Business Improvement Districts
A Business District is a specially designated area in which a municipality can impose an additional sales and / or hotel tax of up to 1% for a term of 23 years. Business Districts are authorized by Illinois law as a means of spurring development or redevelopment, and may only be designated in areas where there is a formal finding of blight.
| Program Details |
| Business District Overview: |
- Authorized by Illinois law (65 ILCS 5/11 74.3 3).
- Allows municipality to define a specific area as “blighted,” which means that the area is slowing the development of the surrounding area and / or constituting an economic or social liability to the community because of its present condition.
- Creation of a business district should have a “but for” purpose, meaning that private development has not occurred and is not reasonably expected to occur, without the assistance of the business district development or redevelopment plan, which includes a commitment to use public financing.
- The business district must be contiguous, and all properties involved must be directly and substantially benefited.
- Sales and / or hotel taxes may be increased (see below), but certain items do not apply: sale of qualified food, drugs, and medical appliances, and sale of any items that require a title.
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| Requirements for Municipality: |
- The municipality first creates a plan for the district, which includes: the goals and vision of the business district; a boundary description; a map of the area; a listing of all addresses included in the district; a description of all projects; estimated project costs; sources of public funding for the projects; and rate of tax to be imposed.
- After a draft plan has been created, the Municipality holds public hearings at least one week, before establishment of the business district.
- Based on the plan, the Municipality creates an ordinance that establishes the sales and / or hotel tax for the business district.
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| Authorities of Municipality: |
- The Municipality may increase the sales and / or hotel tax for all businesses within the business district by 1/4 % increments, up to 1%, without referendum by the citizens, for a term of 23 years.
- The Municipality may issue bonds using the business district tax fund as security, to pay for any project costs associated with the business district.
- The Municipality may form a Business District Development and Redevelopment Commission to act as an agent for the Municipality.
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| Pros and Cons of Business District: |
- Pros:
- Business Districts do not have the restrictions and requirements of Tax increment financing;
- Business Districts can be created by Non-Home Rule Municipalities;
- Business Districts have no impact on taxing districts, so they are less controversial;
- They allow a shift of tax burden away from residents/property owners.
- Cons
- They can impair businesses particularly sensitive to sales or hotel tax.
- They may create competition between businesses inside and outside of the District, because of the higher sales / hotel tax within the District.
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Note: This program overview is intended as a reference only. Some details may have changed since publication and/or not be reflected in the description. For specific application information for this program, please contact Bill Whitmer, Vice President of Economic Development, Lake County Partners at (847) 247-0137.
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