Tax Increment Financing Explained: Reno & Las Vegas Use Future Taxes Today

Both major cities in Nevada, Reno and Las Vegas, use a redevelopment funding tool called Tax Increment Financing (TIF), to pay for new roads, buildings, and construction projects. Supporters say it creates jobs and helps development that would otherwise not happen. Critics call it a subsidy of public money to developers.

Here is how TIF works. The city designates an area that needs redevelopment help and freezes its current property tax value. When new buildings go up and raise the property value, the extra taxes (called the increment) go into a special fund. That money pays for things like new infrastructure or reimbursement to the builder. Normal taxes on the old value are never interrupted and continue to go to schools and city services. Then, after a set number of years, all the new taxes, which have increased because of the development, flow to the regular city budgets.

Reno uses TIF to keep its redevelopment investment risk low. The city does not borrow money or go into debt to support a project. Instead, it uses TIF to support and incentivize new construction in dilapidated areas. If the project fails, the city pays nothing because it risks nothing. Last year, Reno’s Redevelopment Agency approved about $61 million in TIF for the Grand Sierra Resort expansion. That project includes a new 10,000-seat arena that will become the future home court for the University of Nevada’s basketball teams.

Las Vegas does something similar through its Redevelopment Agency. For example, it recently approved $26.9 million in TIF for a Lennar housing and redevelopment project near Cashman Field to support new homes and infrastructure improvements.

Before any deal, experts run a gap analysis. This financial study checks whether the project can make enough profit on its own. It includes the “but-for test,” which is: Would the project happen but for the TIF money? If the numbers show a shortfall, there is a gap and TIF can help fill it. If there is no gap, the project would likely move forward anyway. Cities are expected to use TIF only when it passes this test. Critics note it can be hard to prove because developers control the numbers and often push for the best possible deal. That is why citizen advisory review and input is especially important. For Reno, a nine-member advisory board chaired by Paul Klein reviews applications, provides key input on TIF deals, pushes for transparency, and guides revitalization efforts. Similarly, the Las Vegas Redevelopment Agency has a Citizens Advisory Committee led by Ryan Doherty.

TIF is not new and it is not going away. As Nevada’s population grows, the tool continues to be used by Reno and Las Vegas to fund infrastructure and development with future tax revenue.