Requirements for creating a Tax Increment Reinvestment Zone

Municipalities survive on development and redevelopment. To attract developers, cities may need to utilize Tax Increment Financing (TIF). TIF is a financial incentive for private businesses to participate in projects designed to help the community.

Local governments utilize such funding to revitalize neighborhoods designated as Tax Increment Reinvestment Zones (TIRZ). As property in the area develops and values increase due to such investments, a portion of tax revenues collected goes into the TIF fund.

Not all projects qualify for TIF funding, however. There are criteria at both the city and state level that a project must meet.

According to Texas Tax Code Section 311.005, to be a TIRZ, an area needs to:

  • Be mostly open or underdeveloped and, because of issues like deteriorating structures, considerably impair the county or municipality’s growth.
  • Significantly harm growth, hinder the creation of housing or be considered a social or economic liability as well as a hazard to safety, welfare, morals or public health in its current condition due to a variety of reasons
  • Either be in an area where at least 50% of the appraised property owners signed a petition for the designation or be in a federally assisted new community within the county or municipality.

Requirements at the city level may vary. Designating an area as a TIRZ to receive TIF funding is complex. A close examination of both state and municipal code is necessary for a community to fully determine if a neighborhood qualifies for TIRZ designation and TIF creation.