STAR Bonds

Under the Statewide Innovation Development and Economy Act, units of local government may issue Sales Tax and Revenue (STAR) bonds to assist with the development of approved projects that will have positive economic outcomes and generate new jobs within eligible areas of the state.

Units of local government must first establish, via resolution, a STAR bond district. These districts must be located in a contiguous area with at least 10,000 residents within a 5-mile radius that is located no more than 15 miles from either a state highway or federal interstate. At least 50% of this area must be located within an underserved area at the time the district plan is submitted.

After a STAR bond district is approved, units of local government may submit a STAR bond project. Projects are intended to bolster significant economic activity and job creation, while promoting major tourism, entertainment, and retail. The Act excludes projects related to professional sports stadiums.

The establishment of a STAR bond district and a New Opportunities for Vacation and Adventure (NOVA) district follow the same process listed above. However, a project in a standard STAR bond district requires a developer to make a minimum capital investment of $30 million on the project, have $60 million in projected annual gross sales, and be projected to create 300 new full-time jobs.

A project in a NOVA district requires a developer to make a minimum capital investment of $500 million, have $300 million in projected annual gross sales, and be projected to create 1,500 new full-time jobs.

Yes, the Act sets limitations on bonding for a project. These limits are dependent on which type of district these projects will be located in:

• Projects located in STAR bond districts are limited to 50% of total development costs or $75 million, which ever is less.
• Projects located in NOVA districts are limited to the lesser of 50% of the total development costs or $800 million, whichever is less.

There are limitations on the number of projects that may be located in each of the State's 10 economic development regions. These limitations are based upon population:

• Regions with a population of less than 600,000: 1 project per region
• Regions with a population of between 600,000 and 999,999: 3 projects per region
• Regions with a population of 1 million or more: 4 projects per region

Neither a STAR bond nor a NOVA district may be located, either entirely or partially, inside of a municipality with more than 2 million residents.

Only project costs incurred after the establishment of a STAR bond district may be eligible. These generally include:

• Pre-construction and design costs
• Land acquisition/demolition, clearing, and grading of land
• Improvements to public infrastructure
• Some employee training costs
• Other limited costs reasonably necessary for the success of the project

Project costs do not include:

• Construction costs on public buildings leased to project participants
• Moving expenses
• Property taxes
• General overhead/administrative costs

Interested municipalities and counties must meet the following deadlines:

• June 1, 2026: Notification of intent to establish STAR bond district submitted to the Illinois Department of Commerce and Economic Opportunity (DCEO) and the Illinois Department of Revenue (IDOR).  Submit your notification of intent to ceo.starbonds@illinois.gov.
• January 1, 2027: STAR bond district plan proposals and related required support documentation must be submitted to DCEO, IDOR and the Governor's Office of Management and Budget (GOMB).
• June 1, 2028: Proposed STAR bond project plans and related required support documentation must be submitted to DCEO, IDOR and GOMB. Work must commence within three years of State approval.

50% of the area within the proposed district must qualify as “underserved” as defined in statute.  The current map of underserved areas is included on DCEO’s website and is updated on approximately July 1st of each even-numbered year. Note that this does not require that all parts of the proposed development project be within an underserved area; the underserved requirement applies to the proposed district as a whole. Please refer to the definition of “eligible area” in the Statewide Innovation Development and Economy Act (SIDEA).

“Contiguous area” generally means a geographic area consisting of parcels of real property that share a common boundary or are connected by a continuous line of adjacency, without interruption by non-included parcels.  Applicants, however, are encouraged to submit districts that are compact, as this may improve a project’s chances of selection.  For purposes of determining whether an area is an “eligible area”, the area may be bisected by streets, highways, roads, alleys, railways, bike paths, streams, rivers, and other waterways and still be deemed contiguous.

No.  “Master developer” is defined in the Act as developer cooperating with a political subdivision to plan, develop, and implement a STAR bond project plan for a STAR bond district. The definition of “developer” in the SIDEA specifically excludes a “not-for-profit entity, political subdivision, or other agency or instrumentality of the State.”  This indicates that the master developer must be a private, for-profit entity.

The statute does not exclude this possibility, so a joint district is plausible.  However, such a district may be more complicated to administer and may present more barriers to implementation if the district is approved.  Please note that all municipalities involved would need to pass individual resolutions supporting such a district, and an intergovernmental agreement between the municipalities will be required as part of the application.

Yes. Local sales taxes administered by a municipality, county, or other unit of local government are included in the local sales tax increment. The portion of the local sales tax that is in excess of the aggregate local sales tax in the district for the same month in the base year, as determined by the respective local government is part of the local sales tax increment. The Department of Revenue only allocates local sales tax increment for local sales taxes administered by the Department.

Yes.  Local units of government may include additional revenue streams as a component of “Pledged STAR revenues.”  Such revenues can be used to pay debt service and/or project costs.

Perhaps.  The Act doesn’t dictate the terms of bond indentures local governments will enter into when selling STAR bonds.  Depending on the terms of the bond sales, this risk could be assumed by the local unit of government and/or bondholders.  Note that the degree of risk to bondholders may affect the marketability of the bonds.

For the State and local sales tax increments to be distributed beginning July 1 of any year, the certified copy of the resolution adopting the STAR bond project plan and the STAR bond district boundaries must be filed with IDOR on or before April 1 of that year. For a distribution beginning January 1, these documents must be filed with IDOR on or before October 1 of the prior year. Increments will be distributed monthly. Increments will be distributed to the political subdivision, and the political subdivision can utilize the increment and all other pledged STAR revenues to pay the issued STAR bonds. The State will retain 3% of the monthly State sales tax increment for administering the Act.