What Is Tax Increment Financing?
Tax Increment financing (TIF) is a statutory financing tool to promote economic development, redevelopment, and housing development in areas where it would not otherwise occur. A TIF authority, which could be a city, an entity created by a city, or an entity created by a county, “captures” the revenues generated by the increase in net tax capacity resulting from new development within a designated geographic area called a TIF district. The TIF authority uses the tax increments to finance public improvements and other qualifying costs related to the new development that generated the increase in net tax capacity.Additional information may be obtained from the following links:http://www.house.leg.state.mn.us/hrd/issinfo/sstif.htm or http://www.taxes.state.mn.us/taxes/property_tax_administrators/other_supporting_content/chapter13.
A municipal development program enabling a city to use the additional property taxes that a proposed development project would generate to finance land acquisition, demolition and other costs necessary for that development to occur. Usually the issuance of a bond is necessary to finance these up front costs. Bonds are repaid by the extra taxes that are generated by the new development and construction. The taxed captured to repay the bonds come from all the taxing districts that normally levy a tax on the property. Properties with the same market value, class and area will pay the same tax even if one is in a tax increment district and the other is not.
