Tax Increment Finance Explained

We dread taxes too... someone has to talk about them

By Drew Monroe | Published on 1/25/2024, 4:30:00 AM

We wrote an article last week titled "Greenlights for Alley Improvement", highlighting an art project going up in the alleyway between N. Black Ave and N. Tracy Ave. In the article, we noted that some of the funding for this project is coming from Tax Increment Financing (TIF).

"What is TIF?" you ask.

Here's how it works: A TIF district is created in a specific urban area needing development or revitalization. As development occurs and property values rise, the increase in property taxes (the "increment") is allocated to the TIF fund, redirecting these additional revenues towards further improvements in the district.

According to the Montana Department of Transportation (MDT), TIF-generated revenue comes with specific limitations and must be utilized within the designated district. Revenue from a TIF district can fund projects like enhancing streets and parking facilities, planting trees, installing new bicycle racks, trash bins, and benches, and other projects aimed at beautifying the streets-cape in the specified area.

Within Bozeman City Limits, there are 5 TIF districts, which you can find mapped out here. Notable projects within these districts that have utilized TIF funds in past and present :

  • The Lumberyard (a development currently in the works behind Kenyon Noble on N 11th and Tschache Ln)
  • The ELM concert venue (on N 7th)
  • The Bridger Parking Garage (located between N Black and N Tracy Ave)

Proponents of TIF argue that it encourages urban renewal and economic growth by funding development in underdeveloped areas, leading to job creation and neighborhood improvement.

Critics, on the other hand, contend that TIF diverts funds from essential public services like schools and emergency services. This is because the increased tax revenues from developed areas are reinvested in the TIF district, rather than being used for citywide services, potentially leading to budget shortfalls in other areas.

Regardless of whether you reside in a TIF district, the way Bozeman utilizes its TIF funds can have widespread financial implications; impacting the city as a whole.

TIF in a nutshell… now go pour that cup of coffee.