To resolve a tax increment financing payment dispute between the village of Crete and a company that made infrastructure improvements, the Village Board voted unanimously Monday to approve a new agreement.
The agreement states that by December 2025, the village must pay Crete Property Development $1.4 million in addition to the $7 million already provided in incremental taxes for work completed in the early 2000s.
The village intends to avoid litigation for differing interpretations of the original agreement made in 2002, said village attorney Michael Santschi. When the original agreement’s terms were close to expiring in 2021, Crete Property Development began pressing the village to pay $8.7 million it believed it was owed in principal and interest for the project, which the village claimed was not required under contract provisions, he said.
Santschi said in part due to economic downturns throughout the period of TIF, the money generated never exceeded the amount owed in principal and interest.
“I think that what happened is that there was an expectation, probably across the board, that the TIF would perform better early on, and it just didn’t quite keep up with expectations and the interest,” Satschi said.
Under a TIF district, the property taxes collected by various taxing bodies is frozen at the time the district is created. As property values increase with development, the additional tax dollars, or increment, are placed into a city fund to finance public improvements in the district.
The creation of TIF districts to provide incentives for improvements has been controversial in some south suburbs, with some opponents saying the deals often benefit big businesses while schools and other public services do not receive additional tax dollars even as property values rise.
The TIF district created between the village and Crete Property Development in 2002 borrowed $4.4 million for the installation of roads, water utilities, sanitary sewer utilities, storm sewer improvements and streetlights, according to the new agreement.
Trustee Mark Wiater said the original agreement was structured so 95% of the tax generated by the TIF went to the developer, leaving the TIF with 5%. However, the village did not incur any development costs.
“There’s very little money to form, there always has been, but we’ve never put any money up front,” Wiater said.
The new agreement allows Crete Property Development to continue receiving that 95% of tax revenues for the next two years.
Santschi said the new agreement was a “tough pill to swallow” in terms of a lack of generated funds for public improvements over more than 20 years. But he urged the board’s approval to avoid a legal battle with the developer.
“There are significant advantages to freeing up the TIF districts and letting it work,” Santschi said. “So if I could go back in time and write those differently, I certainly would for you, but I can’t. So this is, I think, the best compromise solution, the best condition we could get that into that everyone would accept.”
Crete Property Development has yet to approve the settlement agreement, village administrator Mike Smith said. He said once this TIF agreement ends, the village may work with the Crete Property Development again because it owns several other vacant parcels of land near and within the TIF district.
