Tax Increment Financing
Tax increment financing (TIF) is a public financing tool that local municipalities use to incentivize private development in certain areas within their jurisdiction called “project areas.” Project areas are created by municipal/city redevelopment agencies through the adoption of an ordinance or resolution by the local governing body or city council.
After a project area is created, the redevelopment agency that created the project area is entitled to receive all or a portion of the tax increment dollars generated from the project area for a specified period of time (usually 15 to 20 years). Tax increment dollars are property tax dollars
received above and beyond an established baseline level of property taxes—typically, the level of property taxes generated from the project area prior to creation of the project area. The redevelopment agency can then use the tax increment dollars it collects from the project area to incentivize
development within the project area, which typically increases property values and, in turn, the total amount of property tax revenues generated from the project area.
After expiration of the tax increment collection period, the tax increment dollars that previously flowed to the redevelopment agency will flow to the taxing entities that levy the property taxes within the project area. In most cases, taxing entities receive more property tax revenues
annually following expiration of the tax increment collection period than before as property values are likely to have increased significantly through the redevelopment process.
Redevelopment projects are commonly used for land purchases, installing infrastructure, financial incentive agreements, property tax rebates, and more.