Legal Definitions - tax-increment financing

Tax-increment financing (TIF) is a method used by local governments to fund commercial developments. It involves issuing bonds to cover the initial costs of acquiring land and other expenses. The additional property taxes generated by the new development are then used to pay off the debt.

For example, a city might use TIF to finance the construction of a new shopping center. The city would issue bonds to cover the cost of buying the land and building the center. As the shopping center generates more property taxes, those taxes would be used to pay off the bonds.

Another example of TIF is a city using it to fund the redevelopment of a blighted area. The city would issue bonds to cover the cost of acquiring and demolishing the existing buildings. As new developments are built in the area, the additional property taxes generated would be used to pay off the bonds.

TIF can be a controversial method of financing, as some argue that it diverts tax revenue away from other public services. However, proponents argue that it can be an effective way to stimulate economic growth and revitalize struggling areas.