What financing method uses additional property tax revenue to pay debt service?

Tax Increment Financing Bonds (TIF Bonds) utilize future increases in property tax revenues to fund debt service. This method is based on the premise that investments made in a particular area—such as infrastructure improvements or other redevelopment activities—will lead to an increase in property values. As property values increase, the property tax revenues generated from these higher valuations can be used to repay the bonds issued for the initial investment.

The effectiveness of TIF Bonds relies heavily on the anticipated growth of the tax base in the specified area. As the local government commits to these developments, the incremental tax revenue is earmarked specifically for servicing the debt incurred to finance those projects, which can help stimulate economic growth within the community.

In contrast, other financing options such as Special Assessment Bonds focus on levying specific taxes or charges on properties that benefit directly from public improvements, and Revenue Bonds are typically secured against specific revenue streams rather than general property tax revenues. Additionally, Refinancing Bonds are designed to restructure existing debt rather than directly generate new revenues through property taxes. Thus, the unique mechanism of leveraging increased property tax revenue for debt repayment distinctly characterizes Tax Increment Financing Bonds in this context.