Types of Economic Investment Tools

Economic Investment Tools

Our city offers various investment programs designed to support eligible businesses and property owners. These incentives are designed to promote business growth, enhance community development, and improve the overall economic health of our city. Each type of incentive serves a specific purpose, from attracting new investments to revitalizing underutilized areas. 

Here’s a comprehensive overview of how these incentives work, their common applications, potential risks, and the positive impacts they aim to achieve within our community.

Incentive TypeFunctionCommonalityRisk LevelRisksPositives
Impact on Taxes
Tax Increment Financing (TIF)Allocates future increases in property taxes within a designated district to finance the cost of public improvements and infrastructure within that area.CommonLowIf the development doesn't generate the projected tax revenues, public projects may lack funding.Stimulates development in blighted or underdeveloped areas. 
Increases property values and revitalizes neighborhoods		No immediate increase in taxes, but reallocates future tax revenue increases from the general fund to finance the district's improvements.
Property Tax AbatementsTemporarily reduces or eliminates property taxes to lower development costs and attract investment.Very CommonModeratePotential loss of expected tax revenues for local governments if the development doesn't stimulate anticipated economic activity.Makes projects financially feasible
Attracts investment
Leads to job creation and economic growth.		Reduces immediate tax revenue but expects to gain more taxes long-term as property values increase.
Sales Tax Exemptions on Construction MaterialsExempts developers from paying sales tax on construction materials, reducing project costs- which is roughly 10%. .CommonLowLoss of sales tax revenue which could fund public services.Lowers construction costs, making projects more viable.Reduces tax revenue during construction but is offset by economic activity and eventual property tax contributions.
Industrial Revenue Bonds (IRBs)Municipalities issue bonds to finance development projects. The bonds are not obligations of the city but may offer tax exemptions for the financed properties.CommonLowMisunderstanding by the public that the City is financially liable if the project fails.Provides low-cost financing for significant projects, often leading to job creation and infrastructure improvements.Offers tax exemptions that decrease immediate tax revenues but aim to increase overall economic activity and future tax base.
Community Improvement Districts (CID)
Allows the City to levy additional taxes or assessments within a specified district to fund public improvements or services that benefit that district directly. These might include enhancements to streetscapes, public parks, or local infrastructure.CommonLow to ModerateCIDs can place an additional financial burden on businesses and residents within the district if not managed carefully. Enhances specific areas, leading to increased property values and attractiveness for further investment. Directly targets local improvements that benefit both businesses and residents within the district.Additional taxes or assessments are localized to the district and used for improvements within the same area, not affecting the broader city tax rates. 
Payment in Lieu of Taxes (PILOT)
A financial agreement where a business or developer makes payments directly to the local government instead of paying traditional property taxes. These payments are often less than the property tax would be and are used to offset infrastructure and service costs directly associated with the development. Common
Moderate
Can lead to perceived inequity in tax burden and potential underfunding of local services if not proportionate to the benefits.Allows municipalities to secure funding for infrastructure improvements necessary for development, fostering economic growth while still receiving some revenue from tax-exempt properties.Temporarily reduces property tax revenue but provides a steady, predictable stream of payments that support specific public projects or municipal debt obligations.