Tax Increment Financing, Explained

Benjamin Schneider writes a CityLab University explainer for Tax Increment Financing(TIF), a controversial revenue generation mechanism implemented in some parts of the country in various forms.

This mechanism for financing redevelopment is a powerful and controversial force in American urbanism. Every state except Arizona currently allows it, as does the District of Columbia, and it has become the most popular incentive tool for economic development in the United States as the federal government has decreased its urban development spending. TIF plays a role in megaprojects such as Chicago’s Lincoln Yards and Amazon’s HQ2 in Arlington, Virginia, as well as in smaller-scale neighborhood improvements, affordable housing, and transit projects.

Schneider also notes the controversy and debate surrounding TIF:

Depending on the specific project, and whom you ask about it, TIF is an essential mechanism for cities to stimulate much-needed economic development and revitalize neighborhoods at no cost to taxpayers, or it’s an opaque developer giveaway that puts a strain on city services without providing much public benefit.

The article includes a lot more detail by way of illuminating the concept. For additional reading after completing the CityLab article, see also a reference to a recent case study in Vermont and a report written about Tax Increment Financing by the Lincoln Institute of Land Policy in September 2018.