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Notice
This document is disseminated under the sponsorship of the U.S. Department of Transportation in the interest of information exchange. The U.S. Government assumes no liability for the use of the information contained in this document.
The U.S. Government does not endorse products or manufacturers. Trademarks or manufacturers' names appear in this report only because they are considered essential to the objective of the document. They are included for informational purposes only and are not intended to reflect a preference, approval, or endorsement of any one product or entity.
The contents of this document do not have the force and effect of law and are not meant to bind the public in any way. This document is intended only to provide information and clarity to the public regarding existing requirements under the law or agency policies. Value capture techniques and policies are often implemented outside of Federal funding or regulatory requirements.
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Cover photos source: USDOT/Getty
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16. Abstract This primer provides practical information for implementing tax increment financing (TIF) for State and local departments of transportation and public works agencies as one approach for adding value capture to their infrastructure funding strategies. It includes an overview of this technique, the processes involved in implementation, and real-world examples of when and how it can be used. |
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Form DOT F 1700.7 (8-72)
Reproduction of completed page authorized
USDOT |
U.S. Department of Transportation |
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EIFD |
Enhanced infrastructure finance district |
ERGG |
Economic Redevelopment and Growth Grant |
FHWA |
Federal Highway Administration |
SIB |
State infrastructure bank |
SSD |
Special service district |
TAD |
Tax allocation district |
TIF |
Tax increment financing |
TIFIA |
Transportation Infrastructure Finance and Innovation Act |
TRZ |
Transportation reinvestment zone |
State and local governments often struggle to mobilize the necessary funds to maintain, rebuild, and expand their local transportation networks. Planned projects often face funding hurdles that may result in projects being delayed or cancelled altogether, leaving important safety and mobility objectives unmet.
Derived from real estate developments, "value capture" refers to a set of techniques that allow monetizing the appreciation in real property values triggered by infrastructure improvements. Such monetization enables generation of future revenues that can be leveraged upfront to help finance current or future infrastructure improvements. Under the right circumstances, this may allow practitioners to help close funding gaps and accelerate project delivery, as well as trigger much needed economic development/redevelopment to provide livable communities, create jobs, and provide environmental stewardship benefits.
In some places, it is assumed that conditions are so bad that no new development will occur. It also is assumed that new or improved infrastructure will be capable of catalyzing new private development. In order to fund this infrastructure improvement, a geographic area (district) subject to the influence of new infrastructure is defined. Specified tax revenues within the district (prior to the project) are benchmarked. Once the project is undertaken, any increase in district revenues is deemed to be attributable to the infrastructure project. This revenue increase (the "tax increment") is not deposited into the general fund, but instead into a special account dedicated to fund the infrastructure project. This tax increment financing, or TIF, continues until the project construction or financing costs have been retired. At that point (sometimes after 15 to 30 years), the TIF district is terminated and all revenues are deposited into the general fund.
This primer was developed on behalf of the Federal Highway Administration's Every Day Counts-5 Value Capture Implementation Team and is based on literature reviews, interviews, case studies, and lessons learned from practicing agencies. It introduces the TIF concept and how it can provide a funding source to help improve transportation and other critical infrastructure needs. It also provides several examples showing how public agencies have established and managed TIFs.
