Tax Increment Financing (TIF)
An economic development tool where the increase in property tax revenue generated by development in a designated district is captured to pay for infrastructure improvements in that district.
How It Works
When a TIF district is created, the current property tax revenue is frozen as the "base." As new development increases property values, the additional ("increment") tax revenue is diverted to fund public improvements — roads, utilities, site preparation, or sometimes subsidies to developers. TIF is controversial: proponents say it catalyzes development that wouldn't happen otherwise; critics argue it diverts revenue from schools and other taxing bodies and often subsidizes development that would have occurred anyway.
Related Terms
- Property Tax — A tax levied on real estate (land and buildings) based on assessed value. Property taxes are the single largest revenue source for most U.S. city governments.
- Assessed Value — The value assigned to a property by a government assessor for the purpose of calculating property taxes, which may differ from market value.
- Economic Development — City government efforts to attract business investment, create jobs, and grow the tax base — including incentives, infrastructure, workforce programs, and marketing.
About This Definition
This definition is part of the CitySpend Municipal Finance Glossary — 59 terms explaining how city governments fund and manage public services. All definitions are written in plain language for taxpayers, journalists, students, and municipal bond investors.