Although I wrote about  this last year specifically on GSR and included other types of increment financing, I figure I'd update this primer to talk about TIF financing in general.

Property Tax Increment Financing (TIF) is a public financing tool that municipalities can use to encourage development in areas where investment might not otherwise occur. Reno has two development districts where TIF financing can be utilized. TIF financing helps local governments fund direct subsidies to developers (or in more ideal cases, infrastructure, river improvements, etc), without needing to pull money from the general fund, issue bonds, or affect the property tax baseline already coming in as revenue. 

Property Tax TIF

The Redevelopment Districts as a whole, function as TIF districts for property taxes. Quite a few projects were financed using TIF, including the Whitewater Park, Riverwalk, Believe/City Plaza and others in the hopes that future property tax would come in and pay these projects off. That eventually happened, but after the huge real estate crash of 2009, the development of downtown Reno didn't go as quickly as expected, and the Redevelopment Agency essentially became a only a debt payor for 10 years after, and is just now reaching a point where it's solvent again.

Here's a map of the two RDA districts in Reno. 

Pros of Property Tax TIF 

1. Stimulates Economic Growth
2. No New Taxes for Residents
3. Supports Public-Private Partnerships
4. Revitalizes Underdeveloped Areas
5. Long-term growth potential
6. Benefit specific to Reno: TIF funds in our area are issued by an elected board rather than an appointed board, which wasn't the case with many redevelopment agencies in California. This reduces the chances of misuse of funds, favoritism, or a lack of accountability.
7. Benefit specific to Nevada: School districts receive the full share of increase in property tax before any funds are diverted to applicants/developers regarding the incremental property tax increase. So no funds are diverted away from schools as a result. 

Cons of TIF Increment Financing using Property Tax

1. The Diversion Factor: It can be argued that TIF districts might divert opportunities elsewhere. For example if a developer in a TIF district wants to use TIF financing to build a 500-unit apartment complex, and a developer outside a TIF district wants to build a 500-unit apartment complex, the developer/applicant in the TIF district could have an easier time making it pencil, providing an unfair advantage, and making it more difficult for developers outside the district to absorb their units into the market. It could be debated however that the reason TIF districts were established in the first place is these RDA districts are more blighted, more difficult or challenging to build in, land is more expensive in these areas (land downtown is often 3x more expensive than vacant buildable land in outlying areas) and thus it 'evens the playing field' for urban developers. 
2. Diverts Funds from Other Public Needs: Since the "increment" in property taxes is diverted back to the applicant/developer, those funds are not available for other public services like infrastructure. This can be a drawback for residents outside the TIF district. It could be debated though that without the project being built, the increase in property tax revenue wouldn't exist in the first place.
3. Potential Gentrification: The neighborhoods surrounding the development project can drive up property values and rents, displacing long-time residents or small businesses, especially in lower-income neighborhoods. On the flip side, it could motivate land owners holding their properties hoping for an increase in value to sell their land/property to someone who is willing to develop it. We have a LOT of property owners downtown simply waiting for their value to increase to sell of their properties, with no intention of actually developing anything on it. 
4. Uncertainty of appreciation: The projected increase in property values might not happen as planned, however in a true TIF deal that doesn't involve bonds, there still is no risk to the city; the developer/applicant simply doesn't receive the incremental increase in property tax back to them as a benefit.

Ways to Minimize Risk to a Municipality

1. TIF Policies That Promote Greater Accountability

• Stronger Oversight & Transparency: Require detailed public reporting on TIF expenditures and their outcomes to prevent misuse.
• Public Input & Review: Involve community stakeholders, including local businesses, in decision-making. Usually an ask for the TIF application is how many community outreach meeetings in Reno have been held. 
• Sunset Clauses & Periodic Review: Limit TIF durations to ensure they do not continue indefinitely and require periodic justification for continuation.

2. Limiting TIF to Truly Blighted Areas

• Implement stricter criteria to ensure that TIF funds are used only in areas that genuinely need redevelopment.
• Conduct impact assessments before approving new TIF districts.

3. Requiring a “But-For” Test 

• The “but-for” test evaluates whether development would not occur without TIF assistance. Strengthening this test can prevent unnecessary subsidies to projects that would have happened anyway. The Reno Redevelopment Agency has a "but, for" test in place.

4. Allocating a Portion of TIF Revenue to Public Services

• Instead of diverting all tax increment revenues to redevelopment, set aside a percentage to return to the city. 

5. Implementing a Community Benefits Agreement (CBA)

• Require developers receiving TIF incentives to sign agreements ensuring benefits such as:
  • Affordable housing units
  • Local hiring requirements
  • Green space or public amenities
  • Support for small businesses in the area

6. Using “Pay-As-You-Go” TIF Instead of Debt-Financed TIF

• Instead of issuing bonds based on projected revenue, only reimburse developers as tax revenue actually comes in, reducing financial risk for municipalities. Reno's Redevelopment Districts and Agency are set up already as pay-as-you-go with no bond issuances planned. 

Success story with TIF Financing

In February 2025, the Manistee City Council approved an amendment to their Downtown Development Authority (DDA) Development and Tax Increment Financing Plan to incorporate a TIF gap financing mechanism aimed at facilitating housing developments in the historic downtown area. This approach functions similarly to the PAYGO model, projecting the increase in a property's taxable value resulting from a proposed project over a set period. The increased taxable value is then used to reimburse eligible costs, effectively filling the financial gap that might otherwise prevent the project from moving forward. This method ensures that the municipality incurs no upfront costs, thereby mitigating financial risk. https://www.manisteenews.com/news/article/manistee-secures-2-2-million-lakefront-20192484.php

Key Considerations for Risk-Free TIF Implementation:

Legally Binding Developer Commitments: Prior to incurring TIF debt, municipalities should secure legally binding commitments from developers to ensure that the anticipated private development will generate sufficient tax revenue to cover the TIF obligations. ​Source: https://whiteandburke.com/advisory-services/win-win-tif-project/

Comprehensive Financial Analysis: Conducting thorough financial and risk analyses is crucial to assess the feasibility and potential impact of the TIF project on the municipality's fiscal health. ​Source: https://whiteandburke.com/advisory-services/win-win-tif-project/

Additional Successful Projects that Utilized TIF Financing

1. Chicago, Illinois:

Marshfield Plaza: This retail development on the city's south side transformed a previously underutilized area into a vibrant shopping center. The project was financed through TIF, which facilitated land acquisition and infrastructure improvements without imposing financial burdens on the city.​

Englewood Square: Located in the Englewood neighborhood, this project utilized TIF to attract major retailers, including a Whole Foods Market. The development has spurred economic growth and job creation in the area, with the increment in property taxes covering the initial investment.​

2. Denver, Colorado:

Union Station Redevelopment: Denver leveraged TIF to transform its historic Union Station into a multimodal transit hub surrounded by mixed-use developments. The project has been a catalyst for urban revitalization, with increased property values generating sufficient tax increments to repay the city's investment.​

3. Dallas, Texas:

The Mercantile Complex Redevelopment: This project involved the renovation of historic buildings in downtown Dallas into residential and commercial spaces. TIF was used to finance the redevelopment, leading to a rejuvenated urban core and increased property tax revenues that offset the city's expenditures.​

4. Portland, Oregon:

South Waterfront Development: Portland's use of TIF in the South Waterfront district facilitated the transformation of former industrial land into a thriving neighborhood with residential, commercial, and research facilities. The increment in property taxes has been instrumental in funding infrastructure improvements, ensuring the city's financial commitments are met without undue risk.​

These examples demonstrate how strategic application of TIF can drive economic development and urban revitalization while safeguarding municipal finances.