Land Use & Zoning
Iowa Code Chapter 403 (Urban Renewal Act) authorizes cities to use tax increment financing (TIF). TIF works by:
AReducing property taxes for all properties in an area
BRedirecting the incremental increase in property tax revenues from a development area to finance improvements in that area✓ Correct
CIssuing bonds backed by state income tax
DAllowing private developers to set tax rates
Explanation
TIF redirects the property tax increment (increase in tax revenues above a base level) generated by new development in a designated area to fund public improvements that support that development.
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Key Terms to Know
Eminent Domain
The power of government to take private property for public use, with the requirement to pay the owner just compensation.
Gross Rent Multiplier (GRM)A quick valuation metric for income properties calculated by dividing the property price by gross annual rental income.
Net Operating Income (NOI)The annual income generated by an income-producing property after subtracting operating expenses, but before debt service.
1031 ExchangeA tax-deferred exchange allowing investors to sell one investment property and reinvest proceeds in a like-kind property while deferring capital gains taxes.
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