A Possible Fiscal Tool for Cities?
Tax-increment financing (TIF) has enjoyed widespread popularity in the United States as a means of financing local infrastructure investments and improvements. The overall goal of tax-increment financing is to revitalize deteriorated sections of a city (designated as TIF districts) through public investment in a variety of physical infrastructure improvements, including land acquisitions, property rehabilitation, road improvements, sewage expansion and building construction. Under TIF policy, municipalities can freeze property taxes in the TIF district at the level that existed prior to any injection in government investment. That revenue continues to accrue back to the governing bodies in the district throughout the life cycle of the TIF (usually between 20-35 years). At the same time, the investment by the government is expected to increase the assessed real estate valuations in the district by stimulating new construction projects by the private sector, and any new tax revenues (i.e. the tax increment) are earmarked for the repayment and servicing of the debt. Once the debt is retired, the increment tax is folded back into regular municipal government coffers.