Source: Wichita Falls, TX
Tax Increment Financing (TIF) is a tool that gives cities, counties, or economic development authorities the ability to capture and use most of the increased local property tax revenues from new development within a defined geographic area for a specific period of time. Municipalities can dedicate these funds toward economic development by creating an urban renewal district, or a TIF district. These districts usually include multiple acres of real estate in a contiguous geographical area, which provides the borrowing capacity for the intended project. This is how it works: First, the value of all the properties inside of a TIF district is assessed, including the total amount of property tax generated by all those properties. Then, for the duration of the TIF district, the Authority collects a portion of the new increase in taxes generated by the development and uses them to pay specific development costs. In fact, TIF is not a reduction in taxes. Think about more of a process where the increase in taxes is being redirected to pay for eligible development expenses.
As a financial tool, TIF gives Authorities the opportunity to channel funding toward improvements in distressed parts of a jurisdiction where development might not otherwise occur. The increases in site value and investment generate increased tax revenues or a “tax increment" that can then be used to finance the costs associated with the development of these projects, including capital costs, financing, professional services, administration, relocation, organizational costs and costs associated with the creation and implementation of the TIF project.
In the City of Pittsburgh, the Urban Redevelopment Authority (URA) is the entity in charge of assessing the legal and financial qualifications of TIF districts. According to the URA, "currently there are 19 TIF’s in Pittsburgh, created for projects ranging from the massive Pittsburgh Technology Center to the Negley Avenue Giant Eagle. These projects have leveraged over $1.67 billion in private investment and created over 15,000 jobs in the City of Pittsburgh. The overall public investment is $304 million."
Civic Lab | Tax Increment Financing (TIF) Illumination Project
Ehlers Blog | What is Tax Increment Financing (TIF)?
Government Finance Officers Association | An Elected Official's Guide to Tax Increment Financing
Urban Land | Tax Increment Financing: Tweaking TIF for the 21st Century