Tax Increment Finance (TIF) Districts

What is a TIF?

A TIF is a special tax district that can be used as an economic development financing tool when market conditions will not allow private investment alone to address physical impediments that limit or prevent otherwise desirable commercial or industrial development.

What does a TIF do?

A TIF provides financing for public improvements (sewer, water, roads, sidewalks, landscaping etc.) that are required to initiate viable economic development by capturing the new property tax revenue created by the proposed development and using it to offset the cost of the public improvements. A TIF district can include undeveloped land, a Main Street district, the whole downtown, or just a few parcels. The size and configuration of the District is determined by the type and nature of the economic development activity that the Town wants to stimulate.

How does a TIF work?

After defining the TIF district, the current assessed values and property tax revenues are “frozen” and continue to flow to the Town’s general fund. However, any future “incremental” increases in property tax revenues within the district (through new construction, expansion, or renovations) can be “captured” and all or a portion of this new revenue can be used to pay for the infrastructure improvements (sewer, water, roads, etc.) that enabled the development within the district. Once the improvements are paid for 100% of the property taxes generated in the District go to the Town’s general fund.

A TIF can be a “win-win” for residents and businesses

For residents: A TIF can encourage desired commercial development in specific areas of the community where it is wanted and needed and would not otherwise occur on a timely basis. Once the public improvements in the district have been paid for, the increased tax revenue generated by the new development becomes part of the Town’s general revenue. With a TIF, the improvements needed to stimulate tax base expansion are offset by that expansion at basically no cost to the other tax payers.

For Businesses: A TIF can provide an attractive and viable mechanism to pay for the public improvements necessary to support desired business development, expansion, or renovation in specific areas desirable to the Town. Without access to these public improvements, an otherwise desirable business may choose to locate or expand in another community resulting in lost tax base, jobs and economic vitality. Businesses want to locate in a “town with a plan”.

Rules and Standards

There are rules and standards that control establishment of TIF districts. These are spelled out in detail in the State Statues, RSA Chapter 162-K. Some of the key provisions are listed below.

    * Any money raised within a TIF district must be spent to benefit the same TIF District.

    * The Town Council is in control of how TIF money is administered and it must be spent consistent with the official plan for the district.

    * There is no limit to the number of TIF districts a community can have, however, the total acreage in any one district shall not exceed 5% of the total acreage in a municipality or more than 8% of a community’s assessed value. Furthermore, all TIF districts combined shall not exceed 10% of the total acreage of the community or more than 16% of a community’s assessed value.

    * Each TIF District must have an Advisory Committee established from within the District to oversee activity and make suggestions and recommendations to the Council to ensure fulfillment of the District purpose.