TIF stands for Tax Increment Financing, a tool that can be used by an Urban Renewal Authority (URA) to help property owners improve their properties. TIF is a revenue stream that URAs can use to overcome barriers to development on a property.
Is TIF a new tax on existing residents? No.
Is TIF an extra tax that future residents will have to pay? No.
Well, where does the TIF revenue come from?
Let’s consider a simple example, a weedy field with piles of dumped debris. Let’s say that the property tax on this property is $1000 per year. If the URA removes the debris and helps a developer build a grocery store on the property, the value of the property increases. This also increases the amount of property tax collected on the property each year. Let’s say the property tax increases to $100,000 per year. The ‘tax increment’ is the amount of extra property tax paid by the grocery store, in this case $99,000. For 25 years after the property is improved, the URA collects the tax increment ($99,000). This $99,000 is used to pay off bonds issued by the URA to help make the improvements either a) until the bonds have been paid, or b) 25 years has elapsed.
Bonds!?! Will Erie taxpayers be responsible for paying the bonds if the URA is unable to? No.
URAs are government entities completely separate from municipal governments. Bonds issued by an URA are usually not guaranteed by a municipal government.
In a final note, some find TIF objectionable because the incremental property taxes goes into the URA, rather than being distributed to special districts (such as a school districts, libraries, fire districts, etc). There is an alternate way to think of this and, should you choose to not embrace the alternate perspective, a solution. The alternate perspective is that the development would not exist, except for the action of the URA. How can a library district reasonably be upset that artificially increased TIF revenue goes to the URA instead of the library district? Without the URA, the library district wouldn’t get such revenue anyway. The solution, should you choose to not embrace the above perspective, is that the URA can ‘pass through’ portions of the TIF to special districts.
I’m pretty favorable to passing TIF through to the special districts, though this will lessen the size of the barriers our URA will be able to help property owners overcome.
Popularity: 1% [?]