While tax increment financing, or TIF, can be a very useful tool for redevelopers, the vague wording of the laws and statutes concerning TIF can lead to misuse and abuse of the financing option. Auburn and its Community Redevelopment Authority, or CRA, found this out firsthand after receiving an audit letter from State Auditor Mike Foley in early May 2024.
TIF works by redirecting the “ad valorem” property taxes into a redevelopment fund, which can then be used to reimburse or pay off debts accrued during the redevelopment. If the original property is worth $100,000, and the redevelopment improves the value of the property to $200,000, then half of the property taxes collected by the county would then be refunded to the redeveloper, while the other half, the taxes from the base value ($100,000) of the property, would be distributed to schools, road departments and any other county entities who would receive a slice of the property tax pie.
This division of property taxes can continue for 15 years, or 20 should the property be deemed “extremely blighted.” After the 15 to 20 year time period, any and all property taxes collected on the property, both base value and improved value, should be distributed by the county to those above mentioned entities. The TIF division of taxes are also required to be “shut off” should the debts incurred through the redevelopment be paid in full, even, and especially, if said debts are paid before the 15 to 20 year limit.
