Because the Township does not have an earnings tax, property taxes fuel its economy. To maintain the public infrastructure, the Township utilizes what's known as Tax Increment Financing, or TIF to recapture the taxes on the change in value after property is developed and funnels those monies into public improvement projects. The $8.5 million dollar widening of Montgomery Road was paid for with TIF dollars!
What is TIF?
·To induce or cause a development or redevelopment that otherwise would not occur—e.g., to convince a developer to build an office building, retail, industrial, or housing development that otherwise would not be constructed. To do so, the increased property taxes are used to pay for costs (e.g., land acquisition or site preparation) that the developer would normally pay.
·To finance public infrastructure (streets, sewer, water, or parking facilities) that are related to the development. In some cases, the developer would be required to pay for this infrastructure through special assessments or other charges. In other cases, all taxpayers would pay through general city taxes.
How does TIF work?
How is TIF used to pay upfront development costs?
·Bonds. The authority or municipality (city or county) may issue its bonds to pay these upfront costs and use increment to pay the bonds back. Often, extra bonds are issued to pay interest on the bonds ("capitalizing" interest) until increments begin to be received.
·Interfund loans. In some cases, the authority may advance money from its own funds (e.g., a development fund or sewer and water fund) and use the increments to reimburse the fund.
·Pay-as-you-go financing. The developer may pay the costs with its own funds. The increments, then, are used to reimburse the developer for these costs. This type of developer financing is often called "pay-as-you-go" or "pay-go" financing