Northwest Illinois Development Alliance

City of Freeport, Illinois

Enterprise Zone Fact Sheet

The City of Freeport was a host government that applied for Enterprise Zone status approximately 13 years ago. Since that time, that enterprise zone has expanded to include the governments of the Village of Hanover, Jo Daviess County, and Stephenson County. This expanded zone is entitled the Freeport/Stephenson County Enterprise Zone. The following are a list of frequently asked questions and corresponding answers about State of Illinois Enterprise Zones in general. I have also inserted some additional information specific to the City of Freeport in these "frequently asked questions". These should be helpful in trying to understand how enterprise zones work.

1. What is a State of Illinois Enterprise Zone?

In 1982, the Illinois General Assembly adopted legislation creating 15 enterprise zones throughout the state. Since the number was limited to just 15, those units of local government that sought to have enterprise zone status competitively applied for designation as one of these enterprise zones. The program proved to be so popular that the State Legislature had increased that number to 93 zones by 1993. Unlike TIF districts which are unlimited as to the number that can be created (as of today there are 810 in 75 counties throughout the State of Illinois), an enterprise zone "slot" must be created specifically by state legislation and applied for competitively. TIF districts can be created at the will of any municipality in an area that qualifies under the definition of the law.

Specifically, an enterprise zone is a designated area within the State of Illinois that has been identified as meeting certain distress criteria relating to tax base, housing opportunities, and job opportunities that are not competitive with the balance of the state. Because of such identified distress criteria, the State Legislature allows for certain incentives to automatically inure to any business or residential development that is located within the defined territory of the enterprise zone. If a project or building can legally be built within the zone, the owners of such projects or buildings automatically qualify for those enterprise zone benefits for which they are eligible. TIF districts, on the other hand, require a negotiated written agreement adopted by the governing body of the host municipality before any benefits can be realized by the business. Consequently, the statement is often made that benefits within an enterprise zone are objective (everybody automatically qualifies), whereas, benefits within a TIF District are subjective (let's make a deal!).

2. What benefits are available within the Freeport/Stephenson County Enterprise Zone?

Every Enterprise Zone in the State of Illinois has two different sets of incentives, those that are automatic through the State, and those which are provided for by local governments that participate in the zone. Those benefits that are provided for by the State of Illinois are the following:

A-Sales Tax Waiver on building materials, assuming the local municipality also voted to waive its 1% of this tax.

B- Investment Tax Credit-the regular 1/2 of 1% Investment Tax Credit against state income tax for any depreciable assets put into service by business is doubled in an enterprise zone. Furthermore, it is tripled if during the same income tax cycle the business increases its overall employment by at least 1%.

C- Jobs Tax Credit-any business hiring an individual who has been laid off from another job receives a $500 credit against state income tax once that individual has been on the job at least six months. This also requires that at least five employees are hired under this category.

D- State Utility Tax Waiver-large employers, that is, those creating at least 200 new jobs or retaining at least 1000 jobs, can file for a waiver of state utility tax for all utilities consumed.

E-Manufacturing, Machinery & Equipment Sales Tax Waiver-similar to the Utility Tax Waiver, larger employers creating 200 jobs or retaining at least 2000 jobs can file for a waiver of sales tax on any manufacturing materials, machinery or equipment that is not currently exempt from sales tax.

Generally, the following are business incentives that are provided for by local units of government:

A- Property Tax Abatement-all units of local government have to individually vote upon whether to provide for the property tax abatement as an automatic part of an enterprise zone incentive package. Such abatements can be in place for up to 20 years or the life of the zone. The total amount of abated taxes is unlimited under the Enterprise Zone provision.

B- Waiver of Local Sales and Utility Taxes-similar to the state abatements, the local municipality or county can vote to abate or waive locally collected sales or utility taxes.

C- Building Permit Waiver-the host municipality or county can vote to waive any or all of the fees normally associated with the issuance of a building permit.

D- Any Taxes of General Applicability-any taxes levied under power of the host municipality or county can be waived within an enterprise zone. These taxes can include food and beverage tax, real estate transfer tax, business licenses, hotel/motel tax, etc.

3. How long is an enterprise zone in place for?

From the initial creation of a new zone, it is put in place for a twenty-year period. Recent legislation has been adopted that allows for every enterprise zone to extend that life by an additional 10 years. The Freeport/Stephenson County Enterprise Zone was put in place on March 1, 1990. No extension has yet been applied for this zone.

4. Who administers the Freeport/Stephenson County Enterprise Zone?

Technically, there are four units of local government that oversee the zone. They have delegated representatives to serve on the Enterprise Zone Advisory Committee that oversees the regular operation of the zone. On a daily basis, the zone has a designated Zone Administrator. That individual is Ron Kane, Stephenson County Assessor, for the City of Freeport. His office, or the Freeport Area Economic Development Foundation office, can handle any questions on administration of or implementation of the zone.

5. Are there any direct expenses involved with accessing zone benefits?

Yes, the Enterprise Zone Advisory Committee put in place last year an application process and fee. These are required to be filed prior to receiving any zone benefits. The fee is based on 1/4 of 1% of the value of the project. Since building permit fees are waived, this zone application fee generally runs less than 1/4 cost of the normal building permit fee.

6. Can you have Enterprise Zone overlap with a TIF District?

Yes, in fact the downtown TIF District overlaps with the Freeport/Stephenson County Enterprise Zone. All benefits realized in the enterprise zone are available except the property tax abatement portion. State law requires that a municipality make it clear that either the TIF District or property tax abatement take precedence, but both cannot be put in place simultaneously. Consequently, the Freeport downtown TIF District waives the property tax abatement benefit of the enterprise zone. If the municipality truly desires the project, a much more lucrative property tax "recapture" can be structured with a TIF District while simultaneously allowing for other enterprise zone benefits to be implemented.

7. What are the phone numbers to contact someone for more information on a project specific basis?

1. Ron Kane
Zone Administrator
Stephenson County Court House
15 N. Galena Avenue
Freeport, Il. 61032
(815) 235-8260

2. Cheryl Kneubuehl
Executive Director
Freeport Area Economic Development Foundation
27 W. Stephenson Street
Freeport, Il. 61032
(815) 233-1356

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