Tax Increment Financing (TIF)

In Chicago, TIF aims to bring new businesses and revitalization to individual areas by making an investment in that area’s development. The intention behind that investment is that any short-term gains will be reinvested in the area. In a TIF redevelopment project area (or district), the area’s current property value is the base amount, and the taxes from that base amount go towards the same taxing bodies they would have previously. However, the growth of the value from development, above that base amount, goes into a special fund, the Special Tax Increment Allocation Fund. These funds are used by the area to make additional investments in development, which creates greater growth in property value. These investments can benefit the community, including funding affordable housing, libraries, schools, or other public buildings. Under Illinois state law, a TIF district may exist for up to 23 years. Common TIF projects include redeveloping vacant buildings, cleaning up polluted areas, or financing public infrastructure improvements. 6

To qualify for a TIF, an area must be identified, as well as the physical and economic traits of the area that need to be improved, the “blighting requirements,” showing that local action is needed to develop the area. The municipality must prepare a Project Area Redevelopment Plan with actions and a budget that includes the TIF eligible costs. Municipal officials and a Joint Board Review (made up of representatives of local taxing bodies) must review the plan, followed by a public hearing. The proposal must then receive approval by the municipal legislative body. Then the mayor may sign it into law without State or Federal approval.7