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In the News

CAPCOG can help: Tax increment finance districts

Thursday, August 08, 2013

When understood and properly used, tax increment finance districts - also known as "tax increment reinvestment zones” - can be a valuable tool for community and economic development.

TIFs work by having one or more taxing jurisdictions — a city, county or hospital district, for example — collectively commit to setting aside property taxes generated within a selected area or district in excess of the amount currently received. Instead of going to the general fund, this extra revenue — the “increment” — is set aside for direct reinvestment into the TIF district in the form of public infrastructure improvements.

Despite common misconception, a TIF doesn’t involve a tax increase. The tax rate remains the same, but any additional tax revenue produced by an increase in property values within the district helps fund infrastructure improvements and other public investments.

> Explore CAPCOG's Economic Development Program

TIFs serve to fund public improvements in areas otherwise unable to support new development without the improvements. In this way, TIFs are often used to revitalize blighted areas, but they have a fairly wide range of potential applications. Using the added or — through the use of bonds — future tax revenue produced by new development within the district, TIFs can pay for water and sewer lines, pedestrian amenities, parking garages, infrastructure for transit-oriented development and much more. TIFs have even been used to lease parking for free public use on nights and weekends.

A simple pay-as-you-go TIF could involve waiting for enough development along a particular road to then apply the added property tax value generated to improvements along that road, ultimately attracting additional development, and so on. Sometimes TIFs are used to support the issuance of bonds that can fund upfront the infrastructure needed to support a specific development project.

> Learn more about TIFs with CAPCOG's Michael Hennig

At the end of the life of a TIF, the district is formally dissolved and all taxes over and above the original base value of the district are once again given to each respective taxing jurisdiction. When successful, this leads to a larger tax base for these jurisdictions. In addition to the larger tax base, the retired TIF district is now equipped with new infrastructure and development that can serve as assets for future community and economic development.

Tax increment finance districts are versatile, so it’s important to develop a plan for incorporating a given TIF within the target area’s broader strategy. A good place to start? Collaborating with the Capital Area Council of Governments. In addition to its team of professionals who can help create a TIF, CAPCOG offers sophisticated planning tools that can help identify an area’s development potential.

> Discover economic trends with CAPCOG's Data Points blog

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