DeKalb is one of 74 Illinois communities cited by the Illinois Department of Revenue for collecting too much money from a taxing district created to encourage economic development.

Under the state’s Tax Increment Financing program, money collected in TIF districts must be returned so improvements can be made in those areas. However, the state has imposed new requirements restricting the amount of taxes communities can collect from TIF districts.

“The state cited problems with TIF for having more than 25 percent of the city’s total retail sales tax and for having more than 15 percent growth,” said Mark Stevens, DeKalb city manager. “We’re being required to revise our boundaries and to explain why we need to keep the properties (within the TIF district).”

DeKalb’s TIF district extends along Sycamore Road to the north boundaries of the city limits. It includes the downtown area, Northland Plaza and the DeKalb Taylor Municipal Airport.

DeKalb has used its TIF funds for street improvements, water and sewer extensions, airport improvements and loans for manufacturing rehabilitation.

The district collects 49.1 percent of the city’s retail sales tax, said Peter Gudmundson, TIF coordinator for the Illinois Department of Revenue. Since a change in state law, DeKalb can no longer collect more than 25 percent of the city’s total retail sales tax, he said. Communities that violate this requirement must redraw their TIF boundaries. If the communities do not redraw their boundaries, they will lose eligiblity to participate in the TIF program.

Also, if the sales revenue from a TIF district increased more than 15 percent between 1985 and 1986, a community must explain why the growth occurred, Gudmundson said. During this period, DeKalb’s growth rate was 24.4 percent, he said.

Communities have 30 days to notify the Illinois Department of Revenue about whether they intend to comply with the changes in state regulations regarding the TIF program and 120 days after that to provide documentation, Gudmundson said.

“The legislature was responding to certain allegations that there were program abuses — that some of the areas (designated as TIF districts) were not blighted,” Gudmundson said.

The Illinois General Assembly was also seeking a more equitable distribution of money, he said.

Gary Boden, DeKalb assistant city manager, said the city originally developed the TIF district according to state established rules. DeKalb maintained a successful program by following the established rules, but the city must now alter its program to comply.

The state will phase-out its obligation to the TIF program in 20 to 23 years, Gudmundson said.