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CHAPTER 13 - ECONOMIC DEVELOPMENT AND SPECIAL PROGRAMS 13.01 - TAX INCREMENT FINANCING The Primary Purpose of TIF Tax increment financing (TIF) is a method of financing real estate development costs to promote development, redevelopment and housing in areas where it would not otherwise occur. TIF Authorities such as cities, city or county Mousing and Redevelopment Authorities, Port Authorities, Economic Development Authorities, or Rural Development Financing Authorities use TIF revenues to encourage developers to invest in new projects. These projects include constructing buildings or other private improvements, cleaning polluted areas, redeveloping areas that contain blight, or paying for public improvements such as streets, sidewalks, sewer and water, and similar improvements. The TIF Concept in Academic Terms Economic development tools such as TIF are often debated where proponents argue their merits as appropriate governmental activities in correcting market failures, while opponents object to the subsidies being granted. The key is often in the "but -for" evaluation, where proponents argue that development and the associated benefits would not occur but -for the use of the incentive, while opponents claim the development would occur regardless of the subsidy. Figures 1.3.01-1 through 13.01-3 illustrate these perspectives with regard to TIF. FIGURE13.01.1 THE CLASSIC EXAMPLE OF TIF A L U Declining value in blighted area TIF plan is enacted TIF activities induce an increase in valuation TIF terminated .' ;Difference between actual value and .:.:frozen value is the captured value Continued decline in Original value absent the use taxable of TIF value TIME Benefit to other taxing urisdictions "Zdr,/://77/77, TAX INCREMENT FINANCING REVISION DATE; NOVEMBER, 2010 13.01 - 1