Tax Increment Financing

Northern Nexus may utilize tax increment financing to fund public infrastructure improvements with the Local Development Financing Act (LDFA), PA 281 of 1986.  There several financing options for LDFA activities that allows for incremental growth of local property taxes over a period of time to fund these improvements.  The approach by Northern Nexus is to utlize the LDFA for specific public infrastructure improvements for a limited time.  

What is a TIF district? Is it a tax increase?

TIF stands for Tax Increment Financing.  A tax increment is the difference between the amount of property tax revenue generated before TIF district designation and the amount of property tax revenue generated after TIF designation.

Only property taxes generated by the incremental increase in value of TIF district are available for TIF projects.  Tax rates do not change when a TIF is created.   TIF districts do not increase taxes.

Creating a TIF does not reduce property tax revenues available to overlapping taxing bodies like schools.  Property taxes collected on properties included in the TIF at the time of its designation continue to be distributed to the school districts, library district, and other taxing districts and are not reduced by the TIF creation.  Only taxes derived from future growth that would not have occurred, "but for the TIF" go to TIF projects.

What are the benefits of TIF districts?

TIF’s create short and long term benefits for communities, which include:

  • Provides development incentives requiring no tax increases.  Properties are assessed and taxed the same way as in non TIF areas. The only change is that during the life of the TIF, property tax revenues are distributed differently with the incremental increase in tax revenue going to the community to finance redevelopment expenditures within the TIF area and the rest going to the underlying taxing bodies.

  • Increases property values. TIF redevelopment projects are an investment that causes property values to increase thus broadening the tax base and benefitting everyone who pays taxes.

  • Induces private investment and development. Communities can utilize TIF funds to offset development costs and improve needed infrastructure to facilitate redevelopment.

  • Creates jobs, job retention and supports training programs.  Increased development and redevelopment mean a greater demand for workforce.  Redevelopment also impacts areas outside of the TIF enabling other businesses to grow and prosper as well.

  • Creates a stronger, broader tax base.  Infrastructure improvements, demolition or redevelopment of blighted areas attract private developers to invest in the community. As a result, the overall equalized assessment value increases, lessening the property tax burden.

  • Locally controlled.  Municipal officials are responsible for determining the best utilization of TIF funds, not the state or federal government.

  • Incremental revenue is reinvested in the TIF district.  TIF funds are only utilized within the TIF district as a means to encourage the redevelopment of the area.

  • Benefits other taxing bodies.  At the end of the TIF the entire property tax generated by the newly revitalized property goes to the underlying taxing bodies providing a revenue increase for schools, libraries and so forth without raising taxes.

Do TIF’s divert money from schools?

No. Schools continue to receive all the tax revenue they were entitled to before the creation of the TIF district. 

Are TIF plans and expenditures public?

Yes.  When a TIF is established there are numerous legal requirements designed to insure the public and also other local taxing bodies are informed.  Public hearings are held and all expenditure decisions must be made in public by local elected officials charged with representing the community. All documents pertaining to a TIF are available through a Freedom of Information Act (FOIA) request.