The newly constructed Central Park Residences on School Street were built in a TIF district with a Credit Enhancement Agreement.
Photo: ReinCorp
By Zendelle Bouchard
The City Council this week approved a newly created TIF district that includes the property where Aries Clean Technologies wants to build a biosolids gasification plant. But what exactly is a TIF district?
A tax increment financing (TIF) district defines what the city can do with the increased valuation on a property that results from development, and it shelters that valuation from the state. For example, if a property is worth $1 million before development and $3 million after development, the property taxes on the $1 million continue to go into the city’s general fund, and the other $2 million can be earmarked by the city for specific purposes as allowed by state law.
TIF funds in the fiscal year 2026-27 municipal budget are slated to be used for road construction, debt service on taxpayer-funded construction projects, the trail system, paying the salary of the city’s communications coordinator and funding the Economic Growth Council, which supports small local businesses as well as commercial development. Other allowable uses of TIFs include affordable housing and homelessness remediation, and public safety facilities and equipment. A TIF is not a zoning ordinance and does not control what can be built on the property or how it can be used.
The sheltering benefit of TIFs means that the increased valuation on the property (the $2 million in the example above) can’t be used by the state in figuring out the subsidies the city receives to fund the schools. In the past several years, as property values have risen in Sanford, the Essential Programs and Services revenue that pays for the majority of the cost of Sanford students’ education has been reduced each year, meaning local taxpayers must pay a bigger share of the cost.
TIFs are not perpetual. They are limited to a term set when they are approved, generally 15 to 30 years. When a TIF expires, the property taxes on increased valuation (the $2 million from our example) go into the general fund and are no longer sheltered. TIFs can be renewed and amended, however.
While TIFs are designed to benefit the city, developers may benefit if the city opts to enter into a credit enhancement agreement (CEA) for a project. If a developer can show that the cost of development makes the project not feasible, a portion of the property taxes on the increased valuation (that $2 million again) can be refunded to them for a period of time, to cover upfront costs like site development and utilities. Not every development in a TIF district has a CEA, and they must be approved by a vote of the City Council separately once the project has been approved and permitted by the state and the city’s Planning Board.
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