Tax Increment Financing

In a move widely welcomed by local governments and the infrastructure sector, the Deputy Prime Minister, Nick Clegg, recently announced that local authorities in England are finally to be granted new powers to undertake Tax Increment Financing ("TIF"). To read the Treasury press release, please click here.

What is TIF?

TIF is a mechanism enabling local authorities to finance infrastructure and regeneration projects in the bond or bank debt markets today off the back of anticipated future increases in local tax revenues. TIF works on the assumption that the projects once completed will lead to increased property values and further development in the relevant area, in turn generating increased tax revenues which the local authority can then use to repay its borrowing over time (often a 20 - 30 year period). In the USA, where TIF has been used for over 50 years, investors in TIF-backed municipal bonds are further incentivised to lend by a tax exemption on the