By Beverly Fortune
Sept. 11, 2008
How TIF works
Tax-increment financing allows a portion of state and local tax revenue created by new private development in a blighted area to be used for public infrastructure improvements.
City officials identify an economically depressed area, and plan public improvements , such as sewers, streets, parking and art.
CITY AND STATE APPROVAL
After identifying the project and developing a plan, the city pledges future tax revenues from the project to pay off bonds used for the up-front costs. The city also approaches the state and asks it to pledge its tax revenues.
An investment company sells bonds to raise the funds for the public improvements.
The bond money is used to pay for the improvements.
A portion of new tax revenue generated by the project’s success pays off the bonds. New taxes are not levied on residents.
— By Beverly Fortune
This piece was published by the Lexington Herald-Leader and can be found at www.kentucky.com