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