In Board of Education of Richland School District No. 88A v. City of Crest Hill, an Illinois appellate court ruled that the boundaries of a Tax Increment Financing (“TIF”) district failed to meet statutory requirements. The Tax Increment Allocation Redevelopment Act (“TIF Act”) allows municipalities to create TIF districts, which may access special tax financing benefits. Under the TIF Act, a TIF district must only include  “contiguous parcels.”

In this case, the local school board sued the City of Crest Hill, arguing that the City created a noncontiguous TIF district because two of the parcels were only connected by a natural-gas right-of-way. The court held that the TIF district was not contiguous as a matter of law because “jumping” the natural-gas right-of-way could not establish contiguity between parcels. In reaching this holding, the court recognized that point-to-point touching or cornering is generally not enough to meet the definition of contiguous. The court also refused to apply the Municipal Code’s definition of “contiguous,” which expressly states that public utilities do not impact contiguity, to the TIF Act.  Thus, the court reasoned that the legislature would have explicitly said that contiguity could be established by jumping over a natural-gas right-of-way if the legislature had meant the term “contiguous” to have such an expansive meaning. It should be noted that the Illinois Supreme Court granted the City’s petition for leave to appeal and will be considering the merits of this case.

The financing benefits provided by a TIF district can affect the property tax revenue of school districts and other taxing districts. The TIF Act only allows for these financing benefits when the TIF Act’s requirements are met. This case demonstrates that a court may invalidate a TIF district if the TIF Act’s requirements are not strictly followed. Consequently, taxing districts should keep the TIF Act’s strict contiguous-area requirements in mind when considering municipal proposals to create TIF districts within their school district’s boundaries.

Contact Dean Krone or Antonio Senagore in our Corporate practice group with questions about TIF districts.

Source: Board of Education of Richland School District No. 88A v. City of Crest Hill, 2020 IL App (3d) 190225