Tax Increment Financing is a controversial method to help redevelop older declining neighborhoods. It can be a very effective method of revitalizing older communities. It is a poorly understood tool, however, and often unfairly critized. TIF is not a 4 letter word.
What is Tax Increment Financing?
Without TIF benefits, a deteriorating area will not improve. Businesses do not sink capital into decaying areas 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.
Taxing bodies are often confused about the impact of TIF. But they are not harmed by a properly developed TIF. All taxing bodies continue to get the same tax revenue from the original real estate. Newly increased taxes from new development in the TIF are used to help the project. Eventually, when the TIF is complete, all taxing bodies will share in the new revenue.
The City of Peoria has developed 9 TIF Districts. The value of these areas was very low. The TIF helped these areas redevelop, and the value of these areas has gone up on average 23% each year. Nearby areas without the TIF have had little improvement in value. And of course the redeveloped areas created jobs and vitality.
Depending on the rate of taxation, taxes paid by the new development may equal about ½ of the total investment by the developer. The city can provide some or all of that incentive back to the developer to help make the project a reality.
More info at:
Illinois Tax Increment Financing Association http://www.illinois-tif.com/Warehouse District http://warehousedistrict.blogspot.com/