Tax Increment Financing (TIF) is a method for funding redevelopment activities or to renovate planning areas. The technique uses the increase in property tax revenue produced by a redevelopment project to finance the necessary public investment in that project area. The TIF allows a municipality to capture the increase in various local property taxes. It works in the following way: when a redevelopment plan is adopted, the existing total value of all taxable property in the project area is frozen at the current assessment.
Once this baseline is established, all future property tax revenues above the base generated by the redevelopment (which normally would be distributed to all taxing bodies having jurisdiction in the area) are allocated to the TIF redevelopment fund. Local taxing bodies (school districts, park district, fire protection district, etc.) continue to receive revenues generated from the current assessed valuation at the time the district is formed. Increases generated beyond this fixed amount (the increment) are paid to the TIF District. It is important to note that the tax base and not the tax revenue is frozen during the tax increment period.
As redevelopment proceeds in the TIF District, property owners pay more in taxes in correlation to the rise in their property values each year. But instead of distributing the additional property tax among the various local taxing bodies as usually done, the incremental growth in property taxes is reserved for improvements and expenses in the TIF District only. Deerfield's Village Center TIF has been a very useful tool to help revitalize the Village Center but it has now expired. The Lake Cook Road TIF expired in 2005.