A Deep Dive into Mahomet’s Tax Increment Financing Impact on the 2024 Mahomet-Seymour Referendum
How does a Tax Increment Financing (TIF) district operate?
A Tax Increment Financing (TIF) district works by first freezing the assessed values from which property taxes are collected in a specific area at the time the district is established. This ‘frozen’ assessed value is then the value from which local taxing bodies (like school districts, fire departments, libraries, etc) can collect property taxes over the lifetime of the TIF. As new businesses or developments come into the area and as property values go up for any other reason (including typical annual increases), the assessed value of the area increases. The property taxes collected on this ‘extra’ assessed value–known as the “increment”–don’t go to the taxing bodies but rather go into a special TIF fund controlled by the local government. In the case of Mahomet, the Village of Mahomet controls the TIF fund.
The purpose of this setup is to help local governments pay for projects that improve the area, like building roads or upgrading infrastructure. The idea is that by using this extra tax revenue for improvements, it makes the area more attractive for businesses, which leads to even more growth. After the TIF district’s term ends, which is typically 23 to 35 (if an extension is approved) years, the full value of all the property in the area can be taxed by local services, like schools, which could bring them a boost in funding.
What are the main arguments in favor of TIF districts?
Proponents of TIF (Tax Increment Financing) districts argue that they are a tool for stimulating economic growth and revitalizing underdeveloped or “blighted” areas. By capturing the increase in property tax revenue, known as the “increment,” and subsidizing infrastructure improvements, TIF districts can attract development. Advocates believe this creates a cycle of growth that benefits the community as a whole. Once the TIF district expires, all local taxing bodies, including school districts, gain access to the increased property values, leading to a long-term boost in tax revenue that can be used for schools, public services, and other community needs.
What concerns are raised about TIF districts, particularly regarding school funding?
Critics of TIF districts, particularly in relation to schools, point out that when a TIF district is established, it essentially “freezes” the amount of property taxes that schools receive. This means that as property values go up within the TIF district, from both new construction and from the typical annual growth, the extra tax revenue is set aside into the TIF fund instead of going to the school district. As schools face rising costs and increasing student enrollment, this can create a financial strain.
Essentially, schools miss out on the potential growth in tax revenue for years—sometimes decades—while property values rise in a TIF district. This can be especially challenging for schools because, during that time, the cost of educating students continues to rise due to factors like increasing enrollment, higher teacher salaries, and the need for updated resources and technology. Additionally, as more residential developments are built within the TIF district, more families move into the area, which can lead to even larger student populations. Unfortunately, the school district doesn’t see the benefit of the higher property values from these new homes until the TIF expires, leaving them with fewer resources to handle the growing demand for education. This puts pressure on schools to find alternative ways to fund education, which might include increasing taxes on homeowners outside the TIF district or relying on referendums to close the funding gap.
The same strains can be put on other taxing bodies, like law enforcement of fire districts.
Without access to the increased property taxes, school districts may have to raise taxes on homeowners or pass referendums to secure more funding, which places a financial burden on local taxpayers. Additionally, critics argue that some developments might happen even without the TIF incentive, and in those cases, the lost revenue could outweigh the benefits.
Critics of TIF districts, particularly in relation to schools, point out that when a TIF district is established, it essentially “freezes” the amount of property taxes that schools receive. This means that as property values go up within the TIF district, from both new construction and from the typical annual growth, the extra tax revenue is set aside into the TIF fund instead of going to the school district. As schools face rising costs and increasing student enrollment, this can create a financial strain.
Essentially, schools miss out on the potential growth in tax revenue for years—sometimes decades—while property values rise in a TIF district. This can be especially challenging for schools because, during that time, the cost of educating students continues to rise due to factors like increasing enrollment, higher teacher salaries, and the need for updated resources and technology. Additionally, as more residential developments are built within the TIF district, more families move into the area, which can lead to even larger student populations. Unfortunately, the school district doesn’t see the benefit of the higher property values from these new homes until the TIF expires, leaving them with fewer resources to handle the growing demand for education. This puts pressure on schools to find alternative ways to fund education, which might include increasing taxes on homeowners outside the TIF district or relying on referendums to close the funding gap.
The same strains can be put on other taxing bodies, like law enforcement of fire districts.
Without access to the increased property taxes, school districts may have to raise taxes on homeowners or pass referendums to secure more funding, which places a financial burden on local taxpayers. Additionally, critics argue that some developments might happen even without the TIF incentive, and in those cases, the lost revenue could outweigh the benefits.
Are there TIF districts in Mahomet?
There are two TIF (Tax Increment Financing) districts in Mahomet: the East Mahomet TIF and the Downtown TIF. The East Mahomet TIF was established in 2000 and extended in 2019 to remain active until 2036. The Mahomet-Seymour School Board voted to approve this with a vote of 5-2 in 2019. The Downtown TIF was created in 2018 and will expire in 2042. The Mahomet-Seymour School Board did not vote to approve this. Instead, then Superintendent Lindsey Hall and Chief School Business Official Trent Nuxoll approved the move without the board’s knowledge. When this came up in discussion during a board meeting, board member Merle Giles said he was not aware of the Downtown TIF District while then Board President Max McComb said he was aware the district entered into the agreement.
What is the structure of Mahomet’s TIF districts?
East Mahomet TIF:
- Established: 2000
- Expiration: Initially, the East Mahomet TIF was set to expire in 2024, but it was extended in 2019 for an additional 12 years, pushing the expiration to 2036. The Board of Education voted to approve this extension.
- Pass-Through Structure:
When the East Mahomet TIF was first created, it had a unique structure that allowed 100% of the property tax revenue—both from commercial and residential properties—to be passed through to local taxing bodies, including the Mahomet-Seymour School District. The Village was setting aside their property tax increment in the TIF fund for improvements, but it was still passing all of the tax revenue back to the local services like schools and fire departments. - However, in 2010, after the TIF fund didn’t grow as much as expected, the Village amended this structure. They continued to pass through 100% of the residential property tax revenue to the Mahomet-Seymour School District (and other taxing bodies) but retained 50% of the commercial property tax increment to fund projects within the East Mahomet TIF. This adjustment allowed the Village to keep half of the commercial tax revenue increase to invest in the area. As part of this agreement, the School District received a 50% discount on their water usage bill from the Village.
- 2019 TIF Extension and School District Agreement:
In 2019, the Village of Mahomet, with support from other local taxing authorities, including the Mahomet-Seymour School District, extended the TIF for 12 more years. Had the TIF expired in 2024 as initially planned, the school district would have gained full access to the increased property values (or the Equalized Assessed Value, EAV) within the district. Instead, the extension postponed this access until 2036.
The school district agreed to support the extension in exchange for being released from its responsibility to develop Churchill Road through its property as the Village continued to grow. Normally, developers in Mahomet are responsible for building infrastructure—such as roads, water, and sewer lines—before turning them over to the Village for maintenance. The school district “paid” for its portion of the road through the TIF extension. The Village estimated that building these roads would have cost the school district around $1.8 million. By revising the Intergovernmental Agreement (IGA) as part of the TIF extension, the Village relieved the school district of this cost. When the TIF was extended, the School District did not negotiate to continue the 50% discount on their water bills.
The change from the district’s development of Churchill Road turned to the Village’s sight to extend South Mahomet Road through the school district’s property to Prairieview Road. With the extension, including water and wastewater, access to the east of Middletown Prairie Elementary allowed developers to purchase property and develop it into both commercial and residential spaces.
The Village of Mahomet says the district’s contribution to South Mahomet Road is $3.25 million with shared engineering costs. The projected total for South Mahomet Road, including the new railroad crossing and continuing through to Prairieview Road is $12.8 million. The Village used $9.6 million in TIF funds for the project. Other developers have not had to extend the road to reach their desired property, and have also enjoyed other TIF-related concessions.
Village officials have said the school district’s obligation to build Churchill would, at minimum, be equal to the amount the Village paid for their portion of South Mahomet Road through the TIF funds which is equal to the amount of money the Village says was diverted from the District to the Village in the first 23 years of the TIF.
Case Studies
Fisher National Bank purchased their land prior to the establishment of the TIF, but the building was completed after 2000, when the TIF was completed. In the first 10 years, the school district did not miss out on any of the assessed value increases because all of the property taxes went to all taxing bodies.
Then in 2010, when the TIF was amended, the district received taxes for the base assessed value of the property, and the taxes collected on the increment went to the Village of Mahomet. The Village of Mahomet then rebates the district with 50% of the amount of the increment, then keeps the other 50% for TIF projects.
This is what the property tax distribution and reimbursements from Fisher National Bank has looked like since 2017:
The chart below is representative of how the money flows from the Champaign County Clerk’s office (left) to how it flows from the Clerk’s office and the Village of Mahomet (right).
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Orange represents money that goes directly to the school. Blue represents all money that goes directly to the Village TIF fund from the County Clerk’s office. Green represents the amount the Village passes through to the schools.
In the case of the property where 1001 Churchill sits, the property held no assessed value when it was purchased in 2016 because the Village split parcels to make sections of land for the strip malls. This means that the tax base for the school district is zero, but they do receive 50% of the taxable increment:
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Blue represents money that goes directly to the TIF fund. Green represents the amount of money the Mahomet-Seymour School District recoups once the Village gives them the TIF pass through.
Downtown TIF:
- Established: 2018
- Expires: 2042
- Pass-Through Structure: The Downtown TIF operates more traditionally compared to the East Mahomet TIF, with 100% of the increment growth from both residential and commercial properties being diverted into the TIF fund. This means the Mahomet-Seymour School District and other taxing bodies do not receive any portion of the increased tax revenue from properties within this TIF district until it expires in 2042.
- According to the Village, the Downtown TIF district has already generated $447,953 in five years.
Case Studies
The land Sangamon on Main is on, formerly Sangamon Elementary, was not taxed before the Downtown TIF was established because it was owned by a taxing body (the Mahomet-Seymour School District). When the building was sold and the TIF District was established, this set the base amount the taxing bodies would receive for the next 24 years at $0. Any assessed value increased (the increment) goes to the TIF fund.
For Sangamon on Main, that means that in its first five years the TIF fund has captured over $174,000 from this property while the school district has received nothing. The school district will continue to receive nothing from this property until 2042.
Blue represents money that goes directly to the TIF fund.
Another example is Eastwood Commons, where property value had been assessed for many years. As you can see, that base amount goes to the Mahomet-Seymour School District and the increment goes to the TIF fund.
Orange represents money that goes directly to the school. Blue represents money that goes directly to the TIF fund.
What are the projected growth models for both TIF Districts, and how will that impact the Mahomet-Seymour School District?
The Village initially used a 2% annual growth model for the East Mahomet TIF when estimating future tax revenues. However, during a recent school board meeting, they discussed a 4% and 5% growth model in their vision for the next 12 years. For bonding purposes, the Village of Mahomet has to use a “conservative” growth estimate.
Actual data from the last five years shows a 12.5% average annual growth in the East Mahomet TIF, which far exceeds the Village’s projections. By contrast, the Downtown TIF has experienced a staggering 70% average annual growth over the same period, although such rapid growth is considered unsustainable for the long term.
It is likely that the East Mahomet TIF could continue to grow at an average annual rate of 12.5% for the next 12 years, especially with businesses like Haymakers, Culvers, a hotel and continued residential development on the horizon. However, since the TIF has been extended, much of this increased revenue will continue to be diverted into the TIF fund.
Our analysis shows that even if the referendum fails, at 5% growth (the Village estimate), $8.6 million will be diverted from the school district to the TIF fund over the next 12 years. This is on top of the $3.2 million the Village predicts was diverted from the school district from 2010-2024. Should the referendum pass, that number grows to $10.3 million at 5% growth.
We use the word predicted because we spent nearly 18 months in 2021-2022 asking for data from the Village and County Clerk’s office. Both taxing authorities stated that they do not have the necessary data to determine the amount of funds diverted from the school district into the TIF.
Because 5% is a very conservative look at TIF district growth, we calculated what the numbers would look like if we take the average TIF growth over the next 12-year period. Without the referendum at 12.5 percent growth, $14.4 million will be diverted from the school district into the TIF funds. Should the referendum pass, that number goes up to $17.3 million.
How Could the Mahomet-Seymour School District make use of the diverted TIF Funds?
Essentially TIF funds are local property taxes diverted from one taxing body to another. In Illinois, local property taxes are a crucial source of funding for school districts, and they can be used in a variety of ways:
- Teacher salaries and benefits: Higher compensation would help the district maintain a strong, motivated teaching staff, directly benefiting student learning and overall academic performance. Additionally, better salaries could reduce teacher turnover, creating a more stable and consistent learning environment for students.
- Instructional materials and supplies: This includes textbooks, technology, and other resources used in the classroom.
- Student transportation: Funding for bus services and other transportation costs.
- Building maintenance and operations: Keeping schools in good repair, including utilities, custodial services, and repairs.
- Administrative costs: Expenses related to running the school district, such as salaries for administrators and support staff.
How did the TIF districts factor into the proposed $112.8 million school referendum rate?
When the Mahomet-Seymour School District sets the tax rate for a referendum, it relies on the Rate Setting EAV (Equalized Assessed Value), which represents the total taxable property base the district can directly tax. This value excludes any property value increments from TIF (Tax Increment Financing) districts because those increments are diverted to the TIF fund and are not immediately available for the school district’s use. As a result, the Rate Setting EAV is smaller than the total property value within the district.
Here’s how a smaller EAV (without the increment) can make the tax rate higher:
- Total Funds Needed: The district needs to raise a specific amount of money to cover the $112.8 million referendum. This amount stays constant regardless of the size of the EAV.
- Smaller EAV, Same Debt: If the EAV is smaller (because it doesn’t include TIF increment amounts), the district has fewer properties to spread the cost of the referendum across. This means that each property will need to contribute more in taxes to meet the required funds, resulting in a higher tax rate.
- Larger EAV, Lower Rate: If the EAV were larger—by including the TIF increment—there would be more properties contributing to the total tax burden. This would allow the district to collect the necessary funds with a lower tax rate per property, since the burden would be spread over a wider tax base.
To be clear, the Mahomet-Seymour School District cannot include the TIF increment in their rate-setting EAV because the district does not have access to the TIF funds. The money goes from the Champaign County Clerk to the Village of Mahomet. The Village then distributes the agreed-upon percentage to the Mahomet-Seymour School District.
Because the TIF increment is excluded, the district must set a higher tax rate to cover the costs of the referendum. This is why having a smaller EAV—due to the exclusion of the TIF increment—leads to a higher tax rate for the referendum, even though the total funds needed remain the same.
What will be the effect of the referendum on taxpayers within the TIF districts? Will this impact those not in TIF districts?
The tax-increasing effect of the referendum on taxpayers within the TIF districts will be the same as for those outside the districts, but where the dollars they pay go may be quite different.
Even though the Mahomet-Seymour School District receives reduced tax revenue from properties within the TIF districts until the TIFs expire, properties inside the TIF districts are still subject to the increased tax rate resulting from the referendum. However, the additional tax revenue generated from these properties goes into the TIF fund, not directly to the school district. In the East Mahomet TIF, the Village will pass through 100-percent residential and 50-percent commercial to the Mahomet-Seymour School District. Fifty-percent of the commercial EAV increase will go to the TIF fund. In the Downtown TIF, 100-percent of the increased EAV will go to the TIF Fund.
At 5% growth (the Village TIF growth estimate) $1.8 million will be diverted from the school district over the next 12 years just from the referendum increased rate of $.96 per $100 in property value. At a 12.5% growth (the actual average since 2018), $3 million will be diverted from the school district into the TIF funds just from the referendum increase. The total amount diverted to the TIFs that would have otherwise gone to the School District will be $10.3 million at 5% growth and 17.3 million at 12.5% growth.
Here’s how it works:
- Increased Tax Rate: Taxpayers (both residential and commercial) in the TIF districts will see the same increase in their tax rates as those outside the TIF, due to the referendum.
- TIF Fund Receives Increment: The tax increment, or the additional revenue generated by the increase in property values and the referendum’s higher tax rate, will be diverted to the TIF fund rather than going to the school district.
- No Immediate Benefit to the School District: Until the TIF districts expire (in 2036 for the East Mahomet TIF and 2042 for the Downtown TIF), the school district will not receive the increased tax revenue from properties within these areas with the exception of the still passed-through 100-percent residential and 50-percent commercial.
This means that while property owners within the TIF districts will pay higher taxes because of the referendum, over the remaining life of the TIFs some of those funds will go directly to the VIllage and not to the school district for use in facilities projects.
How has TIF funding been utilized by the Village of Mahomet?
In the East Mahomet TIF, funds have been primarily directed towards public infrastructure projects, including the construction of South Mahomet Road, which was extended to promote development east of the Mahomet-Seymour School District. This project also included water, wastewater, and storm sewer infrastructure, all aimed at supporting new development. The TIF funds have also been used to widen and resurface US Route 150 and make improvements at key intersections, such as Prairie View Road and Churchill Road.
The Downtown TIF has supported projects aligned with Mahomet’s Downtown Master Plan 2050 Vision, focusing on revitalizing the downtown area. TIF funding has been used for site preparation, such as demolishing outdated structures, and future projects include streetscape improvements, like the 400 Block Streetscape Project, which is expected to enhance the aesthetic and commercial appeal of the downtown area. The Village of Mahomet believes that an additional $15 million in the downtown TIF that includes Street Reconstruction and Infrastructure Improvements, Façade Improvement Programs and Reimbursement to developers for TIF eligible costs including demolition will help them realize the Downtown Master Plan 2050 Vision Projects.
How do we know the TIF districts will continue to grow?
What Mahomet residents can see right now is how the TIF-funded South Mahomet Road has encouraged developers to invest along IL-150. But this TIF development also eyes additional residential development in both the East Mahomet TIF and the Downtown TIF areas.
The Village of Mahomet, which approves all development within the Village boundaries and within a 1.5 mile radius of the Village, will prioritize “infill” development before seeking development of agricultural land. This development will be spurred on by TIF and Business District-funded infrastructure.
With commitments to TIF and the Business District (a new tax that will be placed on sales tax in certain businesses within the Village of Mahomet beginning in Jan. 2025) the Village of Mahomet places emphasis on providing infrastructure that will produce industrial and commercial development alongside housing. Substantial infrastructure improvements are already underway and more planned for the future—including a multi-million in additional infrastructure construction between 2025 and 2036 to drive this growth.
In the East Mahomet TIF district, these projects will most likely include the continued extension of Purnell Drive and Churchill Road, giving access to land to the south and east of the school district’s land for industrial, commercial and residential development.
| Light Purple:I-2 General Industrial District is to provide for the development of a mix of higher intensity commercial and moderate intensity industrial uses. | Dark Purple: I-1 Planned Industrial District is to provide a mix of commercial and light industrial uses in a planned campus setting. Typical uses include large scale businesses, low impact manufacturing, distribution centers and other similar uses in a business park setting. | Pink: C-2 General Commercial District is to provide for a wide range of retail, service, mixed, office and commercial uses. |
| Brown: R-1A Single-Family Residential District is to provide for detached single-family dwellings with related uses on larger sized lots within a low density setting. | Yellow: R-1B Single-Family Residential District is to provide for detached single-family dwellings with related uses on standard sized lots. | Light Green: AG Agriculture District is to provide for limited areas of agricultural activity and for activities associated with a rural setting. |
In the Downtown TIF District, the Village envisions two to three story buildings with businesses and residential areas, including apartments and townhouses.
The primary goals for residential development include:
- Variety of Housing: Mahomet seeks to offer various housing types, from single-family homes to multi-family units, that cater to different stages of life. This includes housing for professionals, growing families, and seniors.
- Infill and Redevelopment: The Village prioritizes infill development, where new housing is built within existing neighborhoods to maintain a cohesive community structure. The completion of platted but undeveloped subdivisions is encouraged over outward expansion, preserving open spaces and preventing urban sprawl.
- Infrastructure and Connectivity: New residential developments are expected to connect efficiently to utilities, infrastructure, and the village’s extensive network of sidewalks and multi-use paths.
Whether or not those visions come to fruition remains to be seen. What we do know is that there have been a committed group of developers who purchase land within the TIF district, then redevelop it into both commercial and residential properties. We also know that the Village has already approved at least another 300 dwellings outside of the TIF districts. Those developments should be completed within the next decade.
Are there any other factors that could have contributed to growth in the TIF Districts?
Interest from commercial developers in Mahomet increased after the completion of Middletown Prairie Elementary.
The construction of Middletown Prairie brought crucial infrastructure improvements and traffic to an area that was otherwise overlooked. Almost immediately, 1001 Churchill, now a strip mall, was built, and the same developers who purchased Sangamon Elementary, now Sangamon on Main, began to purchase land and buildings within both TIF districts. Much of the newly developed land has come from these developers.
Because of the infrastructure provided by the school district and the Village, areas in Conway Farms were prime for development, bringing in businesses such as Sunset Funeral Home, Middletown Apartments, and commercial properties along Churchill Road.
While the TIF-funded infrastructure projects played a role, the Mahomet-Seymour School District’s investments in infrastructure, along with private developers’ interest, contributed significantly to the area’s growth. The developers also benefited from concessions on development agreements, which further incentivized investment in the area.
How will the school district benefit from the growth of the TIF districts when they eventually expire?
When the TIF districts in Mahomet eventually expire—in 2036 for the East Mahomet TIF and in 2042 for the Downtown TIF—the Mahomet-Seymour School District will begin to see financial benefits from the growth in property values that has occurred within those areas.
Here’s how the district will benefit:
Increased Equalized Assessed Value (EAV): Over the years, the property values in the TIF districts have grown significantly. For example, the East Mahomet TIF’s EAV has increased by 3,670% from $1.3 million to nearly $49.5 million between 2000 and 2023. Once the TIF expires, the school district will be able to include this higher EAV in its tax base, which will increase the total revenue available to fund educational programs, facilities, and other needs.
Access to Full Property Tax Revenue: Once the TIF districts expire in 2036 and 2042, all the property tax revenue from the increased property values within the TIF areas—both commercial and residential—will no longer be diverted into the TIF fund. Instead, these funds will be returned to local taxing bodies, including the school district. This means the school district will be able to tax the full assessed value of the properties within the TIF district, resulting in a substantial increase in revenue.
With the development and enrollment projections, will the short-term losses be worth the long-term gain?
An increased Equalized Assessed Value (EAV) benefits the school district and all other taxing bodies by providing additional funds that can be used to serve the public. However, in some cases, when the population grows alongside an increased EAV, the additional revenue may be quickly consumed by the increased demand for services.
In this project, we would have loved to answer this question more directly, but so much goes into school funding that it would be impossible to balance all of the factors. Some are predictable, some unpredictable, others unknown. Uncertainty at the state and federal levels would play into the equation.
Here’s what we know:
If the two TIF districts were focused only on commercial development, the increased EAV would generate revenue without directly increasing the need for services like schools, fire protection, or law enforcement, as would be required with more students or residents. However, both TIF districts are also targeting residential development. This “infill” residential growth could lead to continued increases in school enrollment, potentially offsetting any financial benefits the district might gain from the TIF.
Over the next 20 years, the Mahomet-Seymour community will see whether the financial gains from the TIF (increased EAV) outweigh the short- and long-term challenges faced by the school district. While the long-term benefit of the TIF may be increased EAV, the Village will continue using the increment to fund infrastructure for both commercial and residential development in the meantime.
Each new home brings revenue to the district, but the key question remains: will this revenue be enough to support the educational needs of the growing student population? For instance, with the student population expected to grow at a rate of 1.7% per year (Mahomet Daily projections based on data provided by the school district), the Mahomet-Seymour School District could reach 4,930 students by 2045, which is 700 more than the current projected capacity of 4,200. Whether the Mahomet Daily or the Mahomet-Seymour School District projections are correct, the school district’s maximum capacity could be reached before the payments for the referendum end and the Downtown TIF expires.
Additionally, residential developments like downtown apartments or multi-unit buildings may not bring the same high-value families as single-family homes, which could result in less direct financial benefit to the school district. Not all of the residential growth will come from the TIF districts. Developers outside of the TIF already have subdivisions approved while others have inquired about a timeline.
Whether or not the Mahomet-Seymour School District will have the diverse and adequate funding it needs in 20 years remains to be seen.
Could dissolving the TIF districts help reduce the financial burden on taxpayers?
Unless all the TIF debts are paid off, and all the taxing bodies agree to dissolve the TIFs, it is certain that the East Mahomet TIF will stay in place until 2036, and that the Downtown TIF will continue to function as it has until 2042. And we know that the Village of Mahomet has ambitious plans for both the downtown area, and the east Mahomet area, as shown on their signage around town, the Mahomet Comprehensive Plan and the Mahomet Downtown Master Plan. Their commitment to these areas with the Mahomet Business District tax signifies that more tax money is needed to see those projects to fruition.
