What is a TIF (Tax Increment Financing) District — and How Does It Work?
- Annika OMelia
- Jun 19
- 6 min read
Most folks I’ve talked to in Rock Island agree on one thing: we need economic development. The proposed Nature’s Treatment dispensary and gas station development project dangles the prospect of increased revenue in front of a city anxious to increase its property tax base and sales tax revenue.
Last night, I attended the Amended City Parkway/I-280 TIF District Public Hearing. Rock Island is planning to create a new TIF District to support the dispensary/gas station project and future projects in the general area. Public hearings are required as part of the process.
So, what the heck is a TIF and how do they work?
The Basic Idea
A TIF is a tool cities use to encourage development in areas that need a boost — places with older buildings, vacant lots, or underused property or in cases where “but for” the TIF, the development would not occur.
It works by capturing the new tax revenue generated when an area improves — and then using that money to help fund even more improvements.
How It Works — Step-by-Step
The city creates a TIF district — a specific area (such as part of downtown) that’s designated for revitalization. Here is the proposed TIF district under consideration:
Proposed TIF District presented to the City of Rock Island by Moran Economic Development At the time the district is created, the property tax base is frozen — meaning the schools, parks, and other taxing bodies keep getting the same amount of money they’ve always received from that area.
As improvements happen — new buildings go up, property values rise — the difference between the old tax base and the new, higher tax revenue is called the tax increment.
That tax increment goes into a special TIF fund — which the city can use to:
Fix streets and sidewalks
Help fund private development projects (like restoring an old building)
Add public amenities (lighting, benches, public art)
Offset costs for affordable housing, parking, or site preparation
Contribute to the conservation of the Milan Bottoms
The TIF district typically lasts up to 23 years under Illinois law. After that, the full new property tax revenue goes back to the schools, parks, and other local services.
Why Do Cities Use TIF?
To help pay for improvements by "borrowing" against the future expected gains in property taxes rather than raising property taxes in the present moment
To attract private investment into struggling or outdated areas
To close funding gaps on projects that otherwise wouldn’t happen
To combat blight or underuse in parts of the city
How Will the TIF support the current dispensary/gas station project?
Rock Island plans to utilize the TIF to provide $6 million or 50% of the total project costs, whichever is less, to attract and support the developer in building a dispensary and gas station in the proposed location. The city's investment of $6 million or 50% of the total costs can be used for:
The developer's purchase of the land at the Casino West Site for $270,000.00
Building the infrastructure off-site to bring roads, utilities, sewer, etc. to the site
Eligible TIF expenses to construct the property and enhance the area
How Does the Developer Get Paid?
The Developer does not receive any money upfront, but is rather reimbursed for their eligible expenses over time through submission and reimbursement of submitted expenses. If the TIF allocation fund does not generate the expected revenue and is "empty," the City is not obligated to pay the developer back. One mechanism Rock Island is proposing is to allow the developer to keep 1% of sales tax until they are reimbursed up to the $6 million or 50% of development costs, whichever is less.
Possible Pros and Cons
PROS
1. Increased Tax Revenue
Cannabis dispensaries generate strong sales tax and cannabis excise tax — revenue that can fund city services.
A TIF may help cover upfront costs and still net a long-term gain for the city.
2. Job Creation
Nature’s Treatment is a known operator — expansion typically brings local hiring and livable-wage retail jobs.
3. Strengthens Retail Draw
Cannabis dispensaries bring high foot traffic — often boosting surrounding businesses (restaurants, retail, services).
CONS
1. Public Subsidy for a Profitable Industry
Cannabis is a high-margin business. Some argue that a dispensary shouldn’t need TIF support — especially when local governments already share in excise taxes.
2. Opportunity Cost
If not carefully managed, TIF can tie up future tax revenue needed in other parts of the city. Given the conditions of Rock Island as a whole, the city is choosing to limit the impact of increased revenue to a specific geographic area for decades, thus restricting those funds from flowing throughout Rock Island.
3. Risk of Market Saturation
The Illinois cannabis market is still maturing and Iowa may legalize marijuana in the coming years — competition may increase leading to the project under-delivering on tax benefits, especially if they keep their Milan business operational.
Gas prices fluctuate and historically, Illinois has had higher gas prices than Iowa, which may impact the gas stations sales
4. Environmental Short-sightedness
Local environmental groups have raised concerns that development in this corridor will negatively impact the Milan Bottoms by:
Harming the biodiversity there, including Eagles and endangered species like the Blanding Turtles
Pose risks to water quality through the placement of underground fuel tanks
Harm the integrity of the wetlands which provide important flood protection, carbon sequestration, and natural habitat for the region
Disrupt a site that could attract ecological tourism dollars to the region that are hard to quantify but may drive tourism to the area
5. Big Island Resistance
Adjacent communities that are pursuing their own vision and economic development do not want their tax revenue tied up in the larger TIF district and would like to have more control over how they use their increased tax values
Key Questions for City Council / Public Discussion:
“But For” Test — Is this project truly dependent on TIF? Would it proceed without subsidy? Can the city provide the $6 million without having to freeze the increased tax revenue?
Is the projected return in new tax revenue worth the TIF outlay?
How long will it take to recoup the $6 million investment? Does the city possess detailed bugets as well as revenue projections from the developer?
Does this fit with Rock Island’s long-term land use plan for the site?
How does the community feel about using TIF in this way? Does the community understand the trade-offs inherent in TIFs??
Video Explainers:
For more information on how TIFs work, you can watch this video produced out of the City of Chicago:
Here is a video on how TIFs generally work:
And here is some information on how TIFs work in a city like Chicago - a warning of what some of the downsides of TIFs are for communities.
A Local Example:
Every Quad Citizen is familiar with the development of the BettPlex in Bettendorf. If might surprise you to learn that this project was financed in part through a TIF. The City of Bettendorf extended $10 million in funding for the entire area up for development and specific funding for the Sportsplex. The Sportsplex was estimated to cost $50 million to construct and it was agreed to beforehand that the valuation of the property had to hit $27 million to be financed. Here is an excerpt from the publicly available agreement posted on the City of Bettendorf's website.
Bettendorf Mayor Bob Gallagher stated in the Quad Cities Business Journal that the "Plex," meaning the entire area, generates $50 million in revenue each year (https://quadcitiesbusiness.com/the-plex-its-an-awesome-place/?utm_source=chatgpt.com) . For every $1 the city invested in the Plex, the area generates $5 in revenue, of which the city receives a portion through sales tax and hotel/motel taxes.
In 2021, over 1.5 million visitors stopped by the TBK Bank Sports Complex, bringing in $25 million in regional tourism dollars. According to the City of Bettendorf, the complex alone generated over $1.2 million in sales tax, as well as over $150,000 in hotel and motel taxes last year according to this article in from WQAD (https://www.wqad.com/article/news/local/tbk-sports-expansion-bettendorf/526-f65f086b-0e1c-41b6-aead-e9b524a79e80?utm_source=chatgpt.com)
What's Happening with Existing TIFs in Rock Island?
You can see a list of current TIFs in Rock Island by following this link:
You can find information on how the previous TIFs impact Rock Island's budget by looking through the Annual Comprehensive Financial Reports on the city website. Here's an example of how previous TIFs impact our budget:
You can read the annual reports submitted on each TIF in Rock Island by following this link:
As an example, you can zoom in on the Century Woods TIF and examine the expenditures and the fund activity in 2023.
And here you can see the activity in the current I-280 TIF for the year 2023.
Rock Island Needs a Strong TIF, not a WTF...
Now is the time to design a TIF that benefits the city while spurring economic growth. Clear documentation, detailed budgets and realistic expectations help cities understand their RETURN ON INVESTMENT. As Rock Island firms up their plans to create a TIF and grow an area of the city, city leadership should be concrete and specific in how they structure the deal and how they communicate to the public why our investment in this area will pay dividends back to the public.