Evanston officials, residents debate state tax incentive tied to Illinois House Bill 26 21

Julia Forgash, a Fourth Ward resident, told the Finance & Budget Committee she is worried the state tax incentive under Illinois House Bill 26 21 will shift costs to local taxpayers if developers pursue the program instead of following Evanston’s Inclusionary Housing Ordinance (IHO).

“My understanding is that according to House Bill 26 21, a developer qualifies for a property tax break according to the percentage of affordable housing units allotted,” Forgash said during public comment, adding that the tax incentives “are very high” and could leave the city “on the losing end of this deal.”

The committee discussion and multiple public speakers laid out competing concerns. Chris Oakley, an Evanston resident and licensed architect, urged more study and said the bill’s incentives may depress long-term property tax revenue for the city and schools while encouraging 20% affordable-unit proposals. Oakley warned that 10% IHO options that do not trigger the state incentive would preserve more property tax revenue for local governments.

Council member Kelly framed the issue as a choice between gaining on-site affordable units tied to the state incentive and preserving the city’s full share of property taxes. Kelly called for a pause on approving additional projects that would rely on the state incentive and proposed a joint review with housing and finance committees and affected taxing bodies to evaluate changes to the IHO.

Committee members and public commenters offered examples to underline the fiscal effects they feared and praised. A school board member who arrived late, John Martin, and other speakers cited modeling that showed tens of millions of dollars in foregone property tax revenue for large projects over multi-decade timeframes if developers receive the HB 26 21 incentive and provide 20% affordable units. Jack Kennedy, speaking during public comment on a related budget topic, urged better budget transparency as the committee weighs trade-offs.

City staff and the committee clarified that the state incentive operates by reducing the assessed value used to calculate property tax bills; the levy t hat the city and other local taxing bodies set is spread across the tax base rather than directly “given” away by the city. Committee members noted that developers can apply for the state program regardless of the city’s IHO, and that the law and related programs were originally designed with much larger markets in mind.

The committee did not take formal legislative action on the issue. Members agreed to place the topic on a forthcoming agenda and to discuss a possible subcommittee or joint review with the housing committee and school district representatives to study the fiscal trade-offs and policy options.

Why it matters: The HB 26 21 incentives are intended to encourage developers to include affordable units on-site by lowering assessed value for taxing purposes; however, in smaller jurisdictions like Evanston, committee members and speakers warned the incentives may produce significant reductions in property tax revenue for the city and overlapping taxing bodies while delivering on-site affordable units that sunset under program rules. The committee flagged potential downstream impacts on school district revenue and on current residents’ tax burdens.

Next steps: The committee asked staff to schedule further discussion, including cross-committee review and outreach to school districts and developers, so the city can quantify projected revenue effects and consider possible changes to the IHO or other local measures.