In the Zone: Appellate Court Rules in Favor of Village in TIF Dispute with Schools
In 2004, a village in Illinois established a tax-increment financing district (TIF #1) to revitalize its town center. In 2021 (6 years before the expiration of TIF #1), the village passed several ordinances to create a new TIF district comprised entirely of parcels of land that were previously included in the original TIF district’s redevelopment area (TIF #2). The majority of the parcels in TIF #2 are owned by a local hospital network, which entered into a redevelopment agreement with the village to increase parking for its facilities and facilitate the development of a mixed-use commercial building. Due to delays in the approval processes, the redevelopment of the hospital site began prior to adoption of the ordinance establishing TIF #2.
Two local school districts filed a lawsuit against the village, claiming that the newly established TIF #2 was invalid because it did not satisfy the statutory requirements for a “conservation area” subject to TIF treatment. The school districts claimed that the ongoing redevelopment activity by the hospital (prior to establishment of TIF #2) showed there was no need for tax-increment financing to spur development. Additionally, the school districts claimed that the process of removing parcels from TIF #1 only to include those same parcels in TIF #2 was an unlawful attempt to extend the 23-year lifespan imposed for TIF districts under the Tax Increment Allocation Redevelopment Act (Act).
The trial court ruled in favor of the village, finding it adequately established that the area comprising TIF #2 met the minimum criteria to be deemed a “conservation area” eligible for tax-increment financing. More specifically, the trial court determined that the village had shown there was (1) a lack of community planning, (2) a lagging equalized assessed value (EAV) in the proposed TIF #2 area compared with the rest of the village, and (3) deterioration of parcels within the TIF #2 area. The trial court also determined that the de-TIF/re-TIF process of removing parcels from one TIF district to enroll them in another was not prohibited by the Act.
The school districts appealed the trial court’s decision, and the Appellate Court upheld the ruling in favor of the village. On the issue of TIF #2’s designation as a conservation area, the Appellate Court first determined that the village had not erred in finding that the designated area would not reasonably be anticipated to be developed without implementation of TIF #2 and the associated redevelopment plan. While the hospital campus was being actively redeveloped when TIF #2 was established, the Court determined that this activity was clearly supported by the promise of tax-increment financing—in other words, the redevelopment activity and establishment of TIF #2 worked in tandem to stimulate revitalization of the site. The Court further affirmed that the village properly established the 3 eligibility criteria (lack of planning, lagging EAV, and deterioration) to designate TIF #2 as a conservation area.
The Appellate Court also determined that the de-TIF/re-TIF process for the parcels removed from TIF #1 and enrolled in TIF #2 was valid. The Court acknowledged that, to extend the life of a TIF district, municipalities must seek approval from the Illinois General Assembly. However, the Court found TIF #2 was sufficiently distinct from TIF #1, and therefore the de-TIF/re-TIF was not an invalid extension without legislature approval. The Appellate Court observed that nothing prohibits a parcel of land from being placed in a new TIF district after removal from another. Furthermore, the Court noted that the base EAV values had been reset upon the village’s creation of TIF #2, which effectively allowed the other local taxing bodies to receive tax revenue based on EAVs calculated in 2021 rather than 2004. Therefore, the facts and circumstances underlying the creation of TIF #2 did not suggest an unlawful extension of the original TIF #1.
Board of Education of Winfield S.D. 34, et al. v. Village of Winfield
Post Authored by Erin Monforti, Ancel Glink
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