Understanding TADs and TIFs, the financing tricks that transform cities
It’s easy to feel like you’re drowning in the alphabet soup that is modern municipal economics. But there are two acronyms worth knowing.
To understand redevelopment in Atlanta, you have to know about the TAD and the TIF. Born from an obscure tax law in 1950s California, these financing tools have rapidly spread across the country to foster growth in the decades since. That’s true in Atlanta, where the TAD program has been credited for billions of dollars in assessed property value growth since the program began here in 2001. Most new housing developments in the city limits in the 2020s are popping up in TAD districts. Here’s a look at how these things work:
What are TIFs and TADs exactly?
TAD stands for tax allocation district, and TIF means tax increment financing. They’re different acronyms for essentially the same thing: They’re both mechanisms used by municipalities to fund public infrastructure, attract private developers, and/or provide collateral for bonds in underdeveloped neighborhoods.
Some consider them a sleight-of-hand trick of capitalism because cities use them to borrow money from the future to pay upfront costs in the present. Officials calculate the amount of tax revenue that, say, a housing development will generate for the next decade or more, which typically includes taxes on the project itself, plus expected tax increases on other properties in the district as neighboring values rise. The current assessed value of properties within these districts is considered a base value. Any increase in property values above the base value, known as the increment, generates additional property tax revenue. That money is then earmarked in a TIF or TAD fund for a specific purpose, whether that’s paying for roads, utilities, or parks—or luring developers to invest in new construction of housing or commercial real estate.
What are the pros?
Some city officials argue that TADs/TIFs are catalysts for transforming blighted areas. TIFs can attract capital from private developers who might otherwise think twice before investing upfront costs in distressed neighborhoods. Some officials even argue that these projects spur economic growth beyond the boundaries of the districts themselves.
Invest Atlanta (formerly the Atlanta Development Authority), which manages the city’s 10 TAD districts, says these zones have an annual growth rate of 30 percent—which is faster than the rest of the city—and have attracted billions in private capital, which has meant thousands of new housing units and millions of feet of new commercial space.
What are the cons?
Critics warn that these programs lack transparency and are often used to subsidize development in areas that don’t need that subsidy. When the BeltLine TAD was formed in 2005, many surrounding neighborhoods were underinvested and underfunded. A decade later, the BeltLine TAD’s real estate prices were skyrocketing. This, in part, caused rampant gentrification, displacement, and racial exclusion. Ten percent ($15.5 million) of the BeltLine’s budget for the 2024 fiscal year was earmarked for affordable housing development, which, Atlanta BeltLine, Inc. says, includes financial incentives for private developers. Skeptics say continuing to pay developers to build along the BeltLine—which has spurred some of the fastest-rising property values in the metro—is wasteful.
Where are Atlanta’s TAD districts?
Tax Allocation District (City of Atlanta)
Ten Years of TADs in Atlanta (Council of Development Finance Agencies)