Even if a TIF District isn’t something you’re familiar with, you’ve probably seen one in action – the Highland Strip (near the University of Memphis) and Graceland are both current TIF Districts in Memphis.
The process begins when the State of Tennessee authorizes local governments to establish TIF Districts within their communities. These are often areas that are blighted, abandoned, or otherwise in need of revitalization.
When a TIF District is established, companies who choose to locate in that area receive the benefit of having a portion of their property taxes allocated to improvements they would otherwise have had to cover themselves – including, but not at all limited to, things like sewer infrastructure, parking lot expansions, or street repaving.
The idea is that by incentivizing companies to locate in these areas, the new development will ultimately lead to a significant increase in property value – and higher property value means higher property taxes.
In a TIF District, an initial property tax baseline is set when the District is established. As companies begin to locate within the District and property value increases, any additional tax revenue collected in excess of the baseline – a new tax increment – is kept separate. TIF stands for Tax-Increment Financing.
During the lifetime of a TIF District (anywhere between seven and 30 years), that Tax Increment money is then divided based on percentages authorized by the State: one amount is distributed back to the government as normal taxes, and another amount is used for the improvements within the District that were established upon its founding.
In Tennessee, by default, that second revenue stream can only be used for “public use” construction within the TIF District – the streets, sewers, and parking lots, among other things. But if a company wants to use those funds toward privately-owned assets, like repaying construction debt or creating a new asset on the property – for example, the new arena being proposed near Graceland, one of Memphis’ TIF Districts – it must receive approval from local and state governments.
Locally, there are several agencies that are authorized by the State to create TIF Districts, with the approval of both Shelby County and the City of Memphis (if located within city limits). The State maintains its own standards for creating a TIF District, and local governments can add to those standards if desired.
To see an example of a TIF District in action in Memphis, click here to see the details of the $21 million, 20-year TIF for the Highland Strip, granted by EDGE in 2016.