What is Tax Increment Financing?

Tax increment financing, or TIF, is a financial tool that cities use to incentivize development that otherwise would not be financially possible. The use of TIF allows for job creation, affordable housing, or redevelopment of blighted or contaminated sites.

How does TIF work?

TIF operates using the relationship between property values and taxes. When the city creates a TIF district, the assessed property values within a designated boundary are "frozen" at their current level. As development occurs, and property values naturally increase, the city "captures" the increased local property taxes (City, County, and School District) and distributes these dollars back to the developer to use for specific, pre-authorized purposes. For example, a developer may use the proceeds to fund public improvements such as infrastructure (streets, sewer, water, etc.), or to finance related environmental remediation such as asbestos removal. State property taxes and referendum taxes are not captured by TIF.

Do Falcon Heights residents pay taxes that are used by a TIF project?

No. Any taxes that are paid by a development continue to be applied in the same manner. Only new dollars generated by the project can be captured and redistributed to the project. In some cases, existing taxpayers may be relieved of future tax increases if public improvements that would have been funded through the general fund are done using proceeds from TIF.

What is a TIF district? 

A TIF district is a designated boundary in the City that is created in conjunction with a project that has requested TIF. Local property taxes within the boundary that increase over a determined period of time will be captured and redistributed to properties within the district for certain authorized uses.

What can TIF funds be used for?

TIF funds can only be used for land acquisition and physical improvements; funds cannot be used for loans to businesses, machinery, or equipment.