ABSTRACT
This chapter describes the mechanics of using tax increment financing (TIF) to finance redevelopment projects, the situations in which its use is appropriate, and those in which the benefits of using TIF, as opposed to other combinations of public and private capital, are not as evident. It also contains a summary of the criticisms that have been leveled at TIF, a review of the empirical evaluations of TIF's effectiveness, and suggestions for policy reform. TIF is neither a new tax nor tax abatement in the conventional sense. Rather, it is a reallocation of property tax revenues from the municipality's general fund to a smaller enclave of contiguous properties: a TIF district. Most TIF legislation also allows municipalities to offer subsidized, below-market rate financing from the increment. By providing financing for the total development costs, TIF reduces the amount of equity investment required of the project developer.
