Tax Increment Financing.  Tax increment financing (TIF) is a method of allocating a portion of property taxes to finance public improvements in designated areas.  Typically, under a TIF program a local government issues bonds to finance public improvements.  To repay its bondholders, the local government is permitted to draw upon regular property tax revenue from increases in assessed value inside a special district surrounding the site of the public improvements.
 
Local Tax Increment Financing.  In 2021 the Legislature authorized local governments to use local tax increment financing (LTIF). A local government may designate up to two LTIF areas, and use resulting tax allocation revenues to pay for public improvement costs.  To do so the local government must adopt an ordinance designating a specific increment area within its boundaries.  Public improvements to be financed with the use of LTIF must be specified.  The increment area cannot include the area of the entire jurisdiction of the local government.  A local government can create no more than two active increment areas at any given time, and they may not physically overlap.  An increment area must be retired after no more than 25 years.  There is an assessed value limit within an increment area of $200 million.  If a jurisdiction sponsors two increment areas the two areas may not equal more than $200 million or more than 20 percent of the sponsoring jurisdiction's total assessed value, whichever is less.
 
Prior to establishing an increment area the local government must consider a project analysis that includes objectives for the increment area, identification of properties within the financing area, assessments of likely job creation and private development expected from the project, potential impacts and mitigation measures needed, among others.  If a project analysis indicates an increment area will impact at least 20 percent of assessed value in a fire district mitigation strategies must be negotiated.  Prior to adoption of an ordinance authorizing an increment area the project analysis must be submitted to the Office of the State Treasurer for review.  The local government must hold at least two public briefings for the community regarding the tax increment project.
 
A local government designating a LTIF area may issue general obligation bonds to finance the public improvements within an increment area.  Any increase in assessed value within an area is included in the add-ons for purposes of the 1 percent revenue growth limit calculation.
 
Apportionment of Taxes.  Beginning in the calendar year following the passage of the ordinance, the county treasurer must distribute receipts from regular taxes on real property located in the increment area.  Property taxes to be apportioned under TIF include property tax levies subject to the $10 and $5.90 limits.  Taxes levied by port districts or public utility districts specifically for the purpose of making payment on bonds, and taxes levied by the state for support of the common schools are excluded from TIF apportionment.
 
Each taxing district receives that portion of its regular property taxes produced by the rate of tax levied by the taxing district on the tax allocation base value for that TIF project in the taxing district.  The local government that created the increment area receives an additional portion of the regular property taxes levied by each taxing district upon the increment value within the increment area.  The local government that created the increment area may agree to receive less than the full amount of this portion as long as bond debt service, reserve, and other bond covenant requirements are satisfied.  The portion of the tax receipts distributed to the local government may only be expended to finance public improvement costs financed by TIF.
 
The apportionment of increases in assessed valuation in an increment area cease when the taxing district certifies to the county assessor that allocation revenues are no longer needed to pay the public improvement costs.  Any excess tax allocation revenues must be returned to the county treasurer and distributed to the taxing districts that imposed regular property taxes.

The increment area expires prior to the sunset date if tax allocation revenues are no longer necessary or obligated to pay any bonded indebtedness issued solely to fund the public improvement costs.

The provision requiring mitigation strategies be negotiated if a project analysis indicates an increment area will impact at least 20 percent of assessed value in a fire district is removed.

A governing body of any taxing district within the increment area must approve, by majority vote and according to the governing body's ordinance and publication procedures, the taxing district's partial or full participation in the tax increment project. If the governing body does not approve its participation the taxing district's property taxes are excluded from TIF apportionment.

The apportionment of increases in assessed valuation in an increment area cease when the taxing district certifies to the county assessor that allocation revenues are no longer needed to pay any bonded indebtedness issued solely to fund the public improvement costs.