Tax Increment Financing (TIF) is a means to finance local public and private improvements and economic development activities. Under Section 401.19 of the Iowa Code, municipalities and counties (areas outside municipal corporate limits) with urban renewal areas may utilize the tax increment financing (TIF) mechanism.

TIF allows communities or counties to borrow money to pay the cost of urban renewal projects such as land acquisition and redevelopment, construction of streets, water, sewer, etc. or providing loans or grants to private parties for economic development. Upon creation of a tax incremental district (allowed only within urban renewal areas), the property tax assessment is frozen. While the same amount of tax revenue collected just prior to the creation of the district is guaranteed to each taxing jurisdiction, the increase in tax revenue resulting in the application of the consolidated property tax levy of all local taxing jurisdictions against the increase in value from new private development is paid into a special city or county fund to pay off the debt incurred to finance the development. Once the tax increment debt is repaid, the taxing jurisdictions will receive their respective shares of the increased tax revenue from the district. In this manner, the city or county and its tax increment/urban renewal projects receive virtually all of the increased property tax revenues produced from the development.

General and essential corporate purposes, including economic development are eligible projects. For a county, a revitalization area shall include only property which will be used as industrial property.

Eligible use of the funds include direct or indirect public improvement project costs, including economic development loans or grants. In Iowa cities, the tax increment financing mechanism has been used for such projects as parking garages, skywalks, land acquisition and site clearance, street and utility improvements and public plazas and parks, as well as for economic development loans and grants.

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