Tax increment financing, often called TIF, is a tool that helps communities support public improvement projects and economic growth. CHIP projects may use tax increment financing to help pay for eligible infrastructure costs that enable housing development. Understanding how tax increment works for CHIP can help communities better plan projects, manage funding, and meet program requirements.
VEPC's CHIP webpage may have additional FAQs related to this topic.
75 percent (75%)
Projects meeting certain affordability criteria are eligible to retain an additional 10 percent (10%) for a total of 85 percent (85%).
Tax increment may be retained for a period of up to twenty (20) years from the year in which debt is first incurred.
It depends on both the cost of the infrastructure and the amount of tax increment that will be generated by a housing development project. CHIP financing is used to close gaps in funding. The municipality and developer will need to determine what the gap is and whether the anticipated tax increment will close the gap fully.
The tax increment is calculated by subtracting the taxable value of the property on April 1 from the Original Taxable Value of the property.
Current Taxable Value – Original Taxable Value = Tax Increment
A tax increment financing plan must include:
- a statement of costs and sources of revenue;
- estimates of assessed values within the housing development site;
- the portion of those assessed values to be applied to the Housing Infrastructure Project;
- the resulting tax increments in each year of the financial plan and the lifetime education property tax increment retention;
- the amount of bonded indebtedness or other financing to be incurred;
- estimates of necessary principal, interest, costs of improvements, and related costs and in the event of municipal financing the amount anticipated to be approved by voters;
- other sources of financing and anticipated revenues; and
- the duration of the financial plan.
Yes. Grants, loans, and other funding can be used in combination with CHIP tax increment. However, if a grant is used to pay some or all of the cost of an eligible CHIP infrastructure improvement, the portion of the cost paid by the grant cannot be reimbursed through CHIP (no double dipping).
The OTV of a CHIP Housing Development Site is set on April 1 of the year the Site is approved by VEPC.
This means:
- If VEPC approves an application on 12/31/26, the OTV is the assessed value on 04/01/26.
- If VEPC approves an application on 01/01/27, the OTV is the assessed value on 04/01/27.
The municipality must certify the Original Taxable Value of a CHIP Housing Development Site after VEPC approves the CHIP application.
The municipal Legislative Body.
Yes. However, municipalities should consider this carefully.
A tax stabilization agreement can help make a project financially feasible, especially for challenging or high-cost developments. In some cases, it may help a project move forward that otherwise would not happen.
At the same time, a tax stabilization agreement may reduce or delay the increase in property tax revenue that CHIP relies on to fund infrastructure improvements. This can affect project financing and make administration of the CHIP district more complicated.
Communities also should consider public perception issues, such as fairness, transparency, and the long-term impact on the tax base.
A key question to ask is: Would a smaller or delayed tax increment with a stabilization agreement be better than no project (and no increment) at all?