Kadner: SD 218 backs Crestwood TIF plan
By Phil Kadner firstname.lastname@example.org January 22, 2014 8:22PM
Updated: February 24, 2014 12:23PM
Facing a potential financial calamity, Crestwood has received a key vote of support that may allow it to extend for 12 years payments on bond debt from a special taxing district.
By a 5-2 vote, the Community High School District 218 Board on Tuesday night approved the village’s plan to extend the life of the 135th Street and Cicero Avenue TIF District, which is set to expire in 2025.
As first revealed in the SouthtownStar, Crestwood for nearly a decade failed to make payments on the principal of a $34.7 million bond issue. As a result, the debt, including interest and fees, is such that the village might have to pay $1 million a year out of general revenue to avoid default.
A tax-increment financing district provides tax breaks to encourage business development, ideally in blighted areas. Typically, a town pays for initial infrastructure costs and is paid back with the tax revenue from the new development. That revenue is deferred from the affected local governments until it exceeds the reimbursement amount, at which time they begin receiving it.
But in Crestwood’s case, “it’s either pay $900,000 a year (in the future) out of our general sales tax revenues (instead of from the TIF district revenue) or raising fees,” Mayor Lou Presta said recently.
Crestwood already is reeling under a mountain of legal bills as the result of a scandal over its use of tainted drinking water over many years.
To reorganize its debt and extend the length of the TIF district bond issue, Crestwood is attempting to get the approval of the 10 taxing districts within the TIF district’s boundaries.
District 218 — which includes Eisenhower, Shepard and Richards high schools — is one of the largest of those tax districts. Before it agreed to lengthening the term of the TIF district, the school board demanded that Crestwood agree to annual audits of the TIF fund and other stringent conditions.
The village has to agree, in writing, to use all the tax income from the TIF district to pay off the bond debt, principal and interest and to not reinvest any of that money for improvements within the TIF district. The village board is scheduled to vote on the intergovernmental agreement Thursday, Presta said.
“Our school board members really wanted guarantees that no money from the TIF fund would be wasted on consultants or attorneys,” District 218 Supt. John Byrne said. “They understood the need for the extension, but they wanted to make sure all the money raised in the future, every dime, would go to repay the bond debt.”
The TIF district is east of Cicero Avenue and extends from Calumet Sag Road on the north to approximately 135th Street on the south. It has been successful — attracting Menards and Wal-Mart stores and 13 other businesses that have generated 627 jobs and about $70 million in investment, according to a recent Crestwood study.
Property value in the TIF district has increased 110 percent, from $9.3 million to $19.8 million during its life, according to the study’s report, which also said the district has generated $7.6 million in property tax revenue and $6.3 million in sales tax revenue.
But that revenue apparently was not used to pay off the bond debt. As a result, Fifth Third Bank demanded that Crestwood place $5.5 million in an escrow account, and the village agreed.
Under the intergovernmental agreement, about $3 million of that money would be used to pay down the TIF district debt after the village restructures the bond deal. Such a restructuring, in theory, will cost more money in the short term but save the village millions over the life of the extended TIF district.
Crestwood has received approval to add the 12 years to the TIF district from all taxing bodies within the district except for Moraine Valley Community College and Cook County School District 130.
District 130 is the only one to reject the restructuring plan, with its officials saying they believed it would be unfair to residents of the school district, who live in Alsip, Blue Island and Robbins.
Taxing bodies don’t get much, if any, extra tax income from a TIF district until its initial debt is paid off. Under Illinois’ school funding system, school districts typically rely heavily on property tax revenue for much of their funds.
“We will return to District 130 and ask the board members to reconsider their decision,” Presta said. “We were told that Moraine Valley wanted us to get the approval of District 218 first, before (the college board) voted, so that’s what we did.”
Even if Crestwood manages to get the approval of all 10 taxing districts, it must by law get the Legislature’s approval to extend the life of the TIF district. Lawmakers have signed off on more than 100 such TIF extensions in recent years, according to several municipal attorneys.
Many TIF districts in Illinois are failing to meet initial revenue projections due to declining property value and the Great Recession, which reduced spending and sales tax revenue for years. Crestwood’s TIF district, based on the financial figures in its study, is successful.
But the village at one point apparently made a terrible decision while restructuring its bond debt, resulting in higher interest rates and additional fees.
The TIF money, instead of being used to pay down the debt, apparently was used primarily to pay for the cost of financial restructuring and interest.
Village Trustee John Toscas, who ran unsuccessfully for mayor last spring, said he asked for information about the TIF district for years and “couldn’t get any answers.”
“I knew they weren’t paying down the principal,” Toscas said. “But I couldn’t prove it.’
Toscas suspects that the village used some of the money to pay its legal bills, but Presta denied that during an interview.
“That would be illegal,” he said. “We didn’t do it and couldn’t do it.”