Is that TIF costing me anything?
Published by Mark Von Nida on May 12th, 2008
By Mark
The idea behind a Tax Increment Finance district is to create an incentive for a developer to invest in a “distressed” area. One legal test for creation of a new district would be that the development would not occur “but for” TIF incentives.
The incentive is usually paid for with tax dollars from any incremental increase in property value after the development project. The property value of the distressed area is frozen for the purposes of determining the taxes for schools, cities and other taxing districts otherwise known as the base value. Property taxes are still paid but all monies generated above the base are used by the project.
If the development would not occur “but for” the TIF than how could the TIF be costing me anything?
The answer lies in captured growth within the increment. Absent the development, the property value would continue to grow because of inflation. However, the base value is frozen for the life of the project. This ultimately affects the tax rate of the cities, schools and other districts because the aggregate value is smaller with only the TIF’s base value included.
Tax rates are limited by state law but if the increment were included in the total before tax rates are calculated there is no question, rates would be lowered. One consideration is that often sales tax generated by a project offset property taxes in a city. Schools, park districts et al however do not benefit from sales tax revenue.
So much for an interesting post on TIFs. I’ll try again with some real life examples later. For a comprehensive report on this subject jump here.
Filed under County Issues
May 13th, 2008 at 11:44 am
Studies have shown the best incentive for attracting viable quality economic development that benefits all is overall lower tax rates. Otherwise, some win(developers and selective governments) and others lose( those not getting sales taxes or increases in the property values). Locally, there are so many examples of one city benefiting at the expense of the neighboring city. School districts raise taxes to cover the cost of lost revenue from a local TIF.
It is just not good public policy. The county boards should step in and put an end to TIF’S by way of their control of state and federal money for projects.