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Tax Increment Financing / Tax Reinvestment Zones
The City of Texas City has worked with developments to create a Tax Reinvestment Zone for the purpose of Tax Increment Financing on projects that would provide lasting value for the City and would meet the goals of the City in housing needs, regional retail/commercial/office, or job creation. Tax increment financing is a tool that local governments can use to finance needed infrastructure improvements using property taxes generated within a defined area. These improvements usually are undertaken to promote the viability of an area and to attract new development, renovation, or restoration. The statues governing tax increment financing are located in Chapter 311 of the Texas Tax Code.

The cost of improvements to the area is repaid by the contribution of future tax revenues by each taxing unit that levies taxes against the property. Specifically, each taxing unit can choose to dedicate all, a portion of, or none of the tax revenue that is attributable to the increase in property values due to the improvements within the reinvestment zone. The property is appraised at its current value prior to any public or private improvements made within the zone. This is the baseline. As public or private improvements are made within the zone the increase value or increment above the baseline value has that added tax value or portion of added tax value provided to the zone to pay for agreed upon public improvements. The additional tax revenue that is received from the affected properties is referred to as the tax increment. Each taxing unit determines what percentage of its tax increment, if any, it will commit to repayment of the cost of financing the public improvements.

Tax increment financing may be initiated only by a city. If a property is located outside of the city limits (within the city's extraterritorial jurisdiction or beyond), it is not eligible for tax increment financing unless annexed into the city. Once a city has begun the process of establishing a tax increment financing reinvestment zone, counties, school districts, and special districts are allowed to consider participating in the tax increment financing agreement. Each zone will have its own distinct agreement negotiated primarily by the City and developer, but with input from the other taxing entities interested in participating.

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