When a TIF district is established, the current net taxable value (NTV) on each property within the TIF district is set at a “base” value. Funds are generated by the increase in net taxable value of properties located within the district as those parcels are redeveloped. The difference between the “base NTV” and the new NTV, what is referred to as the “increment”, is rebated back to the municipality. This increment, or rebated real estate taxes, can be used to reimburse developers for approved costs, and/or to cover the municipality’s cost of improving the district.
The rebates are reimbursement for eligible project costs and are tied directly to the property tax increment created on the site of their new development. The City and the property owner negotiate the reimbursement rate based on the new improvements they create. This contract continues until the point at which the property owner has been paid the agreed-upon reimbursement, or when the TIF expires, whichever comes first. TIF 2’s expiration date is December 31, 2035.