How do TIF Districts work?

July 30, 2020

As businesses locate in a TIF district and the area redevelops, the property values rise. Rather than simply collecting the increased taxes from TIF district properties, the city splits the property tax revenues into two streams. The first stream is set at the original amount of the property value before redevelopment, known as the “base rate.” This stream continues to go to the general fund.

The second stream contains the additional tax money generated by the higher property value, or the “tax increment.” This stream does not go to the city or schools, but is kept separate and used to pay for items identified in the TIF financial plan. TIF revenues can be used to fund construction, improvements, repairs, and rehabilitations within the district as well as economic development programs, economic development revolving loan funds, investment funds, services and equipment necessary for employment training, and specific uses associated with the district.

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