|tax increment financing: overview|
|The "tax increment or increment" for the district is determined by multiplying the original tax rate by the captured tax capacity. This roughly equals the additional taxes paid by the captured tax capacity or the increase in taxes that occur as a result of the development.|
How is TIF used for affordable housing?
In Minnesota TIF traditionally was used as a means of redeveloping urban areas that had old or worn-out buildings in need of replacement or rehabilitation. It was initiated as a tool to help with urban renewal (redeveloping "slums" and "blighted" areas). Its use has since spread to other purposes. TIF districts in Minnesota are generally used to:
According to the Minnesota State Law, there are 6 permitted types of TIF districts, but for our purpose we are going to explore two of them, housing and redevelopment that are most widely used for mixed-use and mixed-income housing projects.
What problems are solved by Tax Increment Financing (TIF) policies?
TIF offers a strategy for municipalities to "self finance" a redevelopment
project without having to raise or impose new taxes. In an environment of fiscal stress, TIF is often one of the few means available for municipalities to finance new development projects within the community. Moreover, once
the TIF district expires, the municipality will receive the full benefit of the property taxes on a much higher property tax base than would otherwise have been present without the investments. TIF is increasingly popular as a tool to fund affordable homes because it can generate an additional revenue stream with which to meet a community's housing needs. It is especially helpful given that an increased need for affordable housing is a nearly inevitable byproduct of any successful redevelopment strategy.
TIF is also a tool to assist with brownfield redevelopment. Specifically, using tax increment financing for environmental remediation is permitted under enabling statutes in Minnesota with special laws (beyond the State's regular TIF law) dedicated to this purpose.
TIF is also emerging as a tool to manage and preserve the affordable housing stock in rapidly growing areas to help ensure the continued availability of affordable homes in those communities. Click here to learn about minimum requirements for TIF revenue to be spent on affordable housing.
Where are these policies most applicable?
Tax increment financing districts can be established within jurisdictions in 49 states and the District of Columbia if they meet a set of criteria as defined
|Solutions in Action|
The city stepped in with TIF funds to assist with demolition of the old building and for infrastructure around the site. The rental units are affordable through funding from the Metropolitan Council, Hennepin County, and tax credits from the Minnesota Housing Finance Agency.
For more information contact
Jeanne Andre, city of Golden Valley Department of Planning, Zoning, and Development
Click here to view a Google Streetview of the Golden Valley Town Square development
|Click here to leave the Minnesota Toolbox and learn more about tax increment financing on the national version of HousingPolicy.org|
Go back to learn about other finance tools