the Brownstone or the Milestone Row, where the increase in property taxes goes to schools and parks in order to keep property tax rates down.
But that’s not all. The increased property taxes from these TIF projects are not nearly enough to cover the bond payments, and, therefore, city tax money must be used to make up the difference.
In an effort not to raise taxes, the city is making bond payments with money taken from reserve funds. This can only be done for a few years, and it puts the city in a weaker financial condition. The following is the tax situation for each TIF project. First, the total taxes given to the TIF project, to date, including advances from the general fund as of April 30, 2011:
Baker Hotel, $3.1 million; Moline Foundry, $4 million; St. Charles mall, $1.8 million; First Street, $2,855,000; and St. Charles Manufacturing, $1.8 million.
Next, are projected future taxes (outstanding principal and interest payments as of April 30, 2012) that will go to the TIF projects:
Baker Hotel, $1.9 million; Moline Foundry, $2 million (surplus funds here are going to be used to pay back the general fund); St. Charles mall, $2.4 million; First Street, $40 million; and St. Charles Manufacturing, $3.9 million.
You would think that the mayor and City Council would start to shy away from TIF projects. But, no. The city is planning to give $5 million to a Lexington Homes development.