In Minneapolis, Detroit, Chicago and Milwaukee, officials have used a financing structure known as a TIF — tax incremental financing — to entice a new breed of urban pioneers: Small start-up companies needing capital and educated workers are thus rediscovering the advantages of center-city locations.
      In a TIF structure, a municipality or locality issues bonds to pay for upfront land acquisition, renovation or public infrastructure improvements for a site considered underdeveloped. Future tax revenues, generated by the increased property values, are used to pay back the bonds.
      Large corporations, too, are benefiting from the TIF structure — Medtronic is moving forward with first phase office construction of 820,000 sq. ft. (76,178 sq. m.) at an estimated US$65-million cost, in a TIF redevelopment district in Mounds View, Minn. The new R&D campus for the company's cardiac rhythm management division will eventually include 2 million sq. ft. (185,800 sq. m.) and 6,000 workers, with a final cost topping $100 million.
      In the heart of Chicago's gritty South Side, TIFs have sparked a revolution. Starting first with the re-imagination of some of the nation's most infamous public housing complexes as hip mixed-use developments that include retail and residential units, the changes are spreading across the street to Illinois Institute of Technology, and will soon spawn a state-of-the art technology park.
      IIT just opened a sparkling new incubator for fledgling companies trying to commercialize discoveries generated by faculty research. And soon, the tech park, with wet and dry lab capabilities, will open its doors to several growing companies, offering lease rates far lower than standard market rate for such sophisticated facilities. Companies will benefit from the creative cross-pollination of co-locating in an academic setting. Workers who move into the new residential area across the street will be able to walk to work and have all the necessary amenities nearby.
      First came TIF legislation to finance the residential redevelopment district, considered pivotal to the broader redevelopment plan.
      "No company would have located across the street from a crime-riddled public housing complex," explains IIT's vice president David Baker. Once that process took root, focus turned to the university. A third TIF will finance the tech park, to be housed in existing buildings designed by famed architect Mies van der Rohe. The buildings will be gutted and retro-fitted based on the needs of the tenants. "TIFs have been absolutely critical for the tech park as well," Baker says. "The city financing vastly reduces the cost to renovate for the developer."
      Combined with historic buildings tax credits, Maryland-based developer Townsend Capital LLC will receive approximately $20 million in incentives-about half of the total cost of the project.
      Elsewhere in the state, pharmaceutical production company Anderson Packaging of Rockford has been able to direct more cash to facilities expansion because the state is contributing nearly $300,000 to worker training. The grants are part of Gov. Rod Blagojevich's "Opportunity Returns" initiative that customizes incentive programs based on the different strengths of ten regions within the state. The company opened a new $7.5-million facility in December 2004 with sophisticated packaging equipment.
      "The grant allows us to do more training to keep our people ahead of the game," explains Anderson's Vicky Brown. "And this makes them more productive, helping us to stay cost competitive and to increase sales." She says that the company is currently planning additional expansions in Rockford.
      Meantime, Sara Lee Corp. has decided to consolidate several business segments into a single headquarters operation in Downers Grove, a suburb of Chicago. The company is moving businesses out of St. Louis and Cincinnati to streamline operations.