Information About Incremental Property Tax Revenue
Incremental property tax revenue is derived from the increase in the equalized assessed valuation of real property within the tax increment financing district over and above the equalized assessed valuation in effect at the time the tax increment financing is established. Any such increase in equalized assessed valuation above the initial equalized assessed valuation is then multiplied, on an annual basis, by the aggregate tax rate resulting from the levy of real property taxes by all units of government having taxing power over that real property. The product of this calculation is the amount of incremental property tax revenues generated within the tax increment financing district.
Tax increment financing does not generate revenue by increasing tax rates (tax rates may rise based on factors independent of tax increment financing due to increases in the levies of the different taxing districts). Instead, it generates revenues by allowing the city to capture all property tax revenues that exceed the "base" equalized assessed valuation of the area before being designated for redevelopment.
Property taxes are generally paid to many different taxing districts of which the City of Waukegan is just one. When a tax increment financing district is created, instead of each of the taxing districts receiving their portion of the incremental property taxes, the incremental property tax revenue is deposited into a special tax allocation fund from which redevelopment project costs and principal and interest of obligations issued to finance the redevelopment are paid. Under tax increment financing, all overlapping taxing districts continue to receive real estate tax revenue based on the initial equalized assessed valuation.