Tax Increment Financing (TIF) allows cities to create special districts and to make public improvements within those districts that will generate private-sector development. During the development period, the tax base is frozen at the predevelopment level. Property taxes continue to be paid, but taxes derived from increases in assessed values (the tax increment) resulting from new development either go into a special fund created to retire bonds issued to originate the development or leverage future growth in the district.

The legislative process for implementing and utilizing TIF financing is a complicated process involving the creation of the special district and the public agency that will administer it. The following steps are involved:

1. Prepare a finding of necessity and establish the boundaries of the district. This finding is normally a very detailed study that demonstrates that the district meets the criteria contained in the state's enabling legislation.
   
2. A redevelopment agency is created by resolution or ordinance. This agency may be the governing body of the municipality, or it may be a new agency appointed by the governing body.
   
3. A development plan is prepared and approved by the agency and the city.
   
4. The base year is declared following adoption of the plan.
   
5. The redevelopment agency will solicit developers and enter development agreements.

The links below provide sample legislation for different aspects of this process.

The South Carolina Tax Increment Financing Act for Counties. (current through the 2000 Regular Session of the South Carolina General Assembly). This act describes the conditions under which counties in South Carolina are authorized to implement TIF discricts.

The Illinois Economic Development Project Area Tax Increment Allocation Act of 1995, 65 ILCS 110/. This Illinois legislation uses TIF districts to addresses the depression that often follows the closure of military bases.

District of Columbia Tax Increment Finance Commission Act Bill 12-498 This legislation establishes the District of Columbia Tax Increment Finance Commission. The Commission's purpose is to promote, develop, and advance the general prosperity and economic welfare of the people of the District, to relieve problems of unemployment and underemployment, to re-establish the downtown area as the primary retail shopping and entertainment center for the Washington metropolitan area, and within the downtown area, to improve public facilities and public infrastructure, to encourage private development, to foster the development of entertainment, cultural, recreational and residential, facilities, and to provide improved transportation and community facilities, by providing various means of financing public and private development costs in accordance with this act.

The Ann Arbor Downtown Development Authority Ordinance creates a public body corporate to act in the best interests of the City to halt property value deterioration, increase property tax valuation where possible in the business district of the City, eliminate the causes of that deterioration, and to promote economic growth Downtown Development Authority (DDA). The Ann Arbor DDA has funded a variety of improvement projects in Downtown Ann Arbor, including parking structures, pedestrian amenities, affordable housing, and transportation improvements.