Tips for TIFs: Policies for Neighborhood Tax Increment Financing Districts

Abstract

The research team investigated Tax Increment Financing (TIF), which can often help cities address critical needs to revitalize neighborhoods. Nevertheless, how planners and policy-makers define “neighborhood,” how they construct state-enabling statutes, and how local governments actually apply TIF may determine the success of Tax Increment Financing. A TIF designation should attract growth, it should be used in limited areas for limited durations, and it must include citizen-based planning. If a neighborhood is to receive a TIF designation, slow growth in taxable values might be more appropriate than designating the neighborhood as “physical blight.” Determining which revenue streams are eligible for capture is perhaps the most significant issue in financing. If a TIF district captures all property tax increments, schools and other public associations will be disadvantaged. In contrast, limiting a TIF district's tax base to the general revenues of municipal government will substantially limit the outcomes of a TIF designation. In designating TIF districts, planners and policy-makers must balance assessments of need with investment potential. Finally, the success of neighborhood TIFs depends on planners to anticipate private investment increases on property values to generate funds for planned improvements. The initial characteristics of a TIF district often influence the amount of investment attracted. Municipal planners and policymakers must balance citywide and neighborhood needs to avoid creating multiple tax jurisdictions as “have” and “have not” neighborhoods.

Keywords:

• Tax Increment Financing
• TIF
• property tax
• citizen-based planning
• neighborhood
• urban planning
• taxable values
• municipal government revenues
• multiple tax jurisdictions