As Chicago Looks to Expiring TIF Districts for Increased Revenue, Here’s a Reminder of How TIF Works

April 11, 2024

Chicago’s tax increment financing (TIF) program is in the news again for its role in Mayor Brandon Johnson’s $1.25 billion Housing and Economic Development Bond proposal. Civic Federation President Joe Ferguson testified before City Council’s Committee on Finance on the proposal this morning, making it a good time to re-post some oldies but goodies on TIF from the Civic Federation’s blog archives. These posts explain what TIF does and does not do with regard to government revenues and tax rates and can be read in conjunction with the TIF section of the Federation’s 2011 primer on property tax extension in Cook County

A common misperception is that TIF programs divert or limit revenue from local governments like Chicago Public Schools. This is incorrect. Instead, TIF districts limit the taxable value of property, or the tax base, from which local governments can draw their property tax levies, which is the amount of money that governments request in property tax revenue to fund their budgets each year. TIF districts do not directly limit the amount of money for which local governments can levy. 

After a TIF district is created, the taxable value of property (called the equalized assessed value) within that geographic area is frozen based on the dollar amount that all taxable property within the TIF area is worth at that time. Thereafter, any incremental growth in the value of property within the TIF area is earmarked specifically for the TIF to pay off the costs associated with redevelopment within the area. Except in a specific potential case, this earmarking does not impact the amount of property tax revenue that goes to each local government that overlaps the TIF district, such as Chicago Public Schools and the City of Chicago.  

The result of TIF districts, rather, is that they increase tax rates, both for taxpayers inside a TIF district and outside a TIF district.  

When a TIF district expires, the incremental value of taxable property within the TIF district above the frozen base amount is returned to the tax base. But first, governments can and usually do levy for the taxable property value from the expiring TIF district, which is available outside of tax caps for one year after its expiry. The revenues generated from applying the government’s tax rate to the TIF increment would previously have gone to the TIF district, but instead go to the government’s coffers to be used for any purpose. This allows governments to increase their property tax revenue without actually increasing overall taxes.  


How are Local Governments Able to Access Extra Property Tax Revenue from Expiring TIF Districts? 

Nov. 27, 2013 


Updated Report Explains Effect of TIF on Cook County Local Governments 

Sept. 7, 2011