The California Community Redevelopment Law provides redevelopment agencies with a method of obtaining funds called Tax Increment Financing.
In the year the Redevelopment Project Area is adopted, the total property tax value within the Project Area is established as the base year value. Over the life of the Redevelopment Agency, the base year taxes continue to be distributed to the taxing agencies on the tax role in the same proportion as in "pre-redevelopment" years. Any increase in property tax revenue (above the base year value) generated within the Project Area is redirected to the redevelopment agency. These funds are called Tax Increment and they are available for re-investment in the project area and may be used to pay off any debt created in implementing the Redevelopment Plan. The Agency is required by law to set aside 20% of the total annual Tax Increment for affordable housing projects. Tax Increment does not create new taxes; it simply redistributes the growth in the annual tax base.
Usually, the flow of Tax Increment to the Agency will not be sufficient in itself to finance the full scope of redevelopment activities and development projects. Therefore, agencies issue bonds to capitalize the Tax Increment. These bonds are not a debt of the City or County and are repaid solely from Tax Increment revenues.