Texas Tax Code Chapter 311 gives cities the authority to create special districts, one of the most effective key economic development tools in the state. The City of Garland has two tax increment financing (TIF) districts to promote the development and redevelopment of the following key geographic areas:
The tax year in which the city establishes the TIF sets the real property and/or sales tax assessed value base (base year). For each year in the life of the TIF, a special fund captures the tax revenue (either or both real property and sales) generated from the difference between the base year assessed value and that year’s assess value. Other taxing districts except for school districts can choose to direct all or a portion of their tax revenues into the TIF.
A TIF District board of directors (TIF Authority) chooses how to spend the money captured in the TIF fund. TIF funds can only pay for a specific menu of eligible projects. When the TIF expires, all assessed value revenues are paid to the respective taxing districts like before the TIF was designated. The graph depicts how a TIF district works.
Source: Craig Johnson, Indiana University