TIF stands for Tax Increment Financing. In a very simplified way, It works like this.
Say you want to put a second-story addition on your one-story house.
The second story will add three bedrooms and $100,000 of value to your house. And you know what comes with new value, right? Yep, added taxes. That new value will mean you owe another $1,600 in property taxes every year.
This is where TIF comes in. If your property met all the qualifications, you could get it approved for a TIF district. That means you could take $1,600 of new tax generated by your addition and build an amenity — so long as it is deemed to have a public use and purpose.
For example, maybe you want a deck and fire pit in your backyard. You might say that you’re going to let your neighbors come over and use it, and because you’re making it public, you get to use the new taxes you would have sent to the County to pay for your deck and firepit. And if you do it over 10 years, now you’ve got $16,000 to build the deck and fire pit ($1,600 x 10 Years).
Now, that’s a grossly simplified version. And TIF isn’t used for single-family homes like this. But translate it up in size a bit, and you get the idea. Taxes generated from new improvements pay for stuff within the district. It’s a powerful tool for financing projects and incentivizing development.
And if you want another explanation, here’s an explainer video. But keep in mind, each state has its own laws regarding TIF. North Dakota does not require a finding of ‘blighted’ to approve a TIF. And ‘but for’ tests require a lot of subjective assessments and trust.
