Above, you see Johnny D. Veloper. Johnny wants to use tax-increment financing to build his new development. What does Johnny have to do?
- Apply: Johnny will have to fill out an application with the city. The application will ask for many things, including the condition of the property Johnny is developing, why TIF is needed and what community benefits the TIF project will have.
- Get approval: Johnny’s application will be vetted by the TIF Commission, a group of representatives from different taxing entities, and the city council.
- Build the property: Johnny will be responsible for developing the property as outlined in his proposal. This includes finding other forms of financing besides TIF.
- Generate higher assessed value: Johnny won’t start receiving TIF funds until his developed property passes a certain assessed value threshold — also known as a tax increment. Once Johnny’s property becomes valuable enough, he will start receiving money from TIF.
- Collect and use the agreed-upon amount: Johnny’s TIF will only pay out however much is outlined in his application. After that, the TIF period is over and Johnny will have to pay regular taxes on the property.
Disclaimer: Johnny D. Veloper may have to wait a few years — as of this writing, the city can’t permit any new TIF projects until 2020.