TIF 101: Tax Increment Financing (TIF): How Does That Work?

You can get more content like by signing up for our newsletter at

Here’s a term you’ve probably heard in the news tax increment financing or tiff what is tiff why is it so controversial how does that work i’m matt molot with sterling commercial real estate advisors in part one of the series on tiff funding we’re going to go over the basics we’ll call it tiff 101 now before we get started it’s important to note that here at

Sterling cre we work on commercial sales and developments that involve tip funds from our experience we know tiff projects aren’t all good and they aren’t all bad we also know that the term tiff is pretty murky this series is meant to help clear up some of the confusion about tiff first by simplifying some of the concepts and then by looking at some local case

Studies first tip funds can only be spent in something called a tif district the boundary of districts like the ones in missoula as you can see here are established by local ordinances in general a city council or county commission creates the ordinance after gathering public input the technical term for what the local government body creates is an urban renewal

District urd or targeted economic development district ted instead inside of a urd or ted is where tif money can be applied tif districts urds or teds are often used interchangeably but refer to the same concept typically cities create the districts to help fund improvements to an area that is considered to be blighted which means it is in serious disrepair or

Lacks infrastructure when and where a tif can be applied depends on state and local walls montana wall says that tif funds can only be used to pay for specific things things like road widening and extensions installation of sidewalks street lighting curbs and gutters extending water sewer and broadband to areas of town that lack access are also common uses for

Tip funds so where does the money for tiff come from this is where it starts to get interesting and also where the controversy comes from all land owners in a tif district pay taxes based on the value of their property just like a residential home has taxes that are assessed depending on what the property is worth in a tif district the base value of properties

Are frozen for a period of time often between 20 and 30 years during this time the tax revenue from this base value will be distributed to all the usual sources you see on your tax bill things like schools parks and public safety tiff funds are generated from the difference between the value of an approved property and the frozen base value if big improvements

Are made on a building in a tif district then that building will have a higher value and therefore pays more taxes that’s the increment part of tax increment financing the incremental amount between the actual value of a property and that frozen in time amount with the tif district was put into place so that was a lot of info so i’ll try to sum up here on

One hand tiff funds can be allocated to a developer to improve a neighborhood that might be in desperate need of investment these incentives encourage redevelopment and improvements in areas where a project otherwise might not pencil out but on the other hand those same tif funds aren’t helping to support the day-to-day services in that same district schools

Public safety and other levies in the districts don’t get any of that additional tax revenue because it’s all going back into the tiff bucket so say a developer decides to build a new facility in a tif district how would they get tiff funds to help them expand the surrounding infrastructure whoever is making the improvements in a tiff district applies for the

Funds that application is then considered by the agency that stewards of tiff funds the redevelopment agency can choose to fund the full request deny it or just fund parts of the amount that was applied for in the next part of our series we’ll cover some more details on the mechanics behind tiff then later in the series we’ll cover case studies on projects that

Had little public opposition and others that were highly controversial thanks for watching how does that work you can get more content like this by clicking the link below to sign up for updates or by following sterling cre on facebook and linkedin thanks for watching you

Transcribed from video
TIF 101: Tax Increment Financing (TIF): How Does That Work? By Sterling Commercial Real Estate Advisors