Tax increment financing dedicates the increase in property tax revenue within a district to reimburse eligible development costs.
Structure. A district is established with a base taxable value. As value increases, the taxes on the increment above the base are captured by an authority and applied under an approved plan.
Authorities. Downtown development, brownfield redevelopment, corridor improvement and similar authorities, each with its own enabling statute, governance and permitted activities.
The plan. Identifies the district, the eligible activities and costs, the duration of capture, and the projected increment. Amendments require the same process as adoption in most statutes.
Eligible costs vary by statute — public infrastructure, environmental remediation, demolition, site preparation, and in some programmes non- environmental activities and developer reimbursement.
Opt-out. Other taxing units — counties, libraries, schools — may have rights to exclude their millage from capture, which is a significant political and financial variable.
Reimbursement agreements with developers specifying eligible expenses, documentation, the reimbursement schedule, and the risk that increment is insufficient, which sits with the developer in most structures.
Reporting to the state and to the taxing units, with several states tightening requirements after criticism of transparency.