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Under tax increment financing, property tax revenues are reinvested back into the property. Such TIF districts are special tax districts created to encourage economic development. They also are considered crucial to projects with expensive price tags, such as the $22 million Plaza Towers, which also used TIF money.

Developers for Hieronymus Square Associates are asking for a 13-year rebate plan to receive about $1.3 million a year, with a limit of $16 million for the rebate period. Funds would be disbursed between 2012 and 2024; however, the plan depends on whether Hieronymus Square can be completed by Dec. 1 2009.

The city's Economic Development Committee will review the application on Tuesday.

"It's all up for discussion," economic development director Wendy Ford said. "We and the developers have come to a draft agreement that will be discussed."

Ford said that if both parties reach an agreement, she will attend the city council meeting later that evening to discuss the proposal with city councilors. Developers also will appear at the council meeting, she said.

TIF districts have become one of the most popular economic incentive tools used by cities trying to attract new development. It transfers property tax proceeds within a designated district from general tax rolls for a certain period of time and then uses those revenues to pay for projects and other public improvements in the district.

This essentially freezes property taxes on a development for a certain period of time, helping big projects pay for construction costs.

In addition, TIF money can be used through bonds, which occurred with Plaza Towers, or through rebates, such as Hieronymus Square Associates is proposing.

Although it's too soon to determine if TIF money will be granted, the proposal to use rebates rather than bonds provides "no risk to the city," Ford said.

The uniqueness of Plaza Towers -- it was built on the city's last urban renewal parcel -- led to an agreement where the city borrowed $7 million of bonds for construction, or improvements, on the 14-story downtown high-rise.

Kevin O'Malley, the city's director of finance, said the rebate option is safer because the city only pays when there are improvements to property. If a project fails, the city doesn't face the threat of losing money.

"The city doesn't front the bill," O'Malley said.

Iowa City has six active TIF districts, which is relatively few compared to Coralville, which has 19, according to the Johnson County Auditor's office. In those districts, about 26 major employers, including the University of Iowa and ACT Inc., have had projects funded through TIF money.