The DeKalb City Council recently took the first step in finalizing the formation of a South Fourth Street TIF District. The City Council voted in favor of the formation of a new TIF district in the first reading of the ordinances with mayoral candidate Ald. John Walker casting the sole “no” vote.
A tax increment finance district -- also known as “TIF” -- pools property tax dollars to support investment in a designated area.
“The residents clearly are not ready for the idea of the South Fourth Street TIF yet,” said activist and DeKalb resident Mark Charvat during public comments at the city council meeting.
He said he’s attended community meetings regarding the TIF and found that many residents were not in favor of the proposal. The City Council has held discussions regarding the proposal for about a year.
TIF funds are raised when the amount of tax money taxing bodies receive is frozen for the length of the TIF designation, which lasts 23 years.
As property taxes rise over time, the additional dollars the taxing bodies would have collected get diverted to a TIF Fund.
"Let’s say your property was worth 300,000 [dollars] and now it's worth 310,000,” said DeKalb City Manager Bill Nicklas, “The tax rate against that 10,000 creates some new taxes, and that goes into the fund, goes into the bushel basket.”
The South Fourth Street TIF is expected to generate over $20 million. So, an estimated $12. 4 million that would have gone to the school district will be redirected to the TIF Fund.
Under the agreement, taxing bodies get some of the money back. The school district is estimated to receive $5.7 million in return.
Charvat said he’s concerned about how taxing bodies will manage without the funding.
“How are taxing bodies going to make it up?” he asked. “Well, if you're suddenly at a loss, you lose a bunch of money, taxing bodies have the ability to do what they do best -- tax. So, they'll increase taxes on the rest of us to sustain that loss.”
Voters have demonstrated little support for a tax increase to support schools. A referendum on the November ballot to create a DeKalb County sales tax of 1% to help fund school facilities and mental health professionals failed.
The DeKalb School District
Earlier this month the DeKalb School District 428 school board voted in support of the formation of a TIF.
In a statement, school board president Deyci Ramirez says the district backs the TIF because of its “goal to stimulate job growth, encourage more retail spending, and improve the overall living conditions within the municipality."
The planned TIF district would run on Fourth Street from Taylor Street to about I-88 and includes some lots on Seventh Street.
Nicklas said the area is not rising in property value at the same pace as the rest of the city.
A city analysis of the last six years finds property value increases range by 2.7% in 2021 to 9.2 % in tax year 2023.
Niklas said funds from the current downtown TIF has helped several property owners with the costs of building improvements.
“These would be considered facade improvements,” he said, “minor internal improvements to maybe bring a building up to more accessibility, or replace a furnace, or fix a roof or something like that.”
Documents show that funds have been used for larger private developments too, according to annual tax increment finance report for fiscal year 2022.
Nearly $4 million went to high-end apartments on Fourth Street.
Over $400,000 went to Sun Dog IT, the IT services company owned by DeKalb Mayor Cohen Barnes.
TIFs have drawn concerns about transparency. An audit of TIF districts conducted in 2019 found that $6.5 million was used to cover city employee salaries. It also found discrepancies as to how TIF funds were awarded.
Nicklas said the city since then has in place regulations for how TIF funds are distributed.
The city council is expected to take a final vote on the South Fourth Street TIF next Monday.
