How does Tax Incremental Financing (TIF) work?

The best way to explain this complex issue is with an example. Let’s suppose we create a Tax Incremental District (TID) of one property. This one property is currently assessed at $100,000. A developer proposes to develop this one property and build a new store. After they complete the project the new value on the property adds an additional $900,000 to the assessed value. This makes the assessed value on the newly developed property now worth $1,000,000. Who gets the taxes from the newly developed property? All the taxing entities (village, school, county, state, MMSD, etc.) would continue to receive taxes as if the property were assessed at $100,000. This is called the "tax base".

The new taxes that created an additional $900,000 in assessed value would stay within the TID. This is called the "increment". What does the municipality do with this new "increment" tax? The municipality can use the money to make additional improvements within the TID or it can help the developer. If the developer requests funding to help them complete the project, then state law allows a municipality to help developers using this new "increment" tax. The developer must sufficiently prove they would not be able to complete the project without TIF help because of higher than normal project costs. The state calls this the "but-for test". This new development would not occur ’but-for’ the use of TIF. The municipality then uses the new "increment" tax to help the developer over the course of the life of the TID. The maximum statutory life of a TID is 27 years. The "tax base" taxes would continue to go to all the taxing entities.

Show All Answers

1. Is the Village moving the library?
2. Can zoning laws be used to keep certain businesses away?
3. Why did the Village Decide to Build a New Public Works Facility?
4. How does Tax Incremental Financing (TIF) work?
5. What is the Village doing to try and attract business to Brown Deer?
6. Why did McDonalds close?
7. What is going on with the Brown Deer Library?
8. What is being built north of the Fox 6 building?
9. Why did the Village allow Walmart to locate in the Village?
10. What is happening at 51st and Brown Deer at the abandoned gas station?
11. What is the difference between a Town Hall Meeting and a Village Board Meeting?