Tax Increment Financing (TIF)
The CRA provides funding to selected, eligible redevelopment projects. The CRA is allowed to "capture" the property tax on the increased valuation of property created by selected, eligible redevelopment projects. This "captured" tax increment then is used to assist in funding public improvement costs on the project. This process is referred to as Tax Increment Financing (TIF).
The TIF approval process consists of three major steps:
- Designation of a blighted area - This step identifies the portions of the community that are eligible for the use of TIF. Specific statutorial criteria must be met for an area to be designated as blighted.
- Preparation and approval of a redevelopment plan - The city prepares a specific redevelopment plan for the projected area. The plan has certain statutory requirement and includes a description of the tax increment projected area.
- Approval of a redevelopment agreement - Following approval of the redevelopment plan, the CRA and the developer/owner negotiate a redevelopment agreement. This contract sets forth the mutual responsibilities of both parties and included the financial terms of a project. As part of the agreement process, the developer negotiates loan terms with a private lender, or bond underwriter if the project is utilizing a publicly offered bond issue.