Prominent developer Casey Baldovin envisions a future Peoria that’s prosperous and vibrant, and he wants to help make that happen.
That’s why he strongly supports the city’s use of tax increment financing (TIF) districts as a way to facilitate projects aimed at building the tax base and bolster Peoria’s economy.
“I like Peoria. I’m from here; I want to see it grow,” said Baldovin, the owner and president of Baldovin Construction and the Baldovin Development Group. “I think that the downtown and the Warehouse District are gorgeous, and I think that we have something that a lot of places don’t: We have a gorgeous river, a great riverfront area. I want to be a part of bringing that back to life down here, and without the TIF, I don’t think that would be possible.”
A tax increment is the difference between the amount of property tax revenue prior to establishment of the TIF and the amount generated after the designation. Peoria City Manager Patrick Urich explains that a TIF does not reduce the amount of money collected for other taxing bodies.
“The way that TIF works is that the assessed value for the other taxing bodies is in essence frozen at the base level of the assessed value,” Urich said. “So whatever the school district, for example, was getting when a TIF was established – we’ll say in 2010, if we established a TIF then – in 2020, you’re going to get the same amount of tax revenues you are getting in 2010. All of the growth in assessed value during that period of time is utilized by either the city or by the developer for the work that they put into their property.”
Michael Freilinger, the president and CEO of the Downtown Development Corporation of Peoria, points out that the property owners in a TIF actually do pay the increased tax amount – but the municipality decides how to use the increment, either for its own need to generate economic development or giving it back to the developer according to terms of a redevelopment agreement.
“The city has the legal authority to retain all 100% of the incremental increase, and then the law provides for them to use that money for certain types of things such as infrastructure improvements,” Freilinger said. “An example would be building the parking deck in the Warehouse District, which is needed to serve the new development that's happening.
“Also among the things that they could do is they can rebate a portion of that as an incentive to the developers. That's where that 50% rebate goes back; so the developer actually pays the full amount of property taxes due, it’s just they're getting half of that incremental value back if that's the terms of the redevelopment agreement.”
But do TIF districts really work the way they’re intended, spurring economic growth? Or are they just tax breaks that ultimately backfire?
Professor David Merriman of the University of Illinois-Chicago's College of Urban Planning and Public Affairs has studied tax increment financing and written numerous articles on its usefulness. Among them are a 2000 analysis of the effects of TIFs on economic developmentand a 2018 report for the Lincoln Institute of Land Policy on how to improve TIFs.
“It seems to depend a lot on where the TIF is used and the exact circumstances; sometimes they work and sometimes they don’t, so I think generalizations are always a little bit dangerous,” Merriman said. “But in the scholarly literature that’s been done, the so-called ‘but-for’ provision – which says the development wouldn’t have happened ‘but-for’ the TIF – does not hold. Very often, the scholarly literature finds that areas that were similar to the TIF and didn’t get the TIF did just as well or even better than the area in the TIF.”
Last week, the Peoria City Council approved a redevelopment agreement with Baldovin on a $9.8 million renovation of the former Grawey Building that includes 16 residential units and 28,000 square feet for commercial use. About $9.6 million of that cost are TIF-eligible expenses.
That’s alongside two other major Baldovin developments under construction in the Warehouse District. The $29 million Adams and Oak mixed-use project will turn the former Federal Warehouse Building into 90 residences and 10,000 square feet of commercial space. Additionally, Baldovin demolished the former Julian Hotel at 724 SW Adams to make way for a 10,000 square-foot office building.
“Over the years while we’ve had TIFs in place, we’ve seen nearly twice the amount of private investment in those areas than public investment.”Patrick Urich, Peoria City Manager
Baldovin says the TIF incentive is necessary to get projects like these off the ground, because the upfront costs to renovating an old warehouse would otherwise be prohibitive.
“You take a ton of money that you wouldn’t normally spend (than) if you were to build new,” he said. “So when you can offset some of that – because if you can build a new building for $225-$300 a square foot but (when) you do a renovation of an old building and you’re at $425, the numbers just aren’t there. And as interest rates increase, it’s even a larger gap.
“The Federal Building, when I bought that, our taxes were $20,000 annually, and that was 160,000 square feet. When I get done with the project, my taxes will be just under $500,000. That’s a lot of money, and if that’s your bottom cash flow, losing a half a million dollars to property tax and no one’s helped you out along the way, the gap’s just too large – most developers won’t do it.”
The Warehouse District TIF is one of several TIFs in operation in Peoria, with city leaders expected to consider adding two more this year.
“We’re looking at taking the remaining area along Washington Street that is not in a TIF in the South Side and putting that into what we’re calling the Distillery TIF, and also looking at the area in north Peoria along Galena Road that’s zoned industrial and abuts some of the Illinois American Water property up there,” said Urich, who noted 2022 was the final year of disbursements through the Central Business District and Northside Business Park TIFs.
“TIFs have played a very important role for the city. Over the years while we’ve had TIFs in place, we’ve seen nearly twice the amount of private investment in those areas than public investment. We have seen that the EAV (equalized assessed value) in the area has grown more than 40%, growing faster than the rate of EAV growth in the rest of the city. So the tax base has grown faster because of the private investment that’s occurring there.”
Peoria TIF districts
Here are the active TIF districts in the city of Peoria:
- Peoria Stadium (Dozer Park) TIF. Established: Dec. 19, 2000. Expires: Dec. 31, 2036. Total investment: $23.95 million.
- Eagle View TIF. Established: June 26, 2007. Expires: Dec. 31, 2031. Total investment: $4.48 million.
- Warehouse District TIF: Established: June 26, 2007. Expires: Dec. 31, 2042. Total investment: $78.68 million.
- Hospitality Improvement Zone: Established: Oct. 28, 2008. Expires: Dec. 31, 2044. Total investment: $76.92 million.
- East Village TIF. Established: March 22, 2011. Expires: Dec. 31, 2035. Total investment: $55.58 million.
- South Village TIF: Established: May 28, 2013. Expires: Dec. 31, 2036. Total investment: $3.35 million.
- Downtown Conservation District. Established: July 9, 2013. Expires: Dec. 31, 2037. Total investment: $360,000.
SOURCE: Data provided by City of Peoria
Along with the Warehouse District TIF (established in 2007), Peoria’s other active TIF districts are: the Peoria Stadium District (2000), the Eagle View TIF (2007), the Hospitality Improvement Zone (2008), the East Village TIF (2011), the Downtown Conservation District (2013), the South Village TIF (2013), and the War Memorial-University TIF (2022).
“Incentives are provided by local governments all over this country, and developers can take their project to any city or state that they choose to. So you have to be competitive.”Michael Freilinger, Downtown Development Corporation of Peoria
By state statute, a TIF lasts 23 years and can be extended by another 12 years. Once a TIF expires, the assessed value for property tax purposes is unfrozen and returns to the current level. Urich says TIFs can be modified, and the aim is to increase the value of the area by the time the TIF ends.
“In 2013 when we created the Downtown Conservation TIF, we took some property out of the Central Business District TIF and then reset the base EAV to create the new Downtown Conservation TIF,” he said. “That allowed the taxing bodies to see that money coming in. So the school district, for example here in Peoria Public Schools, saw an influx of about $1 million of additional revenue because of the growth that we had seen in the Central Business District TIF over the years.
“Ultimately what we’re trying to do is to grow the tax base. You’re trying to increase the tax base so that once the TIF concludes, that generates higher tax revenues for all the taxing bodies, and I think we’ve been successful.”
Peoria established its first TIF district in 1978, with the Southtown TIF that expired at the end of 2013. In the 45 years since, documents provided by Urich indicate TIFs have led to more than a half-billion dollars in total investments, with about $360 million of that being private investments.
Urich adds the EAVs in the TIF areas are 30% higher than if the city had done nothing, and that since 2022 Peoria has totaled more than $233 million worth of executed or pending redevelopment agreements aided by TIFs.
“There is a strong rationale for it as a concept. In practice, it often hasn’t worked as well as the concept in the data, the research that's been done.”Prof. David Merriman, University of Illinois-Chicago
“Incentives are provided by local governments all over this country, and developers can take their project to any city or state that they choose to. So you have to be competitive,” said Freilinger, noting that Baldovin could get higher rent payments on a project like Adams and Oak if it was in Chicago. “We have to be competitive and offer an incentive package that is fair to the developer and attracts them, but yet it is also responsible to the taxpayers of the city.”
Still, the incentive tool remains controversial. Merriman says studies have been rather pessimistic about TIFs.
“There is a strong rationale for it as a concept. In practice, it often hasn’t worked as well as the concept in the data, the research that's been done,” Merriman said. “Sometimes it doesn't work because you simply generate no development in the area. That's particularly true where there are kind of unrealistic plans to develop blighted areas where the incentive just simply won't generate enough money to really make it work.
“Other times, what it does is it attracts development (away) from surrounding areas that would have occurred. So although you get development in the area where the TIF is, the surrounding areas actually have less development, because developers have a choice of moving in an area in which there's incentives versus other areas.”
But Freilinger disputes the various arguments against TIFs, saying the other taxing entities are not being deprived and the incentives are crucial to improving the city.
“The choice is: Do we want abandoned warehouse buildings in a portion of our city, or do we want them revitalized and paying more taxes? Keep in mind that that TIF only lasts for a period of time, and then that TIF goes off and that building will be there for another 100 years paying property taxes,” Freilinger said. “So they (taxing bodies) will eventually see an increase in revenue from the development that's occurring under the TIF program; It's just delayed.”
Baldovin believes it’s unfair to vilify him for seeking the TIF incentives to pursue his projects.
“I'm still paying property tax, and if the people that argue with me are like, ‘well, that money could be used for something better,’ – you're assuming that that money was there to begin with.”Casey Baldovin, developer
“I know that most people are pretty hard on TIF and developers, and I think there's a stigma in Peoria because of a particular developer burning the city pretty bad and I think it's given everybody a bad taste,” Baldovin said. “But most of those (critics) aren't educated at all in finance or tax; whether it's income tax or property tax, they just don't really know what they're talking about.”
As an example, Baldovin posed a hypothetical of a vacant property generating $20,000 in taxes that once developed increases to $500,000. That would produce an increment of $480,000 – becoming a $240,000 tax payment under a redevelopment agreement providing a 50% TIF reimbursement.
“I'm still paying property tax, and if the people that argue with me are like, ‘well, that money could be used for something better,’ – you're assuming that that money was there to begin with,” Baldovin said. “There was no tax money there; I created it.
“So it's kind of an arrogance, when you're a developer, to have people tell you what your tax money should be spent on when it's your project that made the tax money. I could have left that building sit vacant – $20,000 annually; do what you please, you get 20 grand. I'm giving you $240,000 more of my money every year. The lack of knowledge that you have to deal with from people arguing against what you should do with your money is preposterous.”
