Tax increment financing (TIF) is one of the least understood — and most consequential — mechanisms in local public finance. When a TIF district is created, the property tax revenue generated by increased property values within that district is diverted away from general government services — including public schools — and redirected to fund development projects.
How TIF Works
When a municipality designates a TIF district, it essentially "freezes" the taxable value of all property within that area. As development occurs and property values rise, the additional tax revenue generated by that increase — the "increment" — is captured by the redevelopment agency rather than flowing to schools, counties, and other taxing entities.
This means that even as a school district's enrollment grows due to new residential development within a TIF district, the district may not receive proportional increases in property tax revenue to fund the additional students.
The Education Funding Impact
The impact on education funding can be substantial. In Utah, school districts receive a significant portion of their local funding from property taxes. When TIF districts capture property tax increments, school districts lose revenue they would otherwise have received — sometimes for 20 to 30 years, the typical lifespan of a TIF agreement.
Research suggests that in high-growth TIF areas, the combination of increased enrollment and diverted funding can create a significant per-pupil funding gap that must be covered either by state aid increases or by cuts to other programs.
What Can Be Done
Greater transparency is the first step. When TIF agreements are created, municipalities should be required to:
Citizens can also take action by attending public hearings when TIF districts are proposed, requesting records through GRAMA, and asking their elected officials about the education funding implications of proposed incentive agreements.
Conclusion
Tax increment financing is not inherently problematic — it can be a useful tool for encouraging development in genuinely blighted areas. But the lack of transparency and disclosure around TIF's impact on education funding is a serious problem that deserves public attention and reform.
Transparency for Education Dollars will continue to track, analyze, and publish information about TIF activity in Utah. We encourage all citizens to engage with this issue through the resources available on our website.