What Is TIF, and Who Really Benefits?

Tax Increment Financing (TIF) sounds complicated—but it’s really just a tool that cities use to encourage development. If you’ve ever wondered who wins, who pays, or whether TIF is a smart move for your community, you’re not alone.

Here’s a plain-English breakdown of what TIF is, how it works, and what the pros and cons are—for both developers and cities.

How Does TIF Work?

Let’s say a piece of land is worth $100,000 and pays $1,000 in property taxes each year.

A developer comes in and builds something valuable—maybe apartments, shops, or an office building—and now the land is worth $1,000,000. It generates $10,000 in taxes.

Normally, that extra $9,000 would go to the city, county, and school district. But with a TIF:

The original $1,000 keeps going to those taxing bodies.
The extra $9,000—called the increment—is set aside in a special fund.
That fund is used to pay for public improvements tied to the project: streets, sidewalks, sewers, utilities, parking, etc.

This system usually lasts for 15 to 25 years, and then the full tax amount starts flowing back to the city, county, and schools.

Does Anyone “Make Money” from a TIF?

No one walks away with a pile of free cash—but here’s who can benefit:

Developers

They may not have to pay for costly infrastructure improvements up front.
TIF can make a financially shaky project more viable.
But they don’t just get a blank check—most cities require proof that the project wouldn’t happen without the TIF (“but-for” test).

Cities

They use TIF to stimulate development in areas that are underperforming or deteriorating.
Over time, the area may grow into a stronger, higher-value tax base.
Cities don’t “lose” money because they keep collecting the same base amount they always have.

But Doesn’t the City or County Lose Out?

That’s a fair question—and the answer is, kind of, but not directly.

Here’s how:

New revenue is redirected for a while. So, even though the area is growing, the city or county can’t use the new tax money for schools, public safety, or general funds until the TIF expires.
If too much of a city is under TIF, that can put a strain on budgets.
School districts and counties often have no say in the approval, even though they’re affected.

That’s why TIF needs to be used strategically—not as a default tool for every new development.

Pros and Cons

For Developers:

Pros:

Offsets public infrastructure costs.
Helps make borderline projects feasible.
Attracts private investment to overlooked areas.

Cons:

Can be slow and political to approve.
Comes with public oversight and documentation.

For Cities:

Pros:

Encourages investment without raising taxes.
Revitalizes blighted or vacant areas.
Pays for needed improvements in targeted districts.

Cons:

Delays new tax revenue for other services.
Carries some financial risk if the project underperforms.
Can create tension with counties or school districts.

What About Counties and School Districts?

Even though they collect the taxes, the city usually controls the TIF district. The county and schools continue to receive the same base tax revenue—but they don’t see a dime of the growth until the TIF ends.

This is why some school districts and counties view TIFs cautiously—they may support development but don’t want to wait decades to see any benefit.

The Bottom Line

TIF is not free money or a loophole—it’s a financial tool.

Used well, it can breathe life into struggling areas and fund the infrastructure needed for growth. Used poorly or too often, it can divert funds from schools and essential services and create controversy.

The key is balance:

Be transparent.
Show a clear public benefit.
Use TIF only when it's truly necessary to get a project off the ground.