The Effingham/Effingham County Enterprise Zone has expanded more in recent years than ever before, thanks to the uptick in residential development it spurred.
The most recent expansion totals about one square mile but is spread throughout the city of Effingham. A lot of the property annexed is areas that could be developed for housing, according to City Economic Development Director Todd Hull.
The annexed area, a substantial part of which is situated in the center of the city, stretches from Effingham Junior High School in the south to HSHS St. Anthony’s Memorial Hospital in the north, and extends over to Henrietta Street and Keller Drive. This includes the first phase of the Fayette Avenue reconstruction project, where houses have been demolished and vacant lots now stand.
“We’ve had several developers and contractors add some projects that they were looking to do, so they were waiting for the Enterprise Zone,” said Hull, adding that some have already begun.
For a project to be considered for annexation, it must meet specific criteria – a minimum of 10 single-family lots or four multifamily lots.
Hull noted there are multiple empty lots between the junior high and the hospital.
“Some projects are now going to go because it is in the Enterprise Zone, maybe that wouldn’t have,” he said.
The city started getting requests to annex property that was only two or three parcels. Even though much of the property annexed includes those parcels, they all have to be contiguous, meaning the property between them must also be included.
“We were trying to prepare for the future for areas that might be developed. This way, they’re ready to go,” said Hull.
The latest expansion follows a series of annexations in the last couple of years. Last year, Prairie Ace Estates Subdivision was annexed. In 2023, three neighborhoods were annexed along with property owned by South Central FS to construct a new feed store. Up until that point, only commercial and industrial properties were allowed in the zone used to stimulate economic growth through tax incentives.
“We didn’t really think about residential when we made them,” said city Economic Development Specialist Sasha Althoff, referring to the original boundaries.
The number of annexation requests started to increase after the residential component was added to the Enterprise Zone in 2023. The Enterprise Zone Board, which includes the city of Effingham, Effingham County, the village of Teutopolis, and 14 other taxing bodies within the zone boundary, applied in the fall of 2022 to add incentives for residential development. They felt the incentives could help local employers with their need for additional employees, since one of the barriers to hiring has been a lack of available housing.
The incentives include real estate tax abatement and building material sales tax exemption that can be used for remodeling, adding on or upgrading. By adding the incentives to the Enterprise Zone, board members hoped to ease the cost burden of building single-family and multifamily homes and to encourage development. They began to immediately see that happen after the first annexation of Stoneridge Subdivision.
“We had a couple of people say they were waiting and weren’t going to build because of costs, but because of the Enterprise Zone, they decided to move their project timeline up. So, I think it helped people as the prices of building materials were going up and the interest rates were up, and they were worried about doing something,” said Althoff. “This took a little bit of that off for them and helped them get over that hump of deciding to go ahead and develop.”
Hull said several developers have told him, “This is huge.”
“It’s one of the best things the city has ever done to add a residential component to the Enterprise Zone because it’s helping to spur housing development throughout the community,” he said.
Nine new residences were developed in the zone this year, including an eight- and nine-unit apartment complex. In addition, 10 homes and another eight-unit apartment building were constructed last year.
“Those are all we would like to think may not have happened without it. They might have, but I bet some of this happened now rather than later because of it,” said Althoff. “And I know there’s many more to come when we added the Hidden Hills Subdivision off of East Evergreen. That one is selling really well, and we’re getting new houses from there all the time.”
Althoff admitted some of them may be larger, higher-end homes, but the hope is people will move out of their house into a new house there.
“Then everyone will kind of take a step up in their housing, maybe get some diversity in the housing market,” she said.
While the zone has drawn a lot of residential interest, businesses are still taking advantage of the incentives, with 12 new commercial or industrial projects in the zone, ranging from a parking lot to new buildings. That, in turn, has spawned 35 new jobs so far this year. Althoff noted there are a lot more projects this year in the zone than last year, when 46 new jobs were created.
According to Althoff and Hull, Effingham was one of the earlier communities to add residential incentives to its zone — a lengthy process that involves submitting an application to the state and having all the taxing bodies agree to abate portions of their property taxes. That meant they had to attend many, many meetings.
“It’s like creating a new zone all over again. We had to go to 18 boards – sometimes we had to go twice,” said Hull.
And the state’s approval isn’t guaranteed.
“You never know how the state’s going to react to it. Because we really like things that have jobs attached to it, so when you do a lot of residential, it is a harder application, but I think that they’re also seeing now the struggle with housing. To have people working at these places, you got to have houses for them. So, it all kind of ties together,” said Althoff.
The Enterprise Zone already encompasses much of the city. However, there’s still room to add more property to it. While Althoff believes they have captured many areas that will see future development, Hull added they can’t anticipate everything. That could include the outskirts of the city and more areas in Teutopolis.
For now, Hull and Althoff are satisfied with the zone’s boundary.
“We did a lot of different areas we were made aware of – either developers or contractors considering or ready-to-do projects,” said Hull.
Still, Althoff does expect more annexations in the future. While the Enterprise Zone is set to expire in 2033, there is an opportunity to extend its life by another 10 years.
“Effingham’s lucky. We’re still moving along,” she said.