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Thursday, February 9, 2012

Conflicts of Interest Under the TIF Act

Section 4(n) of the Illinois TIF Act, 65 ILCS 5/11-74.4-4(n), prohibits conflicts of interest by municipal officials who own real estate within a proposed TIF district. Because this section has created some confusion in its application, this article summarizes the section and suggests a method of clearing up the rules, at least in home rule municipalities.

Cutting through the legislative obfuscation, the important elements of §4(n) provide that:

  • If the mayor/village president or any alderman/trustee (“elected officer”) owns or controls an interest, directly or indirectly, in property within a proposed TIF area, that officer must disclose the interest in writing to the municipal clerk.
  • If an elected officer disposes of an ownership interest in property within a proposed TIF area, the terms of that disposition must be reported to the clerk.
  • These disclosures must be reported to the village board/city council and noted in the minutes of a board/council meeting.
  • The same disclosure rules apply to any municipal employee or consultant involved in the planning and preparation of the TIF redevelopment plan or project.
  • Any of the above persons must refrain from
    • Any “further official involvement” in regard to the redevelopment plan;
    • Voting on any matter pertaining to the TIF plan;
    • Communicating with any member of the board/council on any matter pertaining to the redevelopment plan, project or area.
  • No elected officer or municipal employee involved in the TIF process may acquire any interest, directly or indirectly, in any real estate in a proposed or existing TIF district after
    • obtaining knowledge of the TIF plan, or
    • the first public notice of the TIF plan
  • A property interest acquired in a single parcel of land by an elected officer in a TIF district established prior to 1989 as the officer’s primary residence is permitted but must be disclosed to the clerk.
  • A month-to-month lease in a single parcel of land by an elected officer is not prohibited but must be disclosed to the clerk.
The Act does not provide a specific penalty for a violation but it could be deemed misconduct in office, potentially resulting in removal.  As far as we know, no one has ever been charged with violating this section, nor has a TIF district been challenged because of an alleged violation. 

The purpose of §4(n) is, of course, to prevent public officials, employees and consultants from profiting from “inside information” about a proposed TIF, and the economic development to follow.  But a literal application of the section can create problems for public officials.  The effect is that a public official who owns property in an area being considered for TIF development may not vote or even communicate with any other official, employee or consultant about the TIF project, even as a private citizen speaking during the public comment portion of a board meeting.  And officers and employees may not purchase any property in an area being considered for a TIF district.  A month-to-month lease is permitted, but not a year-to-year lease. 

As an example, an elected official owned a condo in a proposed TIF district in which his mother was the primary resident.  In another case, a trustee owned commercial property in an area being considered for a TIF district. In both cases, the official’s ownership predated the TIF proposal by many years. §4(n) would prohibit these officials from participating in the TIF process in any way. 

Home rule municipalities might consider adopting an ordinance to supersede the TIF Act.  The ordinance would be consistent with the purpose of §4(n) but eliminate the inconsistencies, omissions and conflicts. In any case, in order to determine whether an elected officer, employee or consultant is restricted by §4(n), each such officer, and each employee and consultant who will be involved in developing the TIF should complete and submit a disclosure form to the municipal clerk.  Ancel Glink can assist a home rule municipality in drafting an ordinance to replace §4(n) and can provide the suggested disclosure forms.

Post Authored by Paul Keller, Ancel Glink.


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