What is Tax Increment Financing (TIF)?
Tax increment financing is a financing and development tool that permits local governments to capture future increases in property and other taxes generated by new development within a specified development area. The captured value of the increase in tax revenues is used to finance public improvements within the area in order to attract private investment. A tax increment is the difference between the amount of property tax generated before creation of a development area and the amount of property tax revenue generated after creation of a development area. Taxing districts continue to receive the base tax amount while tax increments are used to fund the public costs of development. Growth is used to pay for growth. TIF is primarily used to help local governments jumpstart improvements in declining or underperforming urban areas where development would not otherwise occur. The “but for” test is often used to describe TIF-funded projects. “But for” the TIF, funded public improvements, de
TIF is a financing tool used to attract development or redevelopment to areas that are currently not benefiting from private-sector investment. The area in which TIF is being used is known as a Tax Increment Reinvestment Zone (TIRZ). The City of San Antonio’s highest priority use of TIF is the revitalization of inner-city neighborhoods and commercial districts, particularly in those areas located inside Loop 410 and south of Highway 90. Tax Increment Reinvestment Zones act as economic stimuli to surrounding areas. By leveraging private investment for certain types of development within a targeted area, TIF can be used to finance new and/or enhanced public improvements and infrastructure. These improvements and infrastructure, in turn, attract additional private investment in surrounding areas. The TIF Mechanism A TIRZ is one of the few planning tools available to the City that contains a built-in mechanism to finance implementation. TIF allows future ad valorem and sales tax revenue to
CHICAGO — Tax Increment Financing (TIF) is one of the most popular economic development tools for cash-strapped municipalities. Widely used within the city and in the surrounding region, what are the pros and cons of such a tool? Do TIF districts create more risk than reward? Learn about TIF districts at the next American Planning Association’s Tuesdays at APA forum on October 9, 2007. The discussion begins at 5 p.m. at APA’s 122 S. Michigan Ave. conference center. The event is free and open to the public. Rachel Weber, associate professor in the Urban Planning and Policy Program at the University of Illinois at Chicago, will discuss the controversies surrounding TIF districts and the effects of TIF on overlapping taxing jurisdictions, such as school districts. TIF districts harness future property tax revenues to pay for current expenditures, enabling the municipal planning function at a time when other resources have dried up. Weber has written extensively on public finance, real est
Tax Increment Financing (TIF) is a unique mechanism that enables an urban renewal authority or board to use the net new tax revenues generated by projects within a designated urban renewal area to help finance future improvements. TIF is a new source of tax revenue, not an additional tax, that would not be available but for new investment. When a redevelopment project is being planned, the urban renewal authority or board analyzes how much additional property and/or sales taxes may be generated once it is completed. That “tax increment” then can be used by the urban renewal entity either to finance the issuance of bonds or to reimburse developers for a portion of their project costs. In either case, the new tax revenue that is created must be used for improvements that have a public benefit and that support the redevelopment effort, such as site clearance, streets, utilities, parks, the removal of hazardous materials or conditions, or site acquisition.