Tax increment funding is a development and redevelopment mechanism available to local government. It is based on development activities that are funded by the increase in taxes on a property or properties from one point in time to another. There are two type of districts; slum and blight and commercial development.
​
​In either case local government adopts an urban renewal plan for a certain parcel or area. Once it makes a finding at a public hearing that the parcel or area is suitable for renewal, it asks the County Auditor to collect all real estate taxes generated by the renewal parcel (area) that are in excess of the current base level. The taxes then increase or decrease based on the parcel valuation and any increase realized is the increment. It can be used to pay the costs of the renewal.
​
​No properties receive a tax break or an exemption; part of the full taxes paid by the parcels within the district are retained and used to pay part of the costs of the renewal activity. When the renewal cots are paid the district is collapsed nd the full taxes collected return to the taxing entities.
​