South Eastern Council of Governments, South Dakota

Tax Increment Financing

Tax Increment Financing is viewed as a self-help tool for local governments to finance redevelopment while increasing future fiscal capacity through a stronger tax base. It relies on local property tax revenues and is administered and monitored almost entirely by local government officials.

A district designated for Tax Increment Financing is allowed to have its tax base frozen at the rate in effect immediately before development. Any amount over the base which occurs because of the development or anticipated development goes into a special fund which is used to retire any debt incurred in financings the development. A time limit is usually placed on the debt repayments, after which the full tax due is paid to jurisdictions having tax authority within the redeveloped area.