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Partners for Climate Protection

Tax increment financing

Tax increment financing (TIF) is a public financing tool used to subsidize infrastructure and other community improvement projects. The method uses the future gains in taxes to subsidize current improvements. In general, improvements to or additional amenities for an existing neighbourhood  drive up property values and property tax revenues. When an increase in site value and private investment generates an increase in tax revenues, it is called the "tax increment". TIF dedicates these tax increments within a defined district to finance the debt issued to pay for the project, and is often designed to channel funding toward improvements in underdeveloped or underutilized areas. It creates funding for public or private projects by borrowing against the future increase in these property tax revenues.

Under Ontario's Community Improvement Plans (CIP), municipalities can make loans or grants within CIP project areas to help pay for certain costs, and can also establish Tax Increment Equivalent Financing (TIEF) programs.

Applications

Public transit, parks, public spaces, brownfields

Benefits

  • Transit infrastructure can be funded through transit-oriented development.
  • Facilitates densification and links infrastructure funding to infill development.
  • Mitigates urban sprawl, which can lower overall municipal operating and maintenance costs for roads or new infrastructure, such as water and wastewater services.
  • If properly designed, new infrastructure can be self-financing.
  • No burden on existing capital reserves and public funding sources.
  • Stimulates private-sector investment.

Barriers and challenges

  • Not viable if sufficient gains in property values are not obtained.
  • Can lead to gentrification of certain neighbourhoods, and a loss of affordable housing.
  • Could siphon investment that would have gone elsewhere in the community.

Resources and notes

Municipal examples

  • Calgary, AB's East Village project, situated on a brownfield, is expected to cost $75 million in debt-financed expenses, which will be repaid over 20 years out of future tax revenues
  • Ontario has introduced TIF as a financing tool for municipal brownfield redevelopment on a pilot basis. Pilot projects include a proposed subway expansion in York Region and the redevelopment of the West Don Lands, a brownfield site in Toronto's waterfront.


Page Updated: 18/09/2015