Whether a 69-unit townhouse development in northern Prospect Heights is worth the financial impacts a proposed incentive would have on other taxpayers was debated Tuesday among representatives of the affected local governments.
Last autumn, Prospect Heights aldermen voted 5-2 to grant Lexington Homes preliminary approval to build the townhouse development on the site of the abandoned Jolly Fun House Academy at 1001 Oak Ave.
But Lexington and city officials now argue that to make any new development on the property possible, a tax increment financing district must be used. It would generate the additional funding needed to bring water utilities to the site, as well as improve stormwater drainage in the surrounding area, they say.
The incentive works by freezing the amount of property taxes local governments receive within the district at the level of its first year. As values rise with new development, additional property tax revenues go to a municipal fund to pay for public improvements within the district.
A TIF district typically expires after 23 years, or if all improvements have been paid off earlier.
The use of TIF districts is commonly debated when they're intended to lure major commercial development. That debate grows stronger when they're used for a residential development, which often increases the demand for services on local governments.
Cathy Johnson, associate superintendent for finance and operations in Northwest Suburban High School District 214, added that as tax breaks on certain sites reduce the amount of property tax that can be collected there, other taxpayers inevitably pay more to make up the difference.
But Prospect Heights officials and their consultants cited two mitigating factors with the Lexington Homes project. Not only would school and library districts get a share of annual TIF funds as new residents move in, but the Jolly Fun House Academy site currently generates no property taxes at all, they said.
Prospect Heights Building & Development Director Dan Peterson said the possibilities of development are slim without public improvements funded through creation of a 28.5-acre TIF district.
About 10 acres of the TIF would lie on the Lexington Homes site and Muir Park, with the rest from a strategically drawn area of properties needed for the utility connection and stormwater drainage improvements, officials said.
City Administrator Joe Wade added that while the TIF district isn't for a major commercial development, the growth it would bring Prospect Heights -- a city without a lake water connection or home rule authority and that's plagued by drainage problems -- is proportionately as important.
The next meeting of the joint review board of local taxing bodies affected by the proposed TIF district will take place March 2 or 9.