TIF Funding 101 (& How it Helps)
Tax increment financing (TIF) is defined as a public financing method that is used to help bring on improvement redevelopment, infrastructure, and other community-improvement projects.
Sounds simple, right? Not quite…but we’ll give explaining it a shot!
Tax increment financing or “TIF” is one of those government terms that is equal parts confusing as it is important. Let’s try to simplify what TIF exactly means.
Let’s say you are running a City. One problem you are facing is one of your districts is run-down and in need of repair. As a City, you have limited resources to help this district out. You need help in order to improve this district before it becomes a ghost town.
When a City’s district is ruled as “blighted” or in a position where it wouldn’t attract private investment (business, shops, restaurants, etc.) without government help, you can ask to have that district be labeled a Tax increment district or TID. What that means is basically any newly generated or “incremental” tax value is set aside only for projects that encourage investment in the district. So, if your building has a broken roof, the tax dollars all go to the same place, but if you fix the roof the new incremental value goes towards improving the district.
Let’s look at a perfect example: Marshfield’s downtown TID or TID#4. Before got approved to become a TID, it needed a lot of help. As with many downtown districts in the state, things were starting to look bleak. The City of Marshfield labeled this district a TID so it could collect monies to help fund improvements in that district.
With those monies, the City could improve many aspects of Marshfield’s downtown. (Queue inspirational montage.)
Now (as many would agree) the district looks great… Businesses are doing better, infrastructure has improved, and new life has been brought to this area. Now that those updates are done they can focus on other areas of improvement. HOWEVER, the TIF money can only be used in the highlighted blue area.
The question now is: “How do we maximize the effect of the money we have left in this area?”
Keep in mind; the money can ONLY be used to improve the downtown area in blue above.
Well, one idea is the 200-block community square. This project is a public/private partnership with City and private donations. $250,000 of TIF money was used for demolition of the former News-Herald building and preparation of the site for redevelopment of this new square.
This shows how the City is getting a really good deal. The point is to keep people that are already in the downtown… downtown. The idea is that if you’re in the downtown for recreation, you may also want to shop and eat in the downtown.
Keeping our money local and funding “mom and pop” shops is essential for keeping our downtown as vibrant as it is.
Disclaimer: As with any government run projects, there are tons of regulations and caveats. The explanation here is to help get a layman’s understanding of this extremely complex process. All Tax Increment Districts are subject to approval by the state and typically have a life of no more than 23 years.