Consider using Tax Increment Financing or District Improvement Financing
Tax Increment Financing (TIF) is a tool cities and counties can use to help desirable projects become reality. Under a TIF, a local government taps the anticipated benefits of future development (such as increased property tax revenues) to pay for infrastructure improvements or other current expenditures that are critical to the success of the proposed project. TIFs can stimulate private investment by assuring developers that the infrastructure needed to support a proposed development will be built in a timely fashion. District Improvement Financing (DIF) is similar, although it funnels the tax dollars toward redevelopment districts rather than toward improvements for specific developments.
TIFs and DIFs can be used for a variety of purposes, including assisting local governments in revitalizing blighted areas, reimbursing developers for some of their project costs, and shifting some costs that would normally fall on the developer to local government. When they're used to revitalize economically distressed areas, they can provide a nucleus that spurs more development, which in turn lifts property values and generates new tax revenues.
The first Tax Increment Financing program was put in place in California in 1952. By 1998, similar programs were authorized in 48 states and the District of Columbia. Authorizing legislation is generally required and, in some instances, constitutional amendments are needed at the state level before a city or county can engage in TIF financing.
The next step is for the local government to establish the boundaries of the TIF area, the duration that the TIF will remain in place and the specified "tax increment" that will be used.
- Massachusetts' TIF and DIF Programs
Cities and towns that wish to set up DIFs in Massachusetts must first be certified by the State Economic Assistance Coordinating Council. DIF districts can be as small as a single parcel or as large as a quarter of a municipality's land. Once a district has been certified, a city or town may use the program to acquire land, build improvements (schools, parks, etc.), or incur indebtedness by pledging tax increments or other project revenues for repayment of debts.