Tax Increment Financing (TIF)
ELP 55 features a developer-controlled $140 million TIF which can be allocated at the developer’s sole discretion. The following flow chart illustrates the payment flow of real estate taxes:
Payments through the TIF are secured by:
- TIF basis is very low (increment is high).
- City has a contractual obligation to pay (can be court ordered similar to standard contract enforcement).
- Funds are separated into a designated account with oversight of the TIF provided by Crowe LLP.
- TIF revenue is a guaranteed stream because the TIF basis is low and increment is high (i.e. recurring yearly cash flow).
- If the City refuses payment, developer could request the courts to appoint a trustee to manage County increment disbursements.
- Illinois law does not allow municipalities to file for bankruptcy (i.e. the City cannot use bankruptcy to release its obligation).
Enterprise Zone
In January 2011, the Illinois Department of Commerce and Economic Opportunity expanded the boundaries of the Joliet Arsenal Enterprise Zone to include ELP 55. The Illinois Enterprise Zone Program is designed to stimulate economic growth and neighborhood revitalization. This is accomplished through state and local tax incentives, regulatory relief, and improved governmental services. Details of the benefits which may be available to Tenants include:
- Sales Tax Exemption - 100% exemption on sales tax for building materials, including any material considered “stuck” to the building; Items may be purchased anywhere in Illinois, not just within the sponsored area.
- Investment Tax Credit - 0.5% credit against the state income tax for investments in qualified property.
- EZ Machinery and Equipment Sales Tax Exemption - Exemption on the state sales tax on all tangible property that is consumed within the enterprise zone for manufacturing purposes.
- Utility Tax Exemption - 5% state tax exemption on gas, electricity, and the Illinois Commerce Commission 0.1% administrative charge and excise taxes on the act or privilege of originating or receiving telecommunications; local government exemptions on gas, electricity, and water may exist as well.
- Job Tax Credit - An employer or business is allowed a $500 credit per eligible employee hired in a given tax year; unused credits may be carried forward.
Foreign Trade Zone
ELP 55 features a Foreign Trade Zone (FTZ) which allows for special customs procedures to U.S. plants engaged in international trade-related activities. Duty-free treatment is accorded items that are processed in FTZs and then re-exported, and duty payment is deferred on items until they are brought out of the FTZ for sale in the U.S. market. There is no time limit on goods stored inside an FTZ and certain foreign and domestic merchandise held in FTZs may be exempted from state and local inventory taxes. This allows firms to minimize their costs while products are waiting to be shipped and helps to offset customs advantages available to overseas producers who compete with domestic industry.
A variety of activities can be conducted in a FTZ, including assembling, packaging, destroying, storing, cleaning, exhibiting, re-packing, distributing, sorting, grading, testing, labeling, repairing, combining with foreign or domestic content, or processing.
FOR MORE INFORMATION, PLEASE CONTACT:
JEFFREY J. KAPCHECK
Vice Chairman
P +1 630 573 7062
jeff.kapcheck@cbre.com
JASON LEV
Senior Vice President
P +1 847 706 4044
jason.lev@cbre.com
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