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Tax Increment Financing (TIF) is a method of public financing used by cities and towns meant to help subsidize various community-improvement projects, redevelopment of land, and infrastructure renewal. A TIF starts with a municipality taking the future tax revenue increases from a district or defined area within the municipality and using those funds towards a redevelopment project or community improvement project. The projects best suited for TIF funding are those that will increase the property tax base within the district the most. California was the first state in the country to create a Tax Increment Financing district and utilize those TIF funds for redevelopment. Since then, all 50 states have authorized the use of TIF and it is also a practice untaken by many countries around the world.
The funds secured through Tax Increment Financing can only be used to fund certain, specific projects and redevelopment. States create legislation granting authority to municipalities to create TIF districts. Municipalities consult with legal counsel throughout the TIF process to ensure that the money from TIF is being spent appropriately. Typically, a TIF district will have a lifespan of around 20 years, the specific length of time will vary depending on legislative requirements.
The process of Tax Increment Financing is less complicated than it sounds. First, a municipality designates a TIF district. This district may be an actual district or a defined area within the municipality. Since only new tax revenue may be used to fund a TIF project, current property taxes in the TIF district are frozen to ensure that homeowners won’t see their property taxes rise during the redevelopment. The expectation is that with the use of TIF funds for renewal and redevelopment projects, the property values in that district will gradually rise along with more revenue from property taxes.
TIF lawyers perform a variety of tasks depending on the client they are representing. On behalf of business owners, commercial developers, apartment home owners, etc., TIF lawyers can help secure land, financing and financial incentives for renovation, industrial development and infrastructure, plant expansion and interior tenant and life-safety improvements. TIF lawyers assist retail, residential and mixed-use project developers with their responses to municipal requests for qualifications, proposals, drafting, and negotiating development and redevelopment agreements to secure available incentives. TIF lawyers may also represent commercial lenders who provide financing to businesses and developers within the TIF district to provide the advice and documentation necessary to secure the lender’s liens and security interests in and to the incentives for the TIF-financed project.
The legal canon concerning TIF can be complex and stressful. If you live in a TIF district, are developing for a TIF district, or are a business owner or property owner in a TIF district, it may be very beneficial for you to hire a TIF lawyer. Lawyers who specialize in TIF can ensure that you are in compliance with TIF law. A Tax Increment Financing lawyer can help you address your specific legal needs, guide you through regulatory obstacles, advise you on best practices, and represent you in court, if necessary.