Applications and Administration
Cities use TIF to finance public infrastructure, land acquisition, demolition, utilities and planning costs, and other improvements including sewer expansion and repair, curb and sidewalk work, storm drainage, traffic control, street construction and expansion, street lighting, water supply, landscaping, park improvements, environmental remediation, bridge construction and repair, and parking structures.
State enabling legislation gives local governments the authority to designate tax increment financing districts. The district usually lasts 20 years, or enough time to pay back the bonds issued to fund the improvements. While arrangements vary, it is common to have a city government assuming the administrative role, making decisions about how and where the tool is applied.
Most jurisdictions only allow bonds to be floated based upon a portion (usually capped at 50%) of the assumed increase in tax revenues. For example, if a $5,000,000 annual tax increment is expected in a development, which would cover the financing costs of a $50,000,000 bond, only a $25,000,000 bond would be typically allowed. If the project is moderately successful, this would mean that a good portion of the expected annual tax revenues (in this case over $2,000,000) would be dedicated to other public purposes other than paying off the bond.
Read more about this topic: Tax Increment Financing