Finance

Tax Increment Financing in Connecticut

Tax Increment Financing in Connecticut, Tax Increment Financing in Connecticut (TIF) allows local governments to use future property tax revenue to fund economic development projects. New TIF legislation streamlines the approval process and allows for greater local control and flexibility. Learn more about the TIF process by attending the free Tax Increment Financing in Connecticut webinar. Using the proper words and phrases is important for marketing and branding your business. Here are a few examples of effective and creative ways to convey your message.

Tax Increment Financing in Connecticut

Pay as you go is a form of tax increment financing

A tax increment financing (TIF) project is one that can use the additional tax revenue from a new development to cover the cost of that development. This type of financing can be used in many different ways, including for physical projects, municipal development, and state and federal redevelopment programs. In Connecticut, the state’s CGS Section 8-134a allows municipalities to issue bonds to pay for public improvements in designated areas, and the additional tax revenue can then be used to repay the bonds.

In this type of financing, the private developer receives repayments only as the incremental taxes are generated. However, the developer has to assume some risk and invest capital in the project’s infrastructure. The developer is only paid once the project is completed and delivers its expected benefits, typically including interest. This type of financing is popular in Connecticut and is available for a wide variety of development projects. In fact, it is often used to finance municipal development plans that use state dollars for infrastructure projects.

Municipalities can designate areas for redevelopment

Tax increment financing (TIF) is a form of private funding that allows municipal governments to fund certain projects. TIFs can be used for municipal development and urban renewal projects, as well as to clean up contaminated property. In Connecticut, municipalities can designate areas for redevelopment that are blighted and need remediation or are otherwise unprofitable. In order to qualify for TIF funding, an area must be underdeveloped, blighted, or unproductive. Municipal governments are allowed to designate up to 20% of their total area for a TIF project, although this is not required.

In Connecticut, municipalities can designate areas for redevelopment using tax increment financing (TIF). To qualify for TIF funding, municipalities must allocate incremental property tax revenues into a fund that consists of two accounts. One fund is dedicated to the financing of economic development, and the other is to pay off bonds. The money from tax increment bonds is separate from the municipality’s overall debt.

Municipalities allocate tax increment revenue to a special fund or to the Connecticut Development Authority

In order to use this tax increment funding to benefit economic development projects, Connecticut municipalities must first establish a tax increment financing district (TIF). The TIF Act gives municipalities the authority to create such a district. Each Tax Increment District must have a special fund for economic development projects, and the municipality must allocate the tax increment revenue to that fund. This tax money is then repaid by paying back bonds or paying off project costs.

Tax Increment Financing in Connecticut

Municipalities may also use the tax increment funding to reimburse debts or fund ongoing economic development programs. The TIF is available to municipalities in Connecticut and Maine for both economic and physical development projects. The Connecticut Development Authority (CDA) administers the program, which provides financial support to communities that engage in economic development activities. Municipalities can also use tax increment funds for physical development activities such as road projects.

Goals of tax increment financing

Tax Increment Financing (TIF) is a local economic development tool, allowing municipalities to use the tax revenues generated by new capital investments. Its goal is to encourage industrial development, increase employment opportunities, and broaden the tax base of municipalities like the Town of Enfield. The Connecticut Legislature passed new TIF legislation in 2015, and it enables municipalities to use tax revenue to spur economic development. While Connecticut has few TIF districts, the state does permit municipalities to establish them.

The Town of Enfield, Connecticut, enters into CEAs to encourage private partners to invest in a local area. CEA funds must go toward the development of public infrastructure, such as roads and parking lots. In order to receive CEA funds, the applicant must submit documentation justifying the expenses. CEAs have a one-year maximum. The Town’s CEA must also include a plan for the long-term use of the funds.

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