What Is Tax Increment Financing
Tax Increment Financing (TIF) is a public financing mechanism that captures the increase in property tax revenue from a designated area and dedicates it to fund infrastructure or development projects within that same area. When a TIF district is created, a baseline property value is established. Any increase in assessed values above that baseline generates "increment" revenue that goes into a special fund rather than the general tax pool. This increment funds bonds, public improvements, or developer reimbursements instead of flowing to schools, municipalities, and other taxing bodies.
How TIF Affects Your Assessment
As a property owner in a TIF district, your property may be subject to higher assessment increases than comparable properties outside the district. Assessors often use different appraisal methods and assessment ratios within TIF zones because the districts are designed to stimulate development and raise property values. This means your assessment growth could outpace market conditions.
When challenging your assessment at a board of review hearing, you need to understand whether your property falls within an active TIF district. If it does, the assessor may justify higher valuations by pointing to planned improvements or development activity in the district. You can counter this by presenting comparable sales data from similar properties outside the TIF zone, which often show lower assessed values for equivalent properties.
TIF Districts and Assessment Ratios
Illinois and other states using TIF maintain specific assessment ratios (typically 33.33% of fair market value for residential property). However, properties in active TIF districts sometimes experience faster assessment growth because assessors factor in anticipated value increases from planned infrastructure. The baseline valuation used to calculate the TIF increment is crucial. If that baseline was set too low, property owners bear the cost through higher incremental assessments.
- Most TIF districts run for 23 to 35 years, meaning long-term assessment pressure for property owners
- The TIF revenue bond debt is typically paid first before taxes go to schools and other services
- Exemptions (homestead, senior freeze, agricultural) may apply within TIF districts, but their benefit can be reduced if the TIF absorbs a portion of assessed value growth
- Commercial properties in TIF districts often face the most aggressive assessments due to developer incentive agreements
Appealing Assessments in TIF Areas
At your board of review hearing, request the TIF district map and baseline valuation documents. This information is public record. Compare your assessed value to comparable sales of similar properties outside the TIF zone. If comparable sales show lower values, you have strong evidence that your assessment reflects TIF-driven inflation rather than actual market conditions. Appraisers use three methods (income, cost, and market approach). In TIF districts, assessors may weight the income or cost approach more heavily to justify higher values, especially for commercial properties. Push back by emphasizing market approach data from comparable sales.
Document any infrastructure deficiencies or incomplete improvements promised in the TIF plan. If the district hasn't delivered on its promised enhancements, your property's actual market value may not support the assessed value. This argument has succeeded in several board of review cases where assessed values were reduced by 10-20% based on this evidence.
Common Questions
- Can I get a homestead exemption if I'm in a TIF district? Yes, homestead exemptions apply in TIF areas, but their dollar benefit may be smaller if the TIF has already captured a portion of your property's value increase. Verify that the exemption is being applied to your full assessed value.
- Does my property have to be in a TIF district indefinitely? No. TIF districts expire, typically after 23-35 years. Once the district dissolves, increment revenue stops flowing to the TIF fund and returns to the general tax pool. Check with your assessor's office for the TIF district's sunset date.
- How do I know if my assessment increase is due to TIF or market conditions? Compare your assessment growth rate to comparable properties outside the TIF zone over the same period. If your property's assessed value grew significantly faster (15-30% faster is common), TIF influence is likely. Bring this data to your board of review hearing.