Tax increment financing
Tax Increment Financing, or TIF, is a tool for redevelopment and community improvement projects throughout the United States for more than half a century. With federal and state sources for redevelopment generally less available, TIF has become an often-used financing mechanism for municipalities. Similar or related approaches are used elsewhere in the world. See for example, Value capture.
What is tax increment financing?
TIF is a tool to use future gains in taxes to finance the current improvements that will create those gains. When a public project such as a road, school, or hazardous waste cleanup is carried out, there is an increase in the value of surrounding real estate, and often new investment (new or rehabilitated buildings, for example). This increased site value and investment creates more taxable property, which increases tax revenues. The increased tax revenues are the “tax increment”. Tax Increment Financing dedicates that increased revenue to finance debt issued to pay for the project. TIF is designed to channel funding toward improvements in distressed or underdeveloped areas where development would not otherwise occur. TIF creates funding for public projects that may otherwise be unaffordable to localities.
Today 49 states and the District of Columbia have enabling legislation for tax increment financing. Arizona is now the only state without a tax increment financing law. While some states, such as California and Illinois, have used TIF for decades, many others have only recently passed or amended state laws that allow them to use this tool.
* Arkansas (2000)
* Washington (2001)
* New Jersey (2002)
* Delaware (2003)
* Massachusetts (2003)
* Louisiana (2003)
* North Carolina (2005)
Since the 1970s, a reduction in federal funding for redevelopment-related activities including spending cuts, restrictions on tax-exempt bonds and an administrative transference of urban policy to local, lower-level governments, has led many cities to consider tax increment financing. State-imposed caps on municipal property tax collections and limits on the amounts and types of city expenditures have also caused local governments to adopt funding strategies like this.
The tax increment financing dispute
TIF districts are not without criticism. Although tax increment financing is one mechanism for local governments that does not rely on federal funds or an overall increase in municipal taxes, many question whether TIF districts actually serve their resident populations. TIF districts are often implemented in blighted, lower-rent, areas. As investment in an area increases, it is not uncommon for real-estate values to rise and for gentrification to occur.[1]
Currently, thousands of districts operate nationwide in the US, from small and mid-sized cities, such as Kenosha, Wisconsin, and Akron, Ohio to the State of California, which invented tax increment financing in 1952. California maintains hundreds of TIF districts and leads the nation in debt issued through tax increment financing.[citation needed]Chicago is another landmark location for TIF. The city runs 131 districts with tax receipts totaling upwards of $325 million per year[citation needed], or about one-third of the city’s total property tax revenue.
The Chicago Reader, a Chicago alternative newspaper published weekly, has published articles regarding tax increment financing districts in Chicago and in Cook County, Illinois written by staff writer Ben Joravsky. Joravsky’s articles are critical of tax increment financing districts as implemented in Chicago.
For examples of academic or interest group reports or papers on tax increment financing districts, see this entry’s External Links
Applications and administration
Cities use TIF to finance public infrastructure, land acquisition, demolition, utilities and planning costs, and other improvements including:
* Sewer expansion and repair
* Curb and sidewalk work
* Storm drainage
* Traffic control
* Street construction & expansion
* Street lighting
* Water supply
* Landscaping
* Park improvements
* Environmental remediation
* Bridge construction & repair
* Parking structures
State enabling legislation gives local governments the authority to designate tax increment financing districts. The district usually lasts 20-25 years, or enough time to pay back the bonds issued to fund the improvements. While structures vary, it is common to have a city government division (or quasi-public authority) assuming the administrative role. This entity is governed by a city council or appointed commission, which makes decisions about how and where the tool is applied.
Copyright: Wikipedia information about Tax increment financing– This article is licensed under the GNU Free Documentation License. It uses material from the
Wikipedia article "Tax increment financing". More from Wikipedia
What is tax increment financing?
TIF is a tool to use future gains in taxes to finance the current improvements that will create those gains. When a public project such as a road, school, or hazardous waste cleanup is carried out, there is an increase in the value of surrounding real estate, and often new investment (new or rehabilitated buildings, for example). This increased site value and investment creates more taxable property, which increases tax revenues. The increased tax revenues are the “tax increment”. Tax Increment Financing dedicates that increased revenue to finance debt issued to pay for the project. TIF is designed to channel funding toward improvements in distressed or underdeveloped areas where development would not otherwise occur. TIF creates funding for public projects that may otherwise be unaffordable to localities.
Today 49 states and the District of Columbia have enabling legislation for tax increment financing. Arizona is now the only state without a tax increment financing law. While some states, such as California and Illinois, have used TIF for decades, many others have only recently passed or amended state laws that allow them to use this tool.
* Arkansas (2000)
* Washington (2001)
* New Jersey (2002)
* Delaware (2003)
* Massachusetts (2003)
* Louisiana (2003)
* North Carolina (2005)
Since the 1970s, a reduction in federal funding for redevelopment-related activities including spending cuts, restrictions on tax-exempt bonds and an administrative transference of urban policy to local, lower-level governments, has led many cities to consider tax increment financing. State-imposed caps on municipal property tax collections and limits on the amounts and types of city expenditures have also caused local governments to adopt funding strategies like this.
The tax increment financing dispute
TIF districts are not without criticism. Although tax increment financing is one mechanism for local governments that does not rely on federal funds or an overall increase in municipal taxes, many question whether TIF districts actually serve their resident populations. TIF districts are often implemented in blighted, lower-rent, areas. As investment in an area increases, it is not uncommon for real-estate values to rise and for gentrification to occur.[1]
Currently, thousands of districts operate nationwide in the US, from small and mid-sized cities, such as Kenosha, Wisconsin, and Akron, Ohio to the State of California, which invented tax increment financing in 1952. California maintains hundreds of TIF districts and leads the nation in debt issued through tax increment financing.[citation needed]Chicago is another landmark location for TIF. The city runs 131 districts with tax receipts totaling upwards of $325 million per year[citation needed], or about one-third of the city’s total property tax revenue.
The Chicago Reader, a Chicago alternative newspaper published weekly, has published articles regarding tax increment financing districts in Chicago and in Cook County, Illinois written by staff writer Ben Joravsky. Joravsky’s articles are critical of tax increment financing districts as implemented in Chicago.
For examples of academic or interest group reports or papers on tax increment financing districts, see this entry’s External Links
Applications and administration
Cities use TIF to finance public infrastructure, land acquisition, demolition, utilities and planning costs, and other improvements including:
* Sewer expansion and repair
* Curb and sidewalk work
* Storm drainage
* Traffic control
* Street construction & expansion
* Street lighting
* Water supply
* Landscaping
* Park improvements
* Environmental remediation
* Bridge construction & repair
* Parking structures
State enabling legislation gives local governments the authority to designate tax increment financing districts. The district usually lasts 20-25 years, or enough time to pay back the bonds issued to fund the improvements. While structures vary, it is common to have a city government division (or quasi-public authority) assuming the administrative role. This entity is governed by a city council or appointed commission, which makes decisions about how and where the tool is applied.
Copyright: Wikipedia information about Tax increment financing– This article is licensed under the GNU Free Documentation License. It uses material from the
Wikipedia article "Tax increment financing". More from Wikipedia
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