The Problems With Tax Increment Financing and How to Fix Them

Tax increment financing (TIF) districts are common in municipalities across the country. However, the economic development tool is also poorly understood and often the target of criticism.

2 minute read

November 13, 2018, 11:00 AM PST

By Camille Fink


Pilsen Chicago

David Wilson / Wikimedia Commons

Anthony Flint considers criticisms of tax increment financing (TIF) and proposals to reform it. In a designated TIF district, projected property tax revenue is calculated for the project as well as for surrounding properties, and those funds are sequestered. “The tax revenue can be used to fund public infrastructure, compensate private developers for their investments, or provide collateral for bonds,” says Flint.

Flint points to examples of TIF successes, but he says that numerous controversies continue to plague TIF projects. One of these issues is a lack of transparency, where TIF funds are sheltered from official oversight and the funds, say critics, are diverted to particular projects. Flint points to analysis by David Merriman, who suggests that states provide more stringent tracking and monitoring of TIF programs:

Model programs can be found in Wisconsin and Illinois, where state agencies track and report on total property tax revenues going to TIF districts, local governments are required to report detailed information related to revenues and their tax base, and nearly everything is published in online databases. All local governments would be well advised to provide extensive, easily accessible information about TIF use, revenues, and expenditures, [Merriman] says. 

Merriman also suggests that counties, school districts, and other overlying local governments be allowed to opt out of contributing resources to TIF districts. In addition, he encourages states to review “but for” clauses. The clauses are used as proof that development would not occur without TIF funds, but they are open to varied and loose interpretations.

Abandoning TIF is one option cities have moving forward. But, says Flint, many are not choosing that path:

Instead, they are redesigning and reimagining it, adding provisions to ensure that equity is a consideration, and building in options that allow school districts to maintain access to revenue. Some jurisdictions have experimented with community improvement districts (CIDs) as a kind of hybrid or alternative framework that corrals both sales tax and property tax revenues for a given development project.

Cities are also bundling TIF in private-sector partnerships with finance tools like credit enhancements or stabilization funds. These arrangements have become so common, says Flint, that TIF on its own is referred to as “naked TIF.”

Tuesday, October 30, 2018 in Lincoln Institute of Land Policy

portrait of professional woman

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching. Mary G., Urban Planner

I love the variety of courses, many practical, and all richly illustrated. They have inspired many ideas that I've applied in practice, and in my own teaching.

Mary G., Urban Planner

Cover CM Credits, Earn Certificates, Push Your Career Forward

Logo for Planetizen Federal Action Tracker with black and white image of U.S. Capitol with water ripple overlay.

Planetizen Federal Action Tracker

A weekly monitor of how Trump’s orders and actions are impacting planners and planning in America.

July 16, 2025 - Diana Ionescu

Green vintage Chicago streetcar from the 1940s parked at the Illinois Railroad Museum in 1988.

Chicago’s Ghost Rails

Just beneath the surface of the modern city lie the remnants of its expansive early 20th-century streetcar system.

July 13, 2025 - WTTV

Blue and silver Amtrak train with vibrant green and yellow foliage in background.

Amtrak Cutting Jobs, Funding to High-Speed Rail

The agency plans to cut 10 percent of its workforce and has confirmed it will not fund new high-speed rail projects.

July 14, 2025 - Smart Cities Dive

Worker in yellow safety vest and hard hat looks up at servers in data center.

Ohio Forces Data Centers to Prepay for Power

Utilities are calling on states to hold data center operators responsible for new energy demands to prevent leaving consumers on the hook for their bills.

July 18 - Inside Climate News

Former MARTA CEO Collie Greenwood standing in front of MARTA HQ with blurred MARTA sign visible in background.

MARTA CEO Steps Down Amid Citizenship Concerns

MARTA’s board announced Thursday that its chief, who is from Canada, is resigning due to questions about his immigration status.

July 18 - WABE

Rendering of proposed protected bikeway in Santa Clara, California.

Silicon Valley ‘Bike Superhighway’ Awarded $14M State Grant

A Caltrans grant brings the 10-mile Central Bikeway project connecting Santa Clara and East San Jose closer to fruition.

July 17 - San José Spotlight