Business Incentives
Helping businesses in Granite City grow and flourish is a major focus for Granite City. The City is dedicated to helping foster the region's economic base to improve the quality of life for its citizens and business community. Through many continuing programs and projects, the City creates opportunities for businesses to succeed.
Have a question about the incentives available for new or expanding businesses? Ask your question here.
City Business Incentives
Tax Increment Financing Districts
Business Districts
Enterprise Zone
Revolving Loan Program
Industrial Revenue Bonds
Industrial Development Bonds
Foreign Trade Zone #31
Illinois Business Incentives
Grants and Loans
Illinois EDGE Program
Start-Up Incentives
Tax Incentives
Business Incentives
Illinois Affordable Housing Tax Credits
Other Incentives
Federal Business Incentives
Small Business Loan Information
Financing Your Business
SBA Financial Assistance
Small Business Innovation Research Program (SBIR)
The Financing Options: All You Should Know Workbook
Investment Companies Program
Madison County Business Incentives
Madison County Economic Development Programs & Incentives Summary
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Granite City Business Incentives
Tax Increment Financing (TIF) Districts
Map of Granite City TIF Districts
Tax increment financing (TIF) is a planning and financing technique which allows a municipality to acquire and prepare property for development and make needed public improvements. TIF districts allow a municipality to capture the increase or growth in local property taxes resulting from a redevelopment project. This property tax increase or growth (the "tax increment") is captured and used by the municipality to help pay for the public costs associated with the redevelopment project.
Through TIF districts, the assessed valuation of real estate within a "blighted", "conservation" or "industrial park" project area is frozen. This base amount (taxes that are normally levied on real estate) continues to be disbursed to the taxing bodies serving the TIF area (e.g. county government, school district, and township). However, the growth in property tax revenues generated in the TIF, over and above the base amount, is diverted to a special tax allocation fund established by the municipality. The municipality can utilize the TIF funds for: demolition or rehabilitation of existing buildings; clearing and grading of land; construction costs of public infrastructure improvements and capital costs; bond financing costs incurred by the municipality; interest costs incurred by a redeveloper; planning, architectural, engineering, legal and other services; training costs of a business' employees within the redevelopment area; property assembly costs and occupant relocation costs; and staffing costs to implement and administer the redevelopment plan.
The municipality can continue to divert the tax increment until all costs related to the redevelopment project are paid, or until the TIF District expires, whichever comes first. TIF districts may also be extended seven years, for a maximum TIF life of 30 years. The municipality can use the tax increment revenue to pay for eligible project costs on a pay-as-received basis or to provide a basis for issuing tax-exempt bonds to pay for the costs.
Tax increment financing is locally initiated and administered. No Federal approval is required. Local units of government must: determine that the proposed TIF area is either "blighted", a "conservation" area, or an "industrial park conservation" area; develop a redevelopment plan for the area; structure a related financing plan for the redevelopment activities; conduct a public hearing on the proposed TIF designation of the area; establish a joint review board comprised of the various taxing bodies; formally enact an ordinance designating the redevelopment project area; approve a redevelopment plan and project; and adopt tax increment financing.
TIF Incentive Application Information: Start here if you want to apply for the Tax Increment Financing incentive. Call the Economic Development Director at (618)452.6213 if you have any questions.
Additional tax increment financing information available here
Granite City TIF Districts
There are currently five separate TIF Districts located within the City of Granite City. They are as follows:
1. Downtown TIF District
2. U.S. Steel TIF District
3. American Steel TIF District
4. Route 3 TIF District
5. Nameoki Commons TIF District
For a more detailed depiction of each TIF District’s boundaries, please see the TIF District Map.
Business Districts
Commercial areas designated as a ‘Business District’ are eligible to participate in a consumer tax revenue incentive to be paid out of increased sales taxes. This program allows for a sales tax increase in the district in an amount up to one percent. The ultimate incidence of liability for payment of the tax shall be upon the purchaser or user of goods or products purchased within the District, and nothing in this Plan shall be construed to impose a tax upon the occupation of selling or distributing goods or products within the District. This tax shall be in addition to any and all other taxes. The City will pledge and apply the consumer tax revenues to the reimbursement of development costs incurred by the developer pursuant to this plan and will issue consumer tax revenue notes evidencing the City’s obligation to do so.
Enterprise Zone
Enterprise Zone Map
An enterprise zone is a specific area designated by the State of Illinois on cooperation with a local government to receive various tax incentives and other benefits to stimulate economic activity and neighborhood revitalization. The Southwestern Madison County Enterprise Zone is a specific area that has been designated by the State of Illinois, Madison County, and participating municipalities to provide special tax incentives to encourage businesses to locate, expand, and retain their operations within the enterprise zone. The Southwestern Madison County Enterprise Zone is comprised of portions of Granite City, Madison, Venice, and parts of unincorporated Madison County. The following incentives are available within the enterprise zones:
Property Tax Abatement:
Property owners that improve or renovate industrial, commercial, or manufacturing property within the zones (and not within Tax Increment Financing Districts) are eligible to receive property tax abatement on the assessed value of the improvements. To receive this abatement, property owners must obtain a building permit and complete a Project Information Form describing the project and submit the form to the local zoning administrator before beginning construction.
Sales Tax Exemption:
A 6.25 percent State sales tax exemption for building materials used to improve or renovate real property within the Enterprise Zones is available to individuals or businesses that purchase their building materials from Illinois retailers or suppliers. To receive this sales tax exemption, the individual or business must provide the participating retailer with a form called a "Purchaser Statement" that identifies their renovation or improvement project as being within the Enterprise Zone and a certification from the Zone Administrator that the project is located within the Enterprise Zone.
Income Tax Deduction For Financial Institutions:
Banks are eligible for a special deduction from their Illinois corporate income tax return. Such institutions may deduct from their taxable income, an amount equal to the interest received from a loan for development in an enterprise zone.
Enterprise Zone Machinery and Equipment Exemption:
The Revenue Act 35 ILCS 120/1d-1f, as amended allows a business enterprise that is certified by DCEO, that either creates a minimum of 200 full-time equivalent jobs in Illinois; or retains a minimum of 2,000 full-time jobs in Illinois; or which retains 90% of the existing jobs, a 6.25 percent state sales tax exemption on all tangible personal property which is used or consumed within an enterprise zone in the process of manufacturing or assembly of tangible personal property for wholesale or retail sale or lease.
This sales tax exemption is applicable to the following:
1. Hand tools used to maintain, repair, or operate machinery and equipment;
2. Abrasives, acids, polishing compounds, or lubricants used in the manufacturing process;
3. Coolants, adhesives, solvents, or cleaners used to maintain, repair, or operate machinery;
4. Manufacturing fuels;
5. Protective clothing and safety equipment;
6. Fuels, chemicals, and catalysts used in the operation of pollution control facilities.
Utility Tax Exemption:
A state utility tax exemption on gas, electricity, and the Illinois Commerce Commission's administrative charge is available to businesses located in enterprise zones. Eligibility for this exemption is contingent upon a business making a $5 million investment which causes the creation of 200 full-time equivalent jobs in Illinois or an investment of $20 million for the retention of 1,000 full-time jobs in Illinois. The majority of the jobs created or retained must be located in the enterprise zone in which the investment occurs.
A business must complete an application to and be certified by DCEO to be eligible for the state utility tax exemption.
Investment Tax Credit:
A state investment tax credit of .5 percent is allowed to a taxpayer that invests in qualified property in an enterprise zone. Qualified properties include buildings, structural components of buildings, elevators, materials, tanks, boilers and major computer installations. Examples of non-qualifying properties include inventories, small personal computers, trademarks, typewriters, and other small, non-depreciable or intangible assets.
The tax credit is allowed for the tax year in which the property is placed in service, or, if the amount of the credit exceeds the tax liability for that year, the excess may be carried forward and applied to the tax liability of the five taxable years following the excess credit year. The credit must be applied to the earliest year for which there is a liability. If there is credit from more than one tax year that is available to offset a liability, the credit accruing first in time, is applied first.
Dividend Deduction:
Individuals, corporations, trusts and estates can deduct from their taxable earnings an amount equal to the dividends paid by a corporation that conducts substantially all of its operations in an enterprise zone.
Job Tax Credit:
Employers that operate businesses within the enterprise zone and expand their operations to hire at least five additional "economically disadvantaged or dislocated workers" are eligible to receive a $500 State tax credit for each eligible employee that they hire to work within the enterprise zone.
Interest Deductions on Loans:
Financial institutions may deduct from their State income tax an amount equal to the interest received from a loan for development in an enterprise zone. The loan must be secured by "qualified property" in an enterprise zone, and the business must be receiving an investment tax credit.
Corporate Contribution Deduction:
Allows corporations to make donations to designated zone organizations for projects approved by DCEO, and claim an income tax deduction at double the value of the contribution.
Enterprise Zone Financing Program:
Businesses located within enterprise zones may apply for Illinois Department of Commerce and Economic Opportunity (DCEO) participation loans to fund their new projects. Participation loans for 25% of a business’s project costs up to $750,000 are available at either fixed or variable rates that are priced 200 basis points below the Wall Street Journal Prime rate. DCEO will allow the participating financial institution to retain 50 basis points to cover the costs of servicing the loan or it may elect to pass along the 50 basis points to the borrower. DCEO’s term shall match that of the participating bank, but in no event shall DCEO funds be amortized longer than 10 years unless there is a balloon payment provision.
Ineligible uses of funds are debt refinancing and contingency funding. Eligible businesses include any for profit entity with less than 500 employees (or not dominant in its field) locating or expanding in an Enterprise Zone. There are no industry restrictions or job creation/retention requirements under this program. Participating financial institutions must enter into a Master Participation Agreement, which outlines all terms, and conditions of any loan participation between the financial institution and DCEO.
Additional information regarding enterprise zone financing available here.
CBD Revolving Loan Program
The CBD Revolving Loan Program is an incentive instituted by the City Council in an effort to help rehabilitate, repair and renovate existing buildings in the downtown central business district area. The Downtown Central Business Area is defined as the area encompassed by the Downtown TIF District. (See here for Downtown TIF/CBD boundary map).
Any interested developers may apply for a loan of up to $10,000 or 25% of the total projected cost of the rehabilitation, whichever is less. Each loan authorized under the revolving assistance loan program shall not exceed a three year term, and shall require monthly payment of interest and penalty, with an initial grace period not to exceed sixty days before debt service shall begin. The interest rate shall be three percent (3%) on the balance remaining from time to time unpaid; interest may be rebated by the City Council if the terms of the loan are faithfully honored and the full loan is repaid within three years.
Loans granted under this program may be used for the following: costs associated with a planned project for demolition, renovation, repair or remodeling of an existing commercial building, engineering, architectural or other professional fees associated with a planned project for an existing commercial building. For more details, please see Ordinance # 7858.
Industrial Revenue Bonds
The City has the authority to offer financing to manufacturing businesses through the use of tax-exempt industrial revenue bonds (IRBs). An IRB is a loan to a company to build or buy a facility or buy land and/or equipment. A key advantage of these bonds is that the effective interest rate is as low as 75% to 80% of the prime rate. The total amount of funding available per project varies.
Although the City issues the bonds, it does not itself make any loans to companies. Instead, the investor(s) buying the bond make the loan. The company must find its own purchaser and may even buy its own IRBs. Under IRB program guidelines, the City technically owns title to the facility built using IRBs and leases it to the company for up to 20 years. At the end of the term, the title is transferred to the company. Due to financing costs, however, IRBs are generally not recommended for projects costing less than $2 million.
In addition to the City, manufacturers can obtain Industrial Revenue Bonds through the Illinois Finance Authority. For more information about IFA’s IRB program, click here.
Industrial Development Bonds (Tax-exempt Revenue Bonds)
Industrial Development Bonds (IDBs) are a public financing alternative to bank loans for small to medium size manufacturers. An IDB is a bond issued by the City of Granite City in order to provide funds to a local business for the construction, equipping or improvement of a non-profit, exempt or manufacturing facility. This method of financing, which is dependent upon the revenue of the company to repay the bonds, and does not impact the debt limit of a community, is referred to as conduit financing.
What is a qualified facility?
Manufacturing
A qualified manufacturing business is a company engaged in a process which alters raw materials or adds value to raw materials. A qualified facility is any facility used in the manufacturing or production of tangible property (including the processing resulting in a change in the condition of such property).
Other
Other non-profit entities are those qualified under Section 501(c)(3) of the IRS Code (e.g. hospitals and nursing homes) while exempt facilities are those defined under Section 142(a) of the Code including industrial sewage and solid waste facilities.
What can be financed?
New Construction
Bond proceeds can be used to finance: construction of a facility; construction of an expansion to an existing facility; the purchase of land with some limitations; items subject to an allowance for depreciation (capital expenditures) with respect to the facility (production related equipment); certain costs of issuance.
Existing Facilities and Equipment
Bond proceeds can be used to purchase an existing facility; however, the building must be refurbished at a cost of at least 15% of the purchase price allocated to the building after deducting the fair market of the land portion being purchased. The renovation must be completed within a two-year period following bond closing. Used equipment can also be financed with bond proceeds provided that the cost of refurbishing the equipment equals at least 100% of the purchase price of the used equipment.
Ineligible Costs
Costs of issuance are limited to 2% of the bond financing. To the extent that costs of issuance exceed 2% of the bond issue, these costs must be paid from other sources. The use of bond financing must be tied directly to the construction or expansion of the facility. Consequently, neither inventory nor working capital can be financed with bond proceeds. Further, the IRS cites specific limitations as to the amount of ancillary space that can be incorporated in project costs. Ancillary spaces or costs must be evaluated on a project specific basis to determine eligibility and include such areas as executive offices, showrooms, warehouses, etc. Not more than 25% of the IDB proceeds can be used to finance ancillary manufacturing facilities nor can more than 25% of the proceeds be used to purchase land.
Refunding a Bond Issue
Existing revenue bonds can be refunded and/or combined with new monies for a planned capital addition to an existing facility. The refunded amount is exempt from a state volume cap limitation.
How to Qualify:
The Borrower must obtain a preliminary inducement resolution from the City where the facility is or will be located to receive initial approval of the project. The passage of an inducement resolution granting preliminary approval of the project indicates the good faith intent both of the Issuer as well as the Borrower to use bonds for the financing of the project. This is a critical step from the borrower’s perspective. In general, until the inducement is received, no contract for construction of a building or order for purchase of production equipment should be executed by the Borrower. Further, in the case of a contract to purchase either land or an existing building, an inducement resolution must be issued before the buyer can take title to the property. Upon passage of the inducement resolution, all eligible project costs incurred after that date are eligible for reimbursement of expenditures. The IDB may not be used to reimburse the borrower for any prior expenditures if the inducement resolution has not been passed at the appropriate time.
With respect to manufacturing IDBs, the proposed capital project cannot exceed $10 million at the specific project site or within the boundaries of the issuing jurisdiction during the period beginning three years prior to the issuance of the bonds and ending three years after the issuance of the bonds. Further, the company must not have expended more than $40 million in capital expenses at all of its facilities nationwide during the year of the borrowing. Practically speaking, IDBs are economically feasible from $1.0 to $9.5 million. The above limits do not apply to non-profit or exempt facilities.
In order to proceed with the borrowing, the City must obtain an allocation of the State of Illinois’ volume cap before bonds are issued. The City is issued an annual allocation based upon the population of the City. The allocation is issued at the beginning of January and must be issued by May 1st, or else it will be returned to the State. Arrangements for the bonds can be made up to a year prior to the time the City receives its allocation from the State.
Bond Maturity and Terms
The maturity and terms of the bonds will depend upon the economic life of the assets being financed and cannot exceed 120% of the expected weighted average economic life of the facilities being financed. Rates may be fixed or variable and generally range in time from seven days to 25 or 30 years.
As Borrowers or users of IDBs tend to be small non-rated companies, they often are required to secure a letter of credit from a bank in order to enhance their attractiveness for a public offering. The letter of credit would be drawn against in the event the Borrower is unable to meet a scheduled payment. The provision of repayment by the Borrower under letter of credit is subject to negotiation between the Borrower and the letter of credit issuer.
Official Statement and Disclosure
The Official Statement is a major tool used to market municipal securities. It is the primary document used by the rating agencies in assigning a rating, by insurance companies, by letter of credit banks in making a commitment for credit enhancement, and by the purchaser of the bonds in determining whether to buy the securities. For this reason, great care is given to the preparation of the Official Statement which provides complete disclosure about the Borrower, summarizes the salient features of the underlying documents and agreements which support the offering, and sets forth extensive information relating to the Borrower and the security for the financing.
The borrower should understand from the onset that their financial statements will be made public in the disclosure process. This may be a step that many privately held companies are unwilling to take. It is imperative that Borrowers weigh this disclosure issue early in the discussion process. However, if the bonds are privately placed, public disclosure of the borrower’s finances is not necessary.
Interest Rates
Interest rate structures will vary for each transaction. Depending upon the Borrower’s requirements, and those of the letter of credit provider, rates may be fixed for periods ranging from seven days to 25 or 30 years. Typically, a shorter term means a lower rate. It is critical to note that the Borrower must include annual letter of credit fees, costs of issuance and re-marketing fees, if applicable. Notwithstanding these added costs, however, tax-exempt industrial development bonds are almost always a significantly less costly form of borrowing than conventional loans.
Marketing the Bond
IDBs are generally sold by negotiated sale since many investment banking firms have requirements to be followed in the preparation of the terms of the lease or bond ordinance.
Advantages
1. The interest rate on an IDB generally averages 1.5% to 2.5% less per year than with a conventional loan.
2. The term of a bond issue is typically 15 to 20 years and in contrast to conventional financing is not subject to periodic renewal, additional points and/or closing expenses at 3 to 5-year intervals.
3. IDB financing may be available for 100% of the project.
4. In the case of new construction, the bond financing consolidates the construction and permanent financing in one transaction thereby eliminating duplicate closing costs.
5. The Borrower has three years in which to spend the proceeds of the bond issue on the capital project.
Disadvantages
1. Up front costs relating to the issuance of IDBs are generally greater than those of conventional loans and include the special bond counsel fee and other legal expenses for issuing the bonds.
Sample Resolution of Official Intent for a Corporate Borrower (.PDF)
Foreign Trade Zone #31
The Tri-City Regional Port District located at Granite City, Illinois is the grantee and license holder for General Purpose Foreign Trade Zone #31. Foreign Trade Zones are sites within the United States where foreign and domestic merchandise is generally considered to be in international commerce. Foreign or domestic merchandise may enter this enclave without a formal customs entry or the payment of custom duties or government excise taxes. Merchandise entering a zone may be: stored; tested; sampled; labeled; repackaged; displayed; repaired; manipulated; mixed; cleaned; assembled; manufactured; salvaged; destroyed or processed.
If the final product is exported from the USA, no U.S. Customs duty or excise tax is levied. If, however, the final product is imported into the U.S., Custom duty and excise taxes are due only at the time of transfer from the foreign trade zone and formal entry into the U.S. The duty paid is the lower of that applicable to the product itself or its component parts. Thus, foreign trade zones provide opportunities to realize customs duty savings. In addition, foreign trade zone procedures provide one of the most flexible methods of handling domestic and imported merchandise.
Manufacturing businesses use foreign trade zones to maintain the cost competitiveness of their U.S. based operations as compared with their foreign-based competitors. For a business, foreign trade zone status provides an opportunity to reduce certain operating costs associated with a U.S. operation that are avoided when operating from a foreign site. Should a business determine that foreign trade zone designation would assist its location and operation in Madison County, the Tri-City Regional Port District will work with the company to facilitate its use of the foreign trade zone.
Additional information regarding the Tri-City Regional Port District can be found at www.tricityport.com