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Delinquent: Local leaders say excessive tax incentives could shift burden onto community taxpayers

ROCKFORD (WREX) —  From Loves Park’s Costco to Rockford’s Amerock Hotel, when municipalities across our region land major projects it’s because of one big reason: tax incentives.

What those incentives look like differs for every project. They might be Historic of River’s Edge Tax credits or TIF Districts, just to name a few.

“The way opportunity has been built in our community is based off of one form or another of giving away tax base,” says Rockford Area Economic Development Council CEO Nate Bryant.

“I think they were well-intended but the unintended consequence has been devastating to our economy and where we could really be,” says architect Gary Anderson. “That corporate welfare that we’re seeing is unacceptable to any community.”

So why the concern? Bryant believes these incentives essentially give the area’s tax base away, placing the property tax burden back on the community.

“Think about the water level in a bath tub the level itself in the tub being the value,” says Bryant. “Then the water beneath it, that would be needed for a tax base. When we are in a situation in our region where we are constantly giving away tax base, in other word creating additional holes in the bottom of our bath tub, it puts us in a position where the bath tub level can drop and start to drop.”

Bryant believes those incentives (or holes) allow the tax base to deteriorate, putting the pressure on taxing bodies to get more water back in the tub.  In other words, taxing people more to get keep that water level up.

“So part of the solution is in the long run being very intentional about how we craft a regional strategy that we work our way out of constantly building opportunity off of giving away tax base.”

Bryant says this will take every city from across the region buying into this idea. Including a city like Belvidere, which has already taken steps down this path.

“We’re not in the business of saying OK, here’s a blank check, we want you to come here,” says Belvidere Mayor Mike Chamberlain.

Chamberlain says while it’s on a case by case basis, the city typically doesn’t offer major tax incentives or at least not right away.

“If it’s worth while to look at finding additional new ways to help somebody make the decision to come here. We’ll go down that road. But we also, if we get down that road and find out it’s not going to be a win for us at all, it might be win for them but that’s not enough to make it happen.”

Chamberlain believes one reason the city doesn’t rely on tax incentives is the work it does with the non-profit Growth Dimensions. The group’s executive director, Pamela Lopez-Fettes, believes the city’s low tax rate, location and workforce lend it to being sought out for development. In addition, the city’s small size allows her group to give tailored attention to businesses which she believes is what keeps them satisfied, instead of looking for tax breaks.

“They find doing business in Belvidere is much easier, seamless, our fees are upfront,” says Lopez-Fettes. “We don’t have a lot of the resources that are available to larger cities…but that’s because they have larger problems. We resolve the problems with the resources we have at our hands with our partnerships and thinking with innovative solutions.”

But Belvidere also has big businesses, like the Fiat-Chrysler plant, to boost its tax base and allowing it to be selective. Over in Rockford, the outlook is a bit different.

“We have a reality of market here in Rockford where our development costs are high, our labor costs are high, and yet the rents that developers are able to get are lower,” says Rockford Economic Development Director Karl Franzen. “So we have to bridge the gap and identify what that gap is and bridge that gap for the project to go forward.”

Franzen says if the city doesn’t bridge that gap, the project could move forward somewhere else. He believes tax incentives, done right, can still benefit the city. He says this is due to the city’s TIF policies which forces potential projects to be scored on a rigorous system.

“I would say in how we do it we aren’t giving away tax base or too much tax base,” says Franzen. “There’s no just blanket “developer gets “X”. We want to make sure the return on investment and the developer fee and everything else that goes into those numbers is appropriate for the industry.”

In addition, the incentive is on a pay as you go process.

“If they don’t perform if they don’t create the increment that was promised none of it is given back to the developer, therefore we’re protecting the tax payer,” says Franzen.

But even with projections like that, economic leaders believe as a region municipalities need to come together, get on the same page, and have a conversation about how to ween themselves off of major tax incentives.

“Quite frankly it’s one in which we have to have because if at the end of the day we don’t find a way to get it done, we’re going to be constantly in a position where our market is suppressed by the reason we have to keep giving away property tax in order to make something happen,” says Bryant. “It’s just that simple.”

This conversation will continue Tuesday, November 19th during a special town hall. Expert panelists will weigh in on a variety of property tax issues at the Salvation Army Community Center from 6:30 to 8 p.m.

Mary Sugden

Mary Sugden is the Investigative Reporter at WREX. She joined the team in December 2014 as the evening producer. In 2015 she made the move to evening reporter before joining the 13 Investigates team in May of 2018.

She grew up in Woodstock, Illinois and graduated from Woodstock High School in 2009. Mary graduated with a degree in Journalism and Marketing from Loyola University Chicago in 2013.

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