Basically, a portion of everyone’s property tax payment is set aside to pay for projects within the urban renewal district. The amount that’s set aside is based on the “tax increment” value within the district. The reason it’s called “tax increment” is because it is the incremental amount of tax value that has grown since the district started.
When the district is created, the assessed value of property within the district is set (or “frozen”) and those taxes continue to go to the government (city, county, and school districts through the State). Any property value increase above that frozen amount is called the “increment.” The amount of taxes on the increased value (or “increment”) is what is collected across the city for the urban renewal district to use for redevelopment projects.