What is TIF Funding? A Basic Explanation

TIF Funding 101 (& How it Helps)

updated January 2019

1/25/17 – Tax increment financing (TIF) is a public financing method that is used to help bring about improvements for redevelopment, infrastructure, and other community-improvement projects.

Tax increment financing or “TIF” is one of those government terms that is equal parts confusing and important. Let’s try to simplify what TIF exactly means:

Imagine you are running a City. One problem you face is that one of your districts is run-down and in need of repair, but you have limited resources to help this district out. Some sort of assistance is needed in order to improve this district before it becomes a ghost town.

When a City’s district is ruled as “blighted,” or in a position where it wouldn’t attract private investment (business, shops, restaurants, etc.) without government help, you can take steps to have that district labeled as a Tax Increment District, or TID.

Basically, that means any newly generated or “incremental” tax value is set aside just for projects that encourage investment in the district. So, if your building has a broken roof, the tax dollars all go to the same place, but if you fix the roof, the new incremental value goes towards improving the district.

Note: TIF assistance should only be provided when it’s been determined that development wouldn’t likely occur without it.

TID 4 MarshfieldLet’s look at a perfect example: Marshfield’s downtown TID, called TID#4. Before downtown became a TID, it needed a lot of help. As with many downtown districts in the state, things were starting to look bleak. The City of Marshfield labeled this district a TID so it could collect monies to help fund improvements in that district. With those monies, the City could improve many aspects of Marshfield’s downtown.

Now the district looks great – Businesses are doing better, infrastructure has improved, and new life has been brought to this area. Now that those updates are done, the City can focus on other areas of improvement. However, the TIF money can ONLY be used in the highlighted blue area.

The question now is: “How do we maximize the effect of the money we have left in this area?”

One idea was the 200-block community square, today Wenzel Family Plaza. This project was a public/private partnership with the City. $250,000 of TIF money was used for demolition of the former News-Herald building and preparation of the site for redevelopment of this new square.

This shows how the City is getting a really good deal. The point of the project was to provide a destination downtown. The idea is that if a family is in the downtown for recreation, they may also want to shop and eat there. Keeping our money local and funding “mom and pop” shops is essential for keeping our downtown as vibrant as it is.

Disclaimer: As with any government run projects, there are tons of regulations and caveats. The explanation here is to help get a layman’s understanding of this extremely complex process. All Tax Increment Districts are subject to approval by the state and typically have a life of 20-27 years depending on the type created.