Frequently Asked Questions

What is TIF?

Short for “tax increment financing”, TIF is a state authorized funding tool used by the Downtown Development Authority (DDA) to develop, construct and maintain critical public infrastructure that supports and promotes economic development as well as placemaking and cultural amenities throughout the downtown area. The TIF tool is utilized by municipalities to support their downtown throughout Michigan and nationwide.

How does TIF Work?

Under TIF, the DDA “captures” property tax revenue on the incremental increases of assessed property values within the downtown district over time. These captured tax revenues are then used to fund public infrastructure improvements within the downtown district. Downtown Traverse City has Two TIF Districts – “TIF 97” was established in 1997 and covers the majority of downtown. “Old Town TIF” was established in 1985 (and renewed in 2016) and covers the Old Town area. See a map of these two districts HERE.

Click HERE for a graphic example of how TIF works.

How is TIF funding spent?

TIF funding is spent on public infrastructure and public improvement projects throughout the TIF districts.

What infrastructure projects has TIF previously funded?

Previous public infrastructure projects funded under TIF include (among others) the Hardy Parking Garage, boardwalks along the river, public restrooms, improvements to the City Opera House, improvements to Clinch Park, bridge replacement, numerous streetscaping projects and the downtown police officer.

How were the public infrastructure projects funded by TIF identified?

Each public infrastructure project was developed through an extensive public engagement process, including the recent Moving Downtown Forward planning process. Some projects include large capital improvements like the Old Town Parking Garage, while other projects include daily activities like washing sidewalks and watering planter boxes. Each project is listed in a “TIF Plan.” The DDA has two Tax Increment Financing (TIF) plans, TIF 97 and Old Town TIF. Revenues are used to fund public infrastructure improvement in the DDA District.

Who oversees TIF expenditures?

The DDA Board is responsible for forming DDA’s annual budget, which includes (among other items) TIF expenditures for public improvement projects. The City Commission has final approval the DDA’s budget, as required by statute.

Who funds TIF and how does it impact me?

TIF captures property tax revenue only on the incremental increases of assessed property values within the downtown district. Individual taxpayers remain unaffected by TIF. In addition, the city continues to receive the same amount of downtown property tax revenue as the year TIF was established, 1997 for TIF 97 and 2016 for Old Town TIF.

What are the benefits of TIF?

Investing in the city center and utilizing tools such as TIF increases the tax base. In fact, Downtown TC generates three times more taxes per acre than the rest of the City. A vibrant downtown increases property values not only in the district, but beyond. Ultimately, Downtown TC serves as a revenue generator for the city and the county.

In addition, large infrastructure projects such as the Hardy and Old Town Parking Garages would not have been possible without TIF as a funding tool.  The city general fund would not be able to support such projects of this magnitude on its own should TIF not be utilized. TIF dollars are also utilized to leverage other funds. For example, when bridge work takes place, TIF is used as the required match for MDOT and federal funding. 

Finally, TIF is used to levy funds for environmental clean up and serve as a catalyst for private investment. The Iron Works property in the Old Town District was one of the first TIF projects. TIF dollars were utilized for public improvements surrounding the property while a private investment was made to redevelop the property. 

Common Myths about TIF

TIF funds are given to private developers.

False. By law, TIF dollars can NOT be used to directly fund private developers. TIF money can only be used to fund critical public projects that leverage and support private investment in downtown.

TIF impacts my taxes.

The tax burden of property owners throughout the city (downtown or otherwise) is unchanged by TIF. What TIF does is determine where a portion of downtown property owner taxes go upon collection. Taxes would not go down if TIF was eliminated.

The variety of regional agencies that contribute toward TIF need the revenue more than the downtown.

Beyond the City of Traverse City, the amount of funds captured by the Downtown TIF is a very small fraction of funds raised by the regional partners involved. The counter-argument is simply that the regional benefits from a vital downtown serving as the economic engine of the region outweigh the marginal cost. The value proposition is particularly high to a region that houses the vast majority of residents that actually work, visit and enjoy Downtown. Furthermore, Downtown remains essential to the future of the regional economy, particularly as the region struggles to attract younger demographics, primary employers and achieve environmental sustainability goals.

TIF 97 was originally provided with a commitment to end after 30 years.

While it is true that some policy makers made a finite 30-year commitment for TIF 97 back in 1997, we are now living amidst new economic realities, and Downtown, while certainly more viable, is not “done.” The recent Covid-19 pandemic revealed how fragile economic vitality can be, and how important a vital downtown is to long-term economic resiliency. Regional economic challenges for the future – lack of affordable housing, workforce and business recruitment challenges, aging demographics, climate change and resilience – could not have been envisioned 30 years ago. This is precisely why the Michigan statute allows DDA’s to be extended, allowing regions to reassess current and future needs and continue to utilize TIF to steer regional prosperity. Furthermore, in Traverse City, the Moving Downtown Forward process revealed that the community does not see Downtown as a finished product. Based on community perspectives shared through this process, there is widespread support for a new series of investments that will meet the guiding principles stated in this report.

The City of Traverse City needs to capture TIF funds to fund basic services.

Some community voices have lobbied for the dissolution of TIF to help fund basic services within the City of Traverse City; however, the Downtown TIF is highly leveraged by regional funding sources. The City contributes 53 cents on the dollar for TIF, with the remaining 47 cents coming from a variety of regional authorities that directly benefit from a vital downtown. If the City walks away from this arrangement, it will keep only 53 cents on the dollar while assuming 100% of the obligation for downtown improvements. Traverse City residents need to understand that ending TIF is a dramatic civic investment decision, walking away from regional funding leverage and placing tens of millions of future public projects solely in the hands of Traverse City’s 16,000 residents. For example, a $43 million bond issuance is recommended to be supported by the next generation of Downtown TIF. Without TIF, this amounts to nearly $2,700 per resident of Traverse City, or nearly $11,000 for a family of four. With the extension of TIF, the cost is zero.