Institute of Planning

TIF Explained

Tax Increment Financing is a tool cities use to subsidize infrastructure or private development by borrowing against the future property tax increases that the development will allegedly generate.

How it Works

  1. City draws a TIF district boundary.
  2. The current tax revenue ("Base") is frozen. It continues going to schools, police, etc.
  3. City issues bonds to build infrastructure in the district.
  4. As property values rise, all new tax revenue ("Increment") goes to pay off the bonds, rather than general services.

The Danger

If the predicted development doesn't happen, or doesn't generate enough "Increment", the city is left holding the bag for the bond debt.

Furthermore, while the increment pays off the bond, the new development still requires city services (fire, police, sewer maintenance) which must be funded by the frozen base—starving the city budget.

Before authorizing a TIF for transit, utilize the Transit Project Multiplier Tool to estimate realistic value uplift. Or consider a more robust system like Land Value Tax.