Tax increment financing

Tax increment financing (TIF) is a public financing method that is used as a subsidy for redevelopment, infrastructure, and other community-improvement projects in many countries, including the United States. Similar or related value capture strategies are used around the world. Through the use of TIF, municipalities typically divert future property tax revenue increases from a defined area or district toward an economic development project or public improvement project in the community. The first TIF was used in California in 1952. By 2004, all 50 American States had authorized the use of TIF. The first TIF in Canada was used in 2007. As the use of TIFs increases elsewhere, in California, where they were first conceived, in 2011 Governor Jerry Brown enacted legislation which led to elimination of California’s nearly 400 redevelopment agencies that implemented TIFs, in response to California's Fiscal 2010 Emergency Proclamation thereby stopping the diversion of property tax revenues from public funding. The RDAs are appealing this decision. TIF subsidies are not appropriated directly from a city's budget, but the city incurs loss through foregone tax revenue.

Tax increment financing (TIF) subsidies, which are used for both publicly subsidized economic development and municipal projects, have provided the means for cities and counties to gain approval of redevelopment of blighted properties or public projects such as city halls, parks, libraries etc. The definition of blight has taken on a broad inclusion of nearly every type of land including farmland, which has given rise to much of the criticism. "

To provide the needed subsidy, the urban renewal district, or TIF district, is essentially always drawn around hundreds or thousands of acres of additional real estate (beyond the project site) to provide the needed borrowing capacity for the project or projects. The borrowing capacity is established by committing all normal yearly future real estate tax increases from every parcel in the TIF district (for 20–25 years, or more) along with the anticipated new tax revenue eventually coming from the project or projects themselves. If the projects are public improvements paying no real estate taxes, all of the repayment will come from the adjacent properties within the TIF district.

Although questioned, it is often presumed that even public improvements trigger gains in taxes above what occurs, or would have occurred in the district without the investment. In many jurisdictions yearly property tax increases are restricted and cannot exceed what would otherwise have occurred.

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