What is TIF?
Tax Increment Financing is a method of funding public investment in an area slated for redevelopment by capturing, for a time, all of the increased tax revenue that may result if the redevelopment stimulates private investment. As private investments add to the tax base within the redevelopment area, the increased tax revenues are placed in a special fund that can only be used for public purpose permitted by law in the TIF District.
TIF involves splitting property tax revenue generated from properties within the TIF District into two components:
Tax Increment Financing offers local governmentsa way to revitalize their communities by expandingtheir tax base, offsetting, in part, the federal andstate funds that are no longer available to themwithout imposing increased property taxes on thewhole community. (Source: ITIA)
How Does TIF Work?
- A Redevelopment Area is studied and established.
- A Project Redevelopment Plan is adopted.
- The Tax base becomes frozen at most recent equalized assessed value (EAV).
- The incremental tax (difference between frozen tax base and subsequent increases in EAV because of TIF) is collected and used for further improvements in the established redevelopment area.
- At TIF termination, all taxing bodies receive taxes on the full value of improved properties.
What are the effects of established redevelopment areas through TIF...
On the redevelopment areas?
- Addresses blighted conditions
- Equalized Assessed Valuation (EAV) Increases
- Encourages private investment
- Neutral in the short term
- In the long term, higher citywide EAV means less tax burden for individual homeowners
On other taxing bodies?
- Short term: modest loss in inflationary growth (if any) but continue to receive tax revenue on base EAV
- Long term: healthier tax base
How is a TIF area identified?
The is required to document a tleast five of the following factors that contribute toblight in order to designate an area for TIF:
- Illegal use of individual structures
- Structures below minimum codestandards
- Overcrowding of structures and community facilities & excessive land coverage
- Environmental Clean-Up
- Declining/Static EAV
- Excessive vacancies
- Lack of ventilation, light or sanitary facilities
- Inadequate utilities
- Deleterious land use or layout
- Lack of community planning