Know Your Audience: How Developers Can Best Use TIF in Tennessee Communities

Municipal leaders across Tennessee are accustomed to fielding inquiries from commercial real estate developers — but understanding what drives those developers, how they evaluate markets, and what makes a project financially viable is essential to deploying TIF effectively. Developer-backed TIF Bonds work best when municipalities understand the developer’s perspective, because that understanding helps you structure an incentive that attracts investment without giving away more than necessary.

How Developers Choose Where to Build

Commercial real estate developers evaluate potential markets across several dimensions simultaneously. They look at population growth trends, employment centers, infrastructure quality, and regulatory environment. They assess whether the local market can support the rents, lease rates, or sale prices their project requires. And they compare the incentive landscape across competing municipalities — because in today’s environment of elevated construction costs and tightening capital markets, the availability and quality of public incentives can determine whether a project lands in your city or a neighboring one.

Tennessee’s business-friendly environment, absence of a state income tax on wages, and growing metro areas in Nashville, Memphis, Knoxville, and Chattanooga already make the state attractive. But developers making site selection decisions weigh those macro advantages against the specific financial feasibility of each project — and that is where TIF becomes the differentiator.

The Financial Anatomy of a Development Project

Every development project has a capital stack — the combination of equity, debt, and incentives that funds the total project cost. The developer contributes equity (their own money), secures construction and permanent debt from lenders, and looks for additional sources to fill any remaining gap. That gap is the difference between what the project costs and what private capital alone can cover while still generating a return that justifies the risk.

TIF fills that gap. By capturing the incremental property tax revenue generated by the completed development and directing it toward eligible project costs, TIF provides a revenue stream that reduces the developer’s out-of-pocket equity requirement and improves the project’s financial feasibility. When the developer can sell their TIF Bond to a capital provider like Hageman Capital, that future revenue stream becomes upfront cash — reducing contributed equity even further and accelerating the project timeline.

What Makes a Project Ideal for TIF

Not every project needs TIF, and not every project qualifies. The “but-for” test requires the municipality to be satisfied that the project would not proceed without TIF assistance. Projects most suited for developer-backed TIF Bonds typically share several characteristics: significant infrastructure or site preparation costs that public investment can address, a projected assessed value increase large enough to generate meaningful tax increment, a developer with the financial capacity to guarantee bond repayment through a taxpayer agreement, and a clear public benefit such as job creation, blight elimination, or tax base expansion.

Tennessee’s TIF framework supports both public infrastructure improvements (roads, utilities, parking, drainage) and, with state approval for IDB projects, private property improvements. Housing Authority TIFs can fund a broad range of redevelopment costs in blighted areas. Understanding which costs qualify — and which TIF agency structure best fits the project — is where municipal leaders can add real value to the developer relationship.

Positioning Your Municipality as Developer-Friendly

Developers value certainty and speed. A municipality that can clearly communicate its TIF process, identify the right TIF agency, and move efficiently from application to bond issuance will attract more and better projects than one where the process is opaque or unpredictable. This does not mean lowering your standards — it means being prepared.

Key steps to positioning your municipality include having a clear TIF policy or application process in place, identifying which TIF agency (Housing Authority or IDB) is best suited for the types of projects you want to attract, understanding the taxpayer agreement framework under SB 1760 so you can discuss it knowledgeably with developers, and working with experienced TIF advisors who can help you evaluate proposals quickly and structure deals that protect the public interest.

Hageman Capital: Bridging the Gap Between Municipalities and Developers

Hageman Capital sits at the intersection of municipal finance and commercial real estate development. We purchase developer-backed TIF Bonds, providing developers with the upfront capital they need — and we work with municipal leaders at no cost to help them understand developer needs, evaluate TIF proposals, and structure transactions that work for both sides. Understanding your audience — the commercial real estate developer — is the first step toward deploying TIF as the powerful community growth tool it is designed to be. Connect with our team to learn more.