The future looks bright and promising for the Tax Increment Financing (TIF) region. However, it’s not just about investing in these areas; it’s about making communities better. From revitalizing communities to driving economic growth, every dollar you invest leads to a brighter future.
Below is a look at each investor’s public investments in TIF areas. Read on to learn how you can use them to make your community prosper and your business profitable.
Tax Increment Financing (TIF) Region Overview
TIF allows local governments to finance infrastructure projects in specific locations that require progress and development. It works by collecting incremental tax revenue from property tax revenue. The government then uses the money to develop infrastructure and attract investment.
A TIF district is a designated area in which property tax increases are set aside for future infrastructure plans. In a TIF district, every increase in property value generates additional tax revenue. This revenue contributes to community benefit projects to promote local improvement.
The concept of TIF area is explained in the figure:
The following are definitions of the concepts used in the diagram:
- Captured evaluation value: The capture value in a TIF district is the total property value minus the original year’s value.
- Baseline attribute values: The starting value of a TIF district is the total property value in its first year.
- Tax increase: The annual tax increment is the property tax levied on the value captured within the TIF district.
TIF emerged in California in the 1950s to combat urban decay and has gained popularity in redevelopment projects across the country. Nearly every state uses it to finance infrastructure, except Arizona, which repealed TIF in 1999.
Types of Public Investment in TIF Districts
As an investor, you can take advantage of different types of public investments in TIFs. Regardless of type, they are vital to economic growth and community development.
Here are three types of public investment:
1. Infrastructure development in a TIF area refers to the construction or improvement of public buildings such as roads and utilities. This project is typically subject to contractor insurance requirements.
2. Public amenities in a TIF district include parks and recreation areas. These areas improve communities for residents and visitors, which is why lawmakers support investors and increase the supply of real estate.
3. Community services in TIF districts involve investments in schools and health care and even investments in mobile homes. The goal is to benefit residents and improve the entire community.
Key Benefits of Public Investment in TIF Districts
Public investment in TIF districts offers potential benefits to investors and communities, such as:
- Economic growth accelerates: Public investment promotes economic activity in TIF areas by improving infrastructure and attracting companies. As an investor, you can also contribute to the creation of jobs and business opportunities, helping the local economy grow and expand.
- Improve quality of life: Investments in public facilities and community services in TIF districts help citizens live better lives. As an investor, you can be a part of providing entertainment, providing access to vital services and creating more community space.
- Attract private investment: TIF districts often attract private investors who see opportunities for growth and profit. Coupled with cross-generational negotiations as an investor, you can partner with local authorities and pursue valuable community projects.
How to leverage public investment in TIF districts
When it comes to fractional real estate investing, it’s best to take advantage of public investment in TIF districts. The plan involves using smart strategies to make the most of infrastructure improvements and community investments. It not only drives economic growth but also revitalizes these areas.
As an investor, here are five ways you can get started with public investing in TIF districts, along with advice from industry insiders.
1. Set clear goals
First determine the specific goals of public investment in the TIF area. Be clear about what you hope to achieve from these investments. This will provide a roadmap for decision-making and ensure alignment with expected outcomes.
Choice Mutual founder and CEO Anthony Martin recommends setting SMART goals for public investment in TIF districts.
Martin told BiggerPockets:
“As stakeholders invest deeper into the TIF region, it’s critical to set clear goals from the beginning. It’s like planning out your road trip destination before you refuel, you’ll know exactly where you’re going and how. Get there. However, make sure these goals are specific, measurable, achievable, relevant and timely.
2. Identify key priorities
Determine the most important objectives that will best benefit your public investment in the TIF area. Doing this will give you an idea of your focus areas as an investor and lead you in the right direction. It also helps you manage human and material resources and allocate financial resources effectively and strategically.
Xiao Jie (Jia Yong), co-founder and president of SuretyNow, recommends clarifying your role and scope as a public investment investor. He told BiggerPockets:
“Investing in a TIF district is all about knowing where to focus your efforts. Identifying our top priorities ahead of time allows you to focus on areas of greatest impact. This sets the stage for ultimate success.
3. Seek stakeholder partnerships
Public investment in TIF areas involves local governments, private investors, and many other stakeholders. This means working with different people and organizations interested in regional initiatives. As an investor, forming partnerships allows you to tap into a variety of knowledge and resources to optimize the impact of your investments.
Bert Hofhuis, founder of Every Investor, emphasized the importance of effective communication and collaboration in public investment, telling BiggerPockets:
“TIF area investing relies heavily on teamwork. By working with stakeholders who share your goals, you can accomplish more than you could on your own. It’s like building a dream home: everyone Everyone contributed their expertise to the project and ended up creating something absolutely wonderful.
4. Get involved in the community
Public investment aims to provide a return on investment (ROI) for communities and their people. This means you should engage with local citizens and stakeholders by involving them in decision-making. By doing this, you ensure that your investments meet the needs and objectives of the public.
Oaks Roofing and Siding Sales Manager Allison Kesselring emphasized the value of community involvement in public investment, telling BiggerPockets:
“Community engagement is critical when investing in TIF districts. By listening to the people who live in these communities, you can ensure that your investments have the greatest impact in your own backyard. Ultimately, successful investments are those that have a positive impact on the community Way.
5. Measure performance
Performance monitoring is critical for any public investment, including those in TIF districts. This step requires tracking how you as an investor meet your key performance indicators (KPIs). These key metrics also measure how you achieve your investment goals.
RubyHome CEO Tony Mariotti recommends performance measurement for public investment, telling BiggerPockets:
“In TIF area investing, monitoring performance is similar to watching a scoreboard. As an investor, it tells you how you are doing and where you need to improve. By tracking these numbers, you can ensure that your investments are working for you communities while maximizing return on investment.
final thoughts
Public investment in TIF districts is key to promoting economic growth and community development. As an investor, the return on investment is worth it.
Consider these practical steps to leverage public investment in TIF districts. Set clear goals, prioritize investments, engage with stakeholders and measure performance. With these in mind, you can maximize its impact.
Ultimately, TIF districts can become thriving centers of opportunity, bringing lasting prosperity to residents and investors.
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Notes on BiggerPockets: These are the opinions written by the author and do not necessarily represent the views of BiggerPockets.
