Urbana school district mulling taking part in enterprise zone to spur tax growth

Urbana school district mulling taking part in enterprise zone to spur tax growth

URBANA — The Urbana school district is considering participating for the first time in the city's enterprise zone program as a way to provide additional incentives for new development.

"Tax-based growth is important for our future as a school district," school board President John Dimit said. "So it is wise for the school board members to give this some serious thought."

An enterprise zone is an area designated by a government body to stimulate economic growth and neighborhood revitalization.

The city has had an enterprise zone since July 1985, according to Urbana Community Development Director Libby Tyler. The boundaries have expanded over the years, and the current zone encompasses about 3 square miles, roughly around University Avenue, Lincoln Avenue, Cunningham Avenue and parts of Philo Road, all within the city limits.

Urbana has used its enterprise zone to stimulate growth by offering tax incentives for major new construction or property improvements.

When SuperValu did an expansion in 2002 inside the enterprise zone, Tyler said the company did not have to pay any sales taxes on construction materials, and the city provided the firm a 10-year abatement on city property taxes from the expansion project.

As the total assessed valuation increases due to improvements or new development, developers in the zone receive abatements of real estate taxes on the increased valuation. It's unlike a tax increment finance district, which puts all of the taxes from the increment into a special fund and then doles out money from that fund. Developers also do not have to pay sales tax on building materials purchased in Illinois and used for certain projects in the zone.

Tyler said applicants need to provide documentation of proposed improvements and need to create a sufficient number of jobs based on a state formula before qualifying for enterprise zone benefits.

While all existing enterprise zones in Illinois are set to expire under state law on June 30, 2016, Tyler said the city is working with Champaign County and other governmental bodies to apply for a brand-new enterprise zone.

Kate Ferrer, economic development specialist for the city, said the proposed new zone will be considerably larger than the old one, perhaps 5, 6 or 7 square miles.

In addition to properties within the city, the proposed new zone would include unincorporated land outside the city limits, possibly including areas along North Cunningham Avenue and High Cross Road, Tyler said. Other possible new locations would include the South Philo Road area and residential areas in southeast Urbana.

In an effort to make Urbana's proposal more attractive to state officials for approval and to maximize the effects of the new enterprise zone, Tyler said, the city is inviting others — including the school and park districts, the MTD, the county and Parkland College — to participate.

Tyler said city officials are asking the school district to consider offering property tax abatements, perhaps for five to 10 years, on projects that provide increased valuation in the new zone. Since the school district accounts for the largest portion of the tax bill, any abatements by it would have the greatest impact. The school board has not yet discussed how much of an abatement the district would offer or for how many years.

"A larger property tax abatement gives us more leverage when working with companies or homeowners considering locating in Urbana," Ferrer said.

She said the school district will have flexibility in establishing the tax abatement program and in determining the number of years and eligible types of projects for tax abatements.

In order for the school district to participate in the enterprise zone program, the Urbana school board (and other government bodies that wish to join them) would need to vote on participating sometime between now and October, Ferrer said.

The school board's vote would be added to the city council's vote as part of the application package that would be sent to the Department of Commerce and Economic Opportunity for approval.

On Aug. 19, the school board directed its staff to continue working with city officials on the school's possible participation.

Ferrer said Urbana should learn whether it gets its new enterprise zone by September 2015, and the new zone would begin operations in January 2016.

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