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What is a TIF?
12/03/2006

What is a TIF?

TIF stands for Tax Increment Financing. A Tax Increment is the difference between the amount of property tax revenue generated before a TIF district is created and the amount of property tax revenue generated after the TIF district is created.

A TIF District is a geographic location where tax increment financing can be used.

TIF is a Tool. Specifically, TIF is a financing tool created by state law to help local governments restore neighborhoods that are suffering from decline and to encourage new private development without raising property taxes.

How it works:

Property taxes collected from an area are divided among many local taxing bodies such as the public school system, the park district, the County, the Water Reclamation District, etc. Prior to a TIF designation taking effect, a "snapshot" is taken of current tax collections and the amount allocated to each of these other taxing bodies is frozen at that level. Any increase in taxes collected within the boundaries of the TIF district can be used to fund improvements and new development for the life of the TIF, usually 23 years.

Why use TIF?

The increase in the amount of taxes generated can be used to fund needed public improvements such as repairs to streets, sidewalks, and sewer systems, and beautification programs like lighting and streetscaping. TIF funds are also used as incentives to attract new businesses and retain existing businesses or help them expand. New business means more jobs, more customers, more investment in the neighborhoods and more taxes collected that, for the 23-year life of the TIF, are invested directly back into the neighborhood.

The TIF process

When an area is being considered for a TIF, a team of consultants is hired to study the area to determine if it qualifies for a TIF, based upon the guidelines of the law. During this stage, the Alderman and the community are consulted and informed. After it is determined that the area is eligible, the project must be approved through the legislative process:

The project is accepted by the Community Development Commission for review; public notices are mailed to tax payers in the area and posted in the Chicago Sun Times.

A public hearing is held before the Community Development Commission to allow citizens to be heard; following the public hearing, the Commission makes its recommendation.

After it is approved by the CDC at the public hearing, the project is introduced to City Council where it is sent to the Finance Committee for review.

The Finance Committee reviews the plan and sends it back to City Council with their recommendation.

The City Council votes whether or not to approve the area for Tax Increment Financing.