NORFOLK, Neb. -- As tax increment financing continues to be discussed in Norfolk, News Channel Nebraska talked with city officials to talk about what it is and how it works.

Tax increment financing, better known as TIF, is a financial agreement between a taxing entity and a developer that diverts future property tax increases toward redevelopment or community improvement projects.

Under normal circumstances, TIF would fix the amount of property taxes on a property for a set number of years, to help the developer complete the project.

Once that period has finished regular property tax amounts are then collected by taxing entities. 

"The taxes on the base value before the project continue to go to the taxing entities, but the additional taxes, the incremental taxes, go to paid debt that was issued to help finance the project," Norfolk Finance Officer Randy Gates said.

While this is regularly what happens with TIF Gates said there are certain circumstances where changes can be made to property before the TIF project begins lowering or raising the amount of property tax needing to be paid.

City administrator Andy Colvin said TIF is only implemented after checking certain requirements, which includes doing a cost-benefit analysis, developing a financial plan, and determining the project to be impossible without TIF.

Colvin said TIF is useful in bringing new development to areas that don't see new growth opportunities and helps offset costs incurred by cleanup, environmental challenges, or other issues with a potential site.

“TIF will help take those costs and reduce the investment that that developer would have to come in and do so they can focus more of their hard cash, so to speak, on the actual improvements they're doing on that property," Colvin said.

While TIF is a useful tool to help provide new development to a city, some residents have expressed concern about how their property taxes would be impacted when TIF is implemented.

When asked about these concerns Colvin said TIF is hard for people to understand, including himself, but said the city wouldn’t be receiving less property tax than they are already getting in most cases.

“The overarching idea is that these projects would not be possible without TIF," Colvin said. "To make the assumption that you're losing tax money because of them you'd have to assume they would have happened anyway. So you wouldn't have had the tax growth anyway without the TIF project"

Colvin said the city is open for anyone who wants to learn more about TIF and asks them to reach out to the city should they want to learn more or ask questions.