Tax Increment Financing (TIF)

Tax Increment Financing (TIF) Districts are a tool for municipalities to finance public infrastructure spending and spur downtown property redevelopment. Though the Vermont TIF program has undergone many statutory changes, it has been available and successful for many years.

Generally, a TIF District is established by a municipality around an area that requires public infrastructure improvements to encourage private real property development or redevelopment. The property values at the time the District is created are determined and the property taxes generated by that original value continue to be paid to the taxing authorities (municipality and the State Education Fund).

However, after VEPC approves the district, the municipality must additionally receive voter approval to incur debt to build public infrastructure. Then, once debt has been incurred, the municipality is allowed to retain a portion of the property tax revenue growth within the district to finance this infrastructure investment. These public improvements cause real property development and redevelopment to occur and, for 20 years, the portion of the property tax revenue growth which the municipality retains pays for the infrastructure debt. The tax revenue from the original value of the property and the remainder of the revenue growth goes to the taxing authorities. After the 20-year property tax retention period, 100% of the property taxes generated in the district go to the taxing authorities.