Tax Increment Financing
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City of Cincinnati Tax Increment Financing

Developers making a large-scale investment that requires substantial public infrastructure improvements may be able to use Tax Increment Financing (TIF) to offset a portion of those costs. The city has several tax increment districts and in some cases will create a TIF specific to a project. In certain limited circumstances, TIF dollars may be used more broadly for urban redevelopment purposes.

How Do They Work?

The Ohio legislature has authorized the creation of Tax Increment Financing under R.C. Section 5709.40 and 5709.41. Upon creating a TIF, Ohio allows a municipality to grant a tax exemption up to 100% of the newly created real property value with the consent of the local school district. Municipalities may require payments in lieu of taxes on the exempt real property value. All payments in lieu of taxes collected on this newly created property value can be used to fund public infrastructure improvements and other eligible uses and back the issuance of debt for these uses when necessary.

The two most common types of TIF in Ohio are Project TIFs and District TIFs. Project TIFs are applicable to particular developments. District TIFs apply to a specific geographic area of the City. In both cases, taxes are exempted on improvements (for the specific project, in the case of a Project TIF, or within the district, in the case of a District TIF), and the City may impose payments in lieu of taxes. District TIFs are subject to geographic area and assessed value caps under state law.

What Are the Benefits?

Tax Increment Financing provides a method to fund public infrastructure and other eligible site improvements adjacent to and within new commercial developments.

How Is It Used?

To initiate the process, a developer applies to the City for a TIF designation prior to the commencement of any construction activities. Next, the Department of Community & Economic Development reviews submitted information and requests additional information as required to determine whether debt must be issued to construct the public improvements and may refer the developer to the Port Authority to underwrite the debt issuance. Finally, a recommendation is made to City Council for the designation of the Project as a TIF as well as any related legislation and legal agreements, such as a Development Agreement (governing the developer’s construction of their project), Cooperative Agreement (when debt is to be issued through the Port), debt agreements (when the City issues the debt) and other related documents (i.e., letter of credit and service agreements).

Depending on the timeline of a project’s infrastructure needs, the City creates a TIF or TIF District and either: 1) waits until the revenues derived from the TIF are sufficient to pay for the costs of the infrastructure, or 2) issues debt for the construction of the infrastructure with such bonds being backed by the future TIF revenues. The decision of whether or not to issue debt depends solely on the immediacy of the TIF project area’s infrastructure needs. The City frequently utilizes the Port Authority for the issuance of debt of TIF projects.

Potential Advantages

  • Encourages investment in the City of Cincinnati by offering developers a tool to fund public infrastructure improvements and, in certain cases, other eligible uses.
  • Reduces the City’s need to provide funding for roadway improvements from its limited capital resources.
  • Enhances development sites by funding the portion of parking improvements.