Tax increment financing funds, or (TIF) funds, are often used by municipalities to create special funding sources for specific areas of improvements. These improvements may include redevelopments, infrastructure improvements, and other community-improvement projects.
While TIF funds can be a great source of funding in helping municipalities reach their development goals, they can also indirectly place burdens on other areas of municipality-supported services. For example, while TIF funds may drive economic development in a city, the developments will create new service demands on police and fire departments.
To further illustrate this point, let us look at the real-world example of the Village of Montgomery, Illinois, a municipality that, according to Google, grew from almost 5,500 people in the 2000 census to 18,438 in the 2010 census, an astounding growth of 337%. The Montgomery Village Board and the Montgomery Economic Development Corporation have been working together to make sure that a proposed TIF district to support business development that both parties favor will not drain other village-funded areas.
To illustrate the possible financial issues the village might face in non-TIF supported areas, the Montgomery fire chief stated that new developments would create a need to update fire protection services and training, which would bring more expenses to keep people and structures safe. Because TIF funds will not support the fire protection district, this is an area where the village would need to examine funding from other sources. But where might these funding sources come from?
Municipal areas not supported by TIF funds are ideal areas to search for available grant funding. In the case of Montgomery, the fire department might be eligible for various fire department equipment and training grants. While one grant might not solve all of a municipality’s funding issues, every little bit helps. Plus, a municipality can apply for several different grants in the same areas.
Some grants, especially federal or state grants, require cash or in-kind matches. If a municipality has money available to spend to match a grant, then matching funding is an easy task. However, municipalities often do not have the money to match a grant by themselves. Luckily, non-governmental foundation or private grants can usually be used as matching funds. If a municipality is looking for money to make an in-kind match, applying for multiple grants to support the same cause would make sense. To learn more about matching funds, read our previous blog articles:
Sometimes, the key to successful funding overall is finding ways to meet all the requirements that accompany a grant—both the direct requirements of the award and the indirect requirements that result from implementing an awarded program. Municipalities can look to grant funding when trying to pick up any excess expenses indirectly caused by TIF funding.
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Image Credit: Elliott Brown