Tax Increment Financing (TIF)

Purpose

Tax Increment Financing (TIF) is a financing tool that is available to all communities in the State of Illinois, as well as all communities in all but three states (Arizona, Delaware, and North Carolina) in the United States. TIFs help local governments restore their most run-down areas, or jump-start economically sluggish parts of town. With this tool, financially strapped local governments can make improvements they need, like new roads or sewers, and provide incentives to attract businesses, without tapping into general funds or raising taxes.

Funding

Without TIF benefits, a deteriorating area will not improve. Businesses are reluctant to sink capital into a lagging area, and most local governments cannot afford the needed costly improvements without raising taxes. But in a TIF district, dollars for improvements are generated by businesses, new and old, attracted by the TIF benefits. Specifically, money for infrastructure improvements and other incentives comes from the growth in property tax revenues – the tax increment. The TIF District does not raise property taxes. The TIF sets aside property tax revenue increases resulting from property improvements, and normal Equalized Assessed Value (EAV) growth. Any tax revenue generated from the increased EAV within the boundaries of the TIF district can be used to fund improvements for the life of the TIF, usually 23 years.

What is TIF?

What is Tax Increment Financing (TIF)? Tax Increment Financing (TIF) is a financing tool that is available to all communities in the State of Illinois as well as all communities in all but three states, (Arizona, Delaware and North Carolina) in the United States. TIFs help local governments restore their most run-down areas or jumpstart economically sluggish parts of town. With this tool, financially strapped local governments can make improvements they need, like new roads or sewers, and provide incentives to attract new businesses, without tapping into general funds or raising taxes.

Without TIF benefits, a deteriorating area will unlikely improve. Businesses are reluctant to sink capital into a lagging area and most local governments cannot afford the needed costly improvements without raising taxes. But in a TIF district, dollars for improvements are generated by businesses new and old attracted by the TIF benefits. Specifically, money for infrastructure improvements and other incentives comes from the growth in property tax revenues the tax increment. The TIF District does not raise property taxes. The TIF sets aside property tax revenue increases resulting from property improvements and normal Equalized Assessed Value (EAV) growth. Any tax revenue generated from the increased EAV within the boundaries of the TIF district can be used to fund improvements for the life of the TIF, usually 23 years.

Source: Illinois Tax Increment Association. FAQs ILLINOIS-TIF.COM