What’s a TIF?

And no, I don’t mean the file type extension (like .jpg, .pdf, .png, etc.). I mean the acronym, T.I.F., also known as tax increment financing. Sounds incredibly dull, doesn’t it? Well, TIF’s are important to know about because they are just one of the many building blocks that make up a community and allow development to happen. That means better buildings, communities and neighborhoods, which increases the value of your home if you happen to own property in an area that is improving.

Technically, TIF’s are a public financing method that is used as a subsidy in which municipalities can direct future tax revenue from a specific business or group of businesses toward a community economic development project. The physical area where the future taxes are to be directed from is referred to as a district. The goal of a TIF is to direct funding to underdeveloped, distressed, or partially abandoned areas where developers are not always as eager to spend money. New, TIF-funded projects in these types of areas often stimulate economic growth, inviting more developers and increasing the value of surrounding real estate.

Perhaps an obvious negative side-effect of establishing a TIF district is the issue of gentrification, in which property is renovated and improved and property values increase, resulting in displacement of small businesses and low-income families. Another issue is that it is often difficult to determine or define an area that is in need of the redevelopment a TIF can provide. How do we define what is “blighted” or deteriorating? And, even if we think we have a good definition of this, how do we establish boundary lines for the TIF district? Additionally, TIF’s can sometimes overlap areas where growth would have occurred anyway, making the subsidy seem unfair or misappropriated.

Though the use of TIF districts first began in California, 1952, they have been employed nationwide since then. There are over 100 TIF districts in Chicago, and city that provides many opportunities to examine how TIF’s work (and whether they work as intended). Here is a link to Chicago’s TIF website.

For a very good definition and discussion of TIF’s, the Lincoln Institute of Land Policy website is very informative.

What do you think of TIF districts? Helpful or harmful? Is there one in your town? 


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