Tax Increment Financing, (TIF), is a public financing method that is used for subsidizing redevelopment, infrastructure and other community-improvement projects in many states. TIF is often designed to channel funding toward improvements in distressed, underdeveloped or underutilized parts of a jurisdiction where development might otherwise not occur.
TIF can help finance public infrastructure, land acquisition, demolition, utilities and planning costs, and other improvements including:
• Sewer expansion and repair
• Curb & sidewalk work
• Storm drainage
• Traffic control
• Street construction expansion
• Street lighting
• Water supply
• Park improvements Environmental remediation
• Bridge construction & repair
• Parking structures
Since the State was forced to greatly reduce their support for economic development, TIF allows municipalities to accept some of this responsibility. TIFs help local governments attract private development and new businesses. New businesses mean more jobs, more customers, and, in turn, more private investment.
TIF designation also helps retain existing businesses that might otherwise find more attractive options elsewhere. Sales tax revenue may also increase and jobs and additional investment (private and public) mean more money for the community. TIF also helps to overcome the extraordinary costs that often prevent development and private investment from occurring on certain properties due to previous environmental contamination. As a result, the TIF area can restore property, which in turn compels property values to increase, thereby expanding the tax base even further.
Without TIF benefits, a deteriorating area will not improve. Businesses will not sink capital into decaying or otherwise compromised areas. In a TIF district, those monies for necessary remediation or improvements are generated by the businesses, new and old attracted by the TIF benefits. Specifically, money for infrastructure improvements and other incentives comes from the growth in sales tax revenues, called the tax increment.
Arizona is the only state that TIF revenue is generated through sales taxes.
TIF’s create short and long term benefits for communities. TIF benefits include:
• No tax increases
• Increased property values
• Private investment and development
• New jobs
• Job retention
• Stronger, broader tax base
• Stronger economic base
• Locally controlled development with State oversight
• Incremental revenue is reinvested in the TIF district
• Stimulates investment outside TIF district boundaries