Tax Increment Financing (TIF)
Tax Increment Financing is a statutory authorization that enables PAR to collect the net new property and/or municipal sales tax revenues generated within a designated urban renewal area to help finance further improvements. TIF is not an additional tax. It is the new sales and property tax revenues that would not be available but for the urban renewal process.
When PAR partners with a private developer to help finance development/ redevelopment the principal tool used is TIF.
The example here is for property tax, however a similar approach is used for sales tax. Under State statute an urban renewal authority can capture and pledge these incremental revenues for a period of up to 25 years. The chart shows how over time, TIF can be a powerful tool for financing difficult redevelopment projects.
Sample TIF Calculation
In the example the assessed value of a vacant site was only $900,000 in 2012 and generated only $50,000 for taxing entities such as Douglas County, Douglas County Public Schools, South Metro Fire, Town of Parker and Douglas County Libraries. The value associated with the property's original use is called the Base Valuation and the revenue generated by it will always be paid over to the original taxing entities throughout the term of the TIF Area.
In 2014, PAR approved the use of TIF financing infrastructure for the development of a mixed use building on a previously vacant site in an established urban renewal area. As a result of the mixed used development the assessed value of the site more than quintupled to $5,000,000 which generated more than $380,000 in property taxes. With Tax Increment Financing PAR was able to capture the net new/incremental increase in revenue (in this case $330,000) and the original taxing entities continue to receive revenue as if the site were still vacant ($50,000)