Tax Increment Financing (TIF) is a public financing method that some local governments and transportation agencies may use to capture a portion of additional property (or sales) tax revenues that result when public investments cause property values (or total sales revenues) to increase.
Typically, a TIF district is established to raise revenues from properties within the district’s boundaries; it may also be referred to as a special taxing districts, development authority district, community facilities district, or community management district. TIF is an increasingly important source of funds for transportation projects, and it has the potential to be a key part of project financing.
This digest examines whether and under what circumstances TIF might be used to fund transit operations and maintenance, as well as the challenges that such arrangements might face. It discusses the available evidence suggesting how transit service can boost the value of transit adjacent properties. It also reviews the legal underpinnings of TIF in the United States, focusing on the state enabling laws that define the parameters for TIF. Relevant litigation surrounding TIFs is also examined. A review of case law highlights the ways in which TIF programs have been challenged in court and concerns that may arise with respect to other taxing districts. The digest also discusses opportunities to include transit operations and maintenance as eligible expenditures for TIF revenues, and potential demands and challenges that agencies might face in doing so.
This digest will be useful to professionals and students working at the intersection of public transportation, community development and real estate, and public finance.