• Tax Increment Financing
Tax Increment Financing (TIF) provides for the temporary
allocation to redevelopment or economic districts of increased tax
proceeds in an allocation area generated by increases in assessed
value. Thus, TIF permits cities, towns or counties to use increased
tax revenues stimulated by redevelopment or economic development
to pay for the capital improvements needed to induce the redevelopment
or economic development. The use of TIF is initiated by the declaration
of a tax allocation area by a county, city, or town Redevelopment
Commission. Property tax assessments are frozen at pre- development
levels in the allocation area. Municipal bonds are then issued to
finance the public improvements. As property values in the allocation
area increase as a result of new development, the increment in tax
revenues is used to meet debt service on issued bonds. Once the
bonds have been paid off, the taxes collected from the allocation
area are distributed to the remaining taxing districts. Bonds payable
from TIF may be used to finance the cost of redevelopment and the
construction of public improvements in the redevelopment area or
for projects that directly serve or benefit that area. Proceeds
may also be used for training. Bond amounts are determined by the
size of the project and the amount of the increment available. The
1992 General Assembly passed legislation allowing depreciable personal
property (machinery and equipment) to be used in computing the increment
in addition to real property.
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