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Basic Construction Business
Practices
Timely articles covering the most
pressing issues facing construction firms in the Midwest
The Basics of Tax Increment Financing
James W. Grice
 Tax Increment Financing can be a tool that allows great flexibility
with regard to funding.
What exactly is Tax Increment Financing (TIF)? As basically as
possible, TIF can be defined as a development tool that helps
revitalize areas. TIF does this by eliminating unfavorable
conditions as well as enacting measures that encourage private
investment.
A tax increment is the difference between the amount of property
taxes collected before and after a district is designated as TIF
eligible.
Why is TIF of interest to a construction owner or developer? Because
TIF helps facilitate development. A municipality involved in TIF
agrees to pay costs or perform certain actions as an incentive to
make the municipality a TIF district, which is attractive to private
developers.
Activities that a municipality might engage in may include
construction of public improvements, relocation, demolition of
buildings, developing planning studies and even the rehabilitation
of existing structures. It also may include construction of new
facilities.
Projects eligible for TIF generally must meet certain criteria,
including the following:
§ Project should be located in a blighted area, so that the project
is deemed necessary in order to eliminate the blight conditions.
§ Project must be located in TIF district and must meet requirements
of TIF law.
§ Project must be intended recipient of any TIF bonds.
§ Applicants must be able to demonstrate that the revenues to be
received from TIF project will offset the debt incurred from the
project.
Areas that generally qualify for TIF include areas that demonstrate
conditions of blight. These areas generally include:
§ Abandoned buildings
§ Underutilized industrial and commercial buildings
§ Underutilized or abandoned military installations
§ Mining sites
§ Undeveloped sites that have been planned or zoned for development
without an existing municipal plan
§ Infrastructure and environmental projects for industrial
enterprises, hospitals and convention centers
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