The DeKalb City Council voted Wednesday to reduce the boundaries of a special taxing district created to promote economic growth.

To comply with a new state requirement, the move will reduce the district’s share of sales taxes by about 50 percent.

An amended state law requires limits on amounts of tax that cities participating in the Tax Increment Finance program can collect.

Under TIF, cities can declare certain areas blighted, place them in TIF districts and receive state rebates from incremental increases in property and sales tax generated by the district. The TIF money must be re-invested for use within the TIF district.

As a result of the new law, DeKalb must redraw its sales tax TIF boundaries to remain in the program. DeKalb has rennovated portions of the downtown area that were economically depressed by using sales tax TIF dollars collected from businesses in the Sycamore Road corridor, which includes Northland Plaza.

However, to meet new state requirements, the city probably will not be able to include both corridor and downtown DeKalb areas in the TIF district, DeKalb City Manager Mark Stevens said.

“If the objective is to maximize sales tax, that is going to mean the downtown TIF district comes out,” Stevens said. “This means we can’t spend dollars earned from the sales tax TIF district in it (the downtown area).”

Because 49.07 percent of DeKalb’s sales tax came from the TIF district, the city no longer complies with the newly imposed state limit of 25 percent. Also, DeKalb must explain to the Illinois Department of Revenue why it’s TIF district experienced a 24.4 percent growth-rate of state sales tax from 1985 to 1986. The state now limits that rate to 15 percent.

DeKalb complies with the revised state law in the size of the district, which encompasses 18.8 percent of the city, as opposed to the state limit of 25 percent. The city’s share of the equalized assessed valuation is 17.8 percent, so the city also complies with the state’s new limit of 20 percent.

When DeKalb’s TIF district was created in December 1986, it met state requirements. However, because of an amendment in the state law, which was implemented in January 1989, the district no longer complies with state requirements.

DeKalb has used TIF dollars to rennovate the downtown area, make repairs to roads and sewers and attract industry to the community.

DeKalb may have to draw two sets of TIF boundaries, one for sales tax and one for property tax, Stevens said.