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SB 3236

MUNI CD-TIF SURPLUS FUNDS

104th Regular Session Introduced by Bill Cunningham

The bill tightens TIF surplus rules by capping distributions at 5%, limiting to once per 10 years, and tying payments to fiscal-year close and termination timing.

Rule 2-10 Committee/3rd Reading Deadline Established As May 22, 2026
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Bill Summary · SB 3236

Overview

SB 3236, introduced in the Illinois 104th General Assembly, would modify the Tax Increment Allocation Redevelopment Act within the Illinois Municipal Code. The bill sets tighter limits on distributing surplus funds from the special tax allocation fund (TAF) and changes timing and conditions for distribution. It also includes clarifying provisions related to the use of surplus funds and governance around obligations issued to finance redevelopment projects.

Main purpose and intent

  • To limit the amount and frequency of surplus funds distributed from the municipality’s special tax allocation fund.
  • To synchronize distribution timing with the municipality’s fiscal year and impose a long-enforcement window (no annual distributions; limited to once every 10 years and capped at 5% of surplus funds).
  • To ensure surplus funds are distributed in a manner that prioritizes debt repayment and statutory priorities, with remaining funds flowing to taxing districts, the state, and the municipality according to specified proportions.
  • To place a condition on distributions if a redevelopment project area’s termination date is extended beyond the 23rd year after designation.

Key provisions and changes

  • Surplus funds cap: Not more than 5% of all surplus funds in the special tax allocation fund may be distributed.
  • Distribution cadence: Surplus funds may be distributed not more than once every 10 years, and distributions are to occur within 180 days after the close of the municipality’s fiscal year.
  • Allocation of distributed funds: Distributions are to be paid by the municipal treasurer to the County Collector and then to the Department of Revenue and to the municipality in direct proportion to incremental revenue from:
    • State and municipal sources, but not exceeding the total incremental revenue received from each source.
    • After statewide and municipal shares are allocated, the County Collector distributes to taxing districts in the same manner as the most recent real property tax distributions.
  • Termination extension effect: If the redevelopment project area’s termination date goes beyond the 23rd calendar year, no surplus funds may be distributed after year 23 until termination.
  • Pledges and obligations: The bill reiterates and clarifies the ability of municipalities to pledge funds in the TAF for redevelopment costs, as well as the potential to issue bonds and the related statutory protections and procedures (including the absence of mandatory referendum for certain obligations).
  • Financial governance: Provides for the possibility of trustee involvement, creation of trust funds, and the security interests in funds backing bonds.
  • Dissolution and termination: Upon final payment of redevelopment costs and obligations, the municipality must dissolve the TAF for that project area and terminate the redevelopment designation, with notification to affected taxing districts prior to dissolution.

Who/what would be affected

  • Municipalities designated with redevelopment project areas using tax increment financing (TIF) proceeds.
  • Local taxing districts, including school districts and other special districts within the redevelopment area.
  • County Collectors and the Illinois Department of Revenue involved in distributing incremental tax revenues.
  • Municipalities issuing obligations (bonds) to finance redevelopment costs, and any trustees or custodians managing funds.

Procedural and timeline aspects

  • Effective date: Immediate upon enactment.
  • Distribution timing: Annual surplus is replaced with a 10-year distribution cycle, with distributions occurring within 180 days after fiscal year-end.
  • Termination considerations: If an area’s projected end extends past year 23, distributions halt after year 23 until termination.
  • Referrendum: Referendum requirements remain optional for certain debt issuances, as currently described in the statute.

This summary captures the bill’s substantive changes to surplus fund distributions, timing, and termination rules for TIF districts in Illinois.

Compiled from official sources — confirm details with the bill’s official record.

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