City councils or county boards of supervisors may use the property taxes resulting from the increase in taxable valuation due to construction of new industrial or commercial facilities to provide economic development incentives to a business or industry. Tax increment financing may be used to pay the cost of public improvements and utilities which will serve the new private development, to finance direct grants or loans to a company, or to provide a local match for federal or state economic development assistance programs.

TIF does not increase a company's property taxes, but it allocates virtually all of the taxes which are paid back to the city or county, where they may be spent to benefit the company.