Understanding TIFA, Brownfield, and LDFA: Tools for Community Investment

At CatchMark, we believe that strong communities are built on transparency, collaboration, and understanding. When our neighbors speak, we listen.

During a recent TIFA Board meeting, a community member raised an important point, that there is limited accessible information explaining how TIFA, Brownfield, and LDFA funds work and how they are managed. That comment resonated deeply with us. These financial tools play a vital role in shaping our towns, supporting redevelopment, and strengthening local economies, yet they can seem complex or distant from everyday life.

In response, we created this guide to help residents, business owners, and local leaders understand what these programs are, how the funds are gathered, and how they’re used to improve our shared spaces. Our goal is simple: to make sure everyone has the knowledge they need to see how community reinvestment happens and how it benefits us all.

TIFA, Brownfield, and LDFA

Communities often face the challenge of funding infrastructure, redevelopment, and revitalization, especially in areas where the market alone will not justify the costs. In Michigan and many other states, several public financing tools exist to help bridge that gap. Three of those are:

• TIFA (Tax Increment Finance Authority)
• Brownfield TIF (under Act 381)
• LDFA (Local Development Finance Authority)

Here is how they work and how they can benefit local residents, businesses, and future development.

What is “tax increment financing” (TIF)? The foundation

Before discussing the three tools, it helps to understand the basic concept of “tax increment financing.”

• In a TIF district, the current or “base” taxable value of property is established at the time the district is formed.
• As redevelopment occurs and property values increase, the additional tax revenue, or “increment,” can be captured and used for eligible costs rather than flowing entirely back to the taxing jurisdictions.
• Those captured funds can be used to reimburse developers or to finance public improvements such as roads, utilities, site preparation, or demolition, subject to statutory and local plan rules.
• Over time, once the improvements are paid for or the capture period ends, full tax revenues revert to traditional taxing bodies such as schools, cities, and counties.

The idea is that the increased property values and economic activity spurred by improvements will ultimately increase the tax base for all, even if some of the gain is invested back first.

TIFA (Tax Increment Finance Authority)

What it is:
A TIFA is a local authority or mechanism that uses the TIF concept focused on specific areas, often downtowns or blighted zones, to spur investment. In Michigan, various local TIF statutes have been consolidated under Public Act 57 of 2018. (michigan.gov)

How it works:

1. A municipality decides to create a TIFA district by adopting a development plan and a TIF plan that outlines:
   • What public improvements or incentives can be funded.
   • The expected increase in taxable value over time, known as the “captured assessed value.”
   • The duration of the TIF.
   • Which taxing jurisdictions’ revenues will be partially captured.
2. The TIF plan must show that the improvements will lead to increased value that otherwise would not be expected, often called the “but-for” test.
3. As new development occurs and values rise, part of the tax increment is diverted to the TIFA to fund or reimburse public improvements.
4. Transparency and public accountability are required. Under Michigan law, TIF authorities must publish budgets, audits, adopted plans, and hold informational meetings.

What it can pay for:

• Public infrastructure such as streets, sidewalks, and utilities.
• Site preparation and demolition.
• Façade improvements.
• Landscaping, parking, and public spaces.
• Administrative costs of the TIFA.

Benefits and considerations:

• Helps overcome financing gaps because public investment can make a private project feasible.
• Encourages private investment in underdeveloped or underutilized areas.
• Capture reduces the share of tax growth going to schools or other taxing bodies, so the tradeoff must be assessed carefully.

Brownfield TIF (Act 381)

What it is:
Brownfield TIF is a specialized form of tax increment financing enabled under Act 381 of 1996. It is used to facilitate redevelopment of contaminated, blighted, or functionally obsolete properties. Such properties often carry high costs of cleanup, environmental assessment, demolition, or remediation, which makes them unattractive to developers without incentives.

How it works:

1. Local units may form a Brownfield Redevelopment Authority (BRA). That authority works with local government and stakeholders to adopt a Brownfield Plan outlining eligible activities and projected tax increment capture.
2. The BRA may submit a Work Plan to state agencies, including EGLE for environmental-related reimbursements and the Michigan Strategic Fund (MSF) / MEDC for non-environmental reimbursements.
3. Eligible costs typically include:
   • Environmental cleanup such as soil, groundwater, asbestos, or lead removal.
   • Demolition and site preparation.
   • Infrastructure improvements such as roads and water or sewer lines.
   • Relocation, testing, and monitoring.
   • Public and administrative expenses.
   • In some cases, housing rehabilitation in mixed-use projects.
4. As redevelopment proceeds and property values increase, the increment is captured and used to reimburse the developer for approved costs. Once reimbursements are complete, the full tax revenues revert to the taxing jurisdictions.

Recent changes and housing focus:
In 2023, the law was amended to expand the definition of eligible property and activities to include housing in certain contexts, enabling “housing TIF” under Act 381. For plans capturing school taxes, the Michigan State Housing Development Authority (MSHDA) has oversight and review roles.

Why it matters:

• Encourages reuse of properties that are otherwise difficult or costly to redevelop.
• Helps reduce environmental hazards while returning property to productive use.
• Generates new tax revenue that would not exist without redevelopment.
• Acts as a catalyst to stimulate further private investment in surrounding areas.

LDFA (Local Development Finance Authority)

What it is:
The Local Development Finance Authority (LDFA) is another tool under Michigan’s Local Development Financing Act, as codified under Public Act 57 of 2018. It allows municipalities to create districts focused on economic development, especially for industrial, high-technology, agricultural processing, or energy-related uses.

How it works:

1. A municipality proposes to establish an LDFA district and must hold public hearings and notify taxing jurisdictions.
2. The municipality adopts a development plan and, if tax increment capture is expected, a tax increment financing plan describing the boundaries, public improvements, and use of captured revenues.
3. The LDFA board oversees operations.
4. Funding can come from captured tax increment revenues, bonds, grants, donations, or loans.
5. Eligible improvements include:
   • Public infrastructure such as roads, sewers, water, and utilities.
   • Site acquisition, demolition, and site preparation.
   • Utility lines, rail spurs, and communications infrastructure.
   • Administrative costs.
   • Projects in certified technology parks or energy parks.

Why it matters:

• Supports industrial or technology-oriented development that yields jobs and economic growth.
• Provides a financial tool for districts not served by general-purpose TIF tools.
• Encourages private sector investment by reducing cost burdens for necessary infrastructure.

Putting It All Together: How These Tools Serve a Community

Each of these tools shares a common goal: using future assessed value increases to invest in today’s infrastructure and redevelopment. However, they differ in focus, eligible activities, oversight, and risk.

How they benefit the community

1. Catalyzing private investment: Helps close financial gaps for projects that might not otherwise happen.
2. Better use of underutilized land: Makes it feasible to rehabilitate contaminated or blighted sites.
3. Job creation and economic growth: Expanding businesses and redevelopment increase local employment and tax base.
4. Infrastructure improvements with less burden on taxpayers: Allows focused reinvestment of tax income generated by improvements themselves.
5. Accountability and transparency: Authorities must publish plans, hold hearings, and file reports for public review.

Challenges and considerations

• Balancing tax capture and public needs. Capturing increments means reduced short-term revenue for some taxing bodies.
• Ensuring the “but-for” test. Development should not happen without the incentive.
• Risk of overcommitment. Overestimating capture can create shortfalls.
• Coordination among taxing jurisdictions. Multiple units may be affected, and some may opt out.
• Oversight and compliance. Especially for Brownfield projects, eligibility and costs are tightly regulated.

Conclusion: Why the Public Should Care

When used wisely, TIFA, Brownfield TIF, and LDFA are powerful community tools. They help fill gaps in infrastructure and site costs, attract new development, clean up contaminated land, and create jobs while eventually expanding the tax base for all.

Residents should pay attention because these tools affect how tax dollars are leveraged locally. The projects they support shape the character of neighborhoods and downtowns. Public hearings and reports allow for community input and oversight.

Local officials, development authorities, and residents should work together to identify priority sites, evaluate which tool fits best, and ensure transparency to maximize public benefit.

Stay connected to what’s happening in our area by visiting CatchMark Community.