Local incentives

Local development incentives

ON TO 2050, the region’s comprehensive plan, calls for local governments to reform their use of development incentives. The Chicago Metropolitan Agency for Planning (CMAP) conducts and publishes analysis on local development incentives in support of this plan recommendation.  

The use of tax incentives to recruit or retain businesses at the local level is common. Types of local tax incentives utilized regularly in northeastern Illinois include tax increment financing (TIF), sales tax rebates, business district tax rebates, property tax abatements, and Cook County property tax incentive classifications. In 2020, CMAP research  found that 216 of the region’s 284 municipalities — over 75 percent — use some type of local tax incentive, as do many other local governments, such as counties and school districts.  

However, there are drawbacks to local incentive use, including high costs, diminishing returns, damaging intra-regional competition, underutilized opportunities to promote equitable growth, and other challenges. These limitations, which are well established in local and national academic research, make local incentives less effective in achieving local and regional goals.  

To enhance metropolitan Chicago’s economic and fiscal positions, CMAP supports incentive reform by local governments within a larger program of smart, regional economic development. CMAP research advances these goals by publishing data and analysis on the following topics:  

  • The prevalence and distribution of local incentives

  • Motivations for incentive use by local governments 

  • The fiscal and economic impacts of local incentives 

  • Strategies and best practices for improvement and reform 

 

Improving local development incentives guide

In September 2020, CMAP published Improving local development incentives, a guide for local governments in northeastern Illinois. This technical guide provides important background information about incentive use in the region and identifies clear principles, strategies, and practices to implement incentive reform in alignment with ON TO 2050. These recommendations, which are tailored to the CMAP region, build on past CMAP work; interviews and focus groups with over two dozen local planners, developers, and consultants; and an extensive review of the literature on incentive use and best practices in economic development. 

Two versions of the guide are available:

 

The prevalence and impact of sales tax rebates

CMAP has analyzed the prevalence and impact of sales tax rebates in the region. The 2014 analysis, Sales tax rebate database analysis highlights prevalence of rebate agreements in metropolitan Chicago, introduced data from the new Illinois Department of Revenue database on revenue-sharing agreements and analyzed the quantity and distribution of sales tax rebates in the region. The 2016 update, Sales tax rebates remain prevalent in northeastern Illinois, reviewed updated data and analyzed the location of rebate-receiving businesses as well as potential impacts of rebates across local government borders. 

 

Local economic development incentives report

In 2013, CMAP issued a report, Examination of local economic development incentives, to analyze how local governments use incentives to attract or retain businesses — such as retail stores, auto dealerships, corporate offices, and manufacturing or warehousing industries — or to encourage the redevelopment of underutilized sites and the construction of affordable housing and mixed-use development. CMAP studied sales tax rebates, tax increment financing (TIF) districts, property tax abatements, and Cook County property tax incentive classifications to determine their prevalence, structure, and goals, along with their effects on development in the region. 

 

 

 

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Local development incentives

ON TO 2050, the region’s comprehensive plan, calls for local governments to reform their use of development incentives. The Chicago Metropolitan Agency for Planning (CMAP) conducts and publishes analysis on local development incentives in support of this plan recommendation.  

The use of tax incentives to recruit or retain businesses at the local level is common. Types of local tax incentives utilized regularly in northeastern Illinois include tax increment financing (TIF), sales tax rebates, business district tax rebates, property tax abatements, and Cook County property tax incentive classifications. In 2020, CMAP research  found that 216 of the region’s 284 municipalities — over 75 percent — use some type of local tax incentive, as do many other local governments, such as counties and school districts.  

However, there are drawbacks to local incentive use, including high costs, diminishing returns, damaging intra-regional competition, underutilized opportunities to promote equitable growth, and other challenges. These limitations, which are well established in local and national academic research, make local incentives less effective in achieving local and regional goals.  

To enhance metropolitan Chicago’s economic and fiscal positions, CMAP supports incentive reform by local governments within a larger program of smart, regional economic development. CMAP research advances these goals by publishing data and analysis on the following topics:  

  • The prevalence and distribution of local incentives

  • Motivations for incentive use by local governments 

  • The fiscal and economic impacts of local incentives 

  • Strategies and best practices for improvement and reform 

 

Improving local development incentives guide

In September 2020, CMAP published Improving local development incentives, a guide for local governments in northeastern Illinois. This technical guide provides important background information about incentive use in the region and identifies clear principles, strategies, and practices to implement incentive reform in alignment with ON TO 2050. These recommendations, which are tailored to the CMAP region, build on past CMAP work; interviews and focus groups with over two dozen local planners, developers, and consultants; and an extensive review of the literature on incentive use and best practices in economic development. 

Two versions of the guide are available:

 

The prevalence and impact of sales tax rebates

CMAP has analyzed the prevalence and impact of sales tax rebates in the region. The 2014 analysis, Sales tax rebate database analysis highlights prevalence of rebate agreements in metropolitan Chicago, introduced data from the new Illinois Department of Revenue database on revenue-sharing agreements and analyzed the quantity and distribution of sales tax rebates in the region. The 2016 update, Sales tax rebates remain prevalent in northeastern Illinois, reviewed updated data and analyzed the location of rebate-receiving businesses as well as potential impacts of rebates across local government borders. 

 

Local economic development incentives report

In 2013, CMAP issued a report, Examination of local economic development incentives, to analyze how local governments use incentives to attract or retain businesses — such as retail stores, auto dealerships, corporate offices, and manufacturing or warehousing industries — or to encourage the redevelopment of underutilized sites and the construction of affordable housing and mixed-use development. CMAP studied sales tax rebates, tax increment financing (TIF) districts, property tax abatements, and Cook County property tax incentive classifications to determine their prevalence, structure, and goals, along with their effects on development in the region. 

 

 

 

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Incentives guide

 

Incentives guide

Examination of Local Economic Development Incentives in Northeastern Illinois