Tax Increment Financing (TIF) provides the opportunity to leverage limited public financing of public infrastructure (i.e roads, sewers and utilities) and site preparation in order to attract private investment. It encourages the development of certain projects that are in the public interest that would otherwise be too cost-prohibitive to undertake.
Tax increment is the difference between the amount of property tax revenue generated prior to the new development and the amount of property tax revenue generated after the improvements are made. A special obligation bond is issued based upon the expectation of increased real property taxes. Proceeds from the sale of the TIF Bonds, and not taxpayer dollars, are used to pay for specific project improvements. A special fund is created into which all “incremental” real property taxes are placed. Withdrawals are made from this special fund to cover debt payments on the TIF Bonds. TIFs are specifically structured so that the City’s general fund revenues are not used and raising local property taxes is not required.