What is a TIF District? Understanding Tax Increment Financing

Tax Increment Financing (TIF) is a public financial tool cities, towns, and counties use to stimulate development and redevelopment in specific areas.

This mechanism allows for the reallocation of newly generated tax revenue for up to 25 years, supporting local projects.

In Oklahoma, the TIF framework is established by the Local Development Act (62 O.S. §§850-869), enacted in 1992 and has undergone several amendments since.

Here is what you need to know about TIFs, according to Oklahoma Commerce.

Purpose of TIFs

The primary aim of TIF is to spur private development projects by investing tax dollars in public improvements and other eligible project costs. This funding helps enhance the infrastructure and attractiveness of targeted areas, fostering economic growth.

How TIF Works

Under a TIF district, the government borrows money to finance development initiatives, often targeting public infrastructure or offering incentives to developers. The repayment of this loan is facilitated by capturing a portion of the tax revenue generated by the new development.

Impact on Schools and Local Government

One common concern is whether TIFs divert funds from schools or local governments. However, the revenue received by agencies—known as “taxing jurisdictions”—remains unchanged from before the TIF district was created. Only the new tax revenue generated by the development is used to repay the borrowed funds.

Post-Loan Repayment

Once the loan is repaid, the TIF district ceases to exist, and 100% of the tax revenues are returned to the taxing jurisdictions. This transition can lead to increased funding for schools and local government services.

Community Benefits

The new development associated with TIF districts generates additional tax revenue, which increases the funds available for essential public services such as education and local government operations. This, in turn, can lead to a more robust local economy.

Use of TIF Revenues

TIF revenues are designated for publicly approved project costs within a defined geographic area, known as the Project Area. According to the Local Development Act, eligible project costs may include:

1. Public works and improvements
2. Land acquisition, clearance, and grading
3. Financing and professional services
4. Administrative costs and interest fees
5. Assistance for private development financing

Locations for TIF Districts

1. TIF districts can be established in several types of areas, including:
2. Reinvestment Areas: Locations in need of public improvements to reverse economic stagnation, retain or expand employment, or attract major investments. These areas typically have at least 50% of structures that are 35 years old or older or may be classified as blighted under the Urban Renewal Act.
3. Historic Preservation Areas: Sites listed in or nominated for the National Register of Historic Places that are subject to historic preservation zoning.
4. Enterprise Areas: Regions within state or federal enterprise zones that are designed to promote economic growth in disadvantaged areas.

TIF districts play a crucial role in promoting local development and enhancing community infrastructure, all while ensuring that existing tax revenues for schools and local governments remain stable. Through careful planning and investment, TIFs can lead to a more prosperous and revitalized community.