This bulletin, which supersedes Local Finance Bulletin No. 35 published in October 2006, explains the purposes of project development-or tax increment-financing, discusses various policy implications underlying its use, and describes how it became available to North Carolina local governments. It also outlines the statutorily prescribed steps for using project development financing, incorporating the 2007 amendments, and provides an example of how it might work in practice.

2008 MPA Capstone paper. This paper represents work done by a UNC-Chapel Hill Master of Public Administration student. It is not a formal report of the Institute of Government, nor is it the work of School of Government faculty.

Executive Summary

In July 2003, the North Carolina General Assembly overwhelmingly passed the Project Development Financing Act. The purpose of the act is to encourage local governments to be “actively engaged in economic development efforts to attract and stimulate private sector job creation and capital investors.” Project development financing, commonly known as tax increment financing (TIF), is one of the most widely used tools for economic development in other states. Local governments typically use TIF to stimulate economic development in blighted, depressed, or underdeveloped areas by financing public improvements. Despite the great expectations that accompanied TIF, only three municipalities in North Carolina have taken advantage of the legislation. This paper presents deterrents to municipal TIF adoption for local and state officials to consider when evaluating the limited TIF adoption by North Carolina municipalities